The Foodpanda Business Model – How Does Foodpanda Make Money?

Executive Summary:

Foodpanda is an on-demand delivery platform that delivers meals, beverages, groceries, and more. It partners with independent drivers to fulfill orders.

Foodpanda makes money via commissions, delivery fees, subscription fees, as well as grocery sales. The company operates on a marketplace business model.

Founded in 2012, Foodpanda has grown to become one of the world’s largest online delivery platforms. It has raised close to $750 million over the course of its existence.

What Is Foodpanda?

Foodpanda is an online food delivery platform that allows customers to order meals, beverages, or groceries from restaurants and other shops nearby.

The service is available in 13 countries, which are almost exclusively located in Asia (with the exception of Germany).

Foodpanda does not prepare the food themselves. Instead, it works together with local establishments that take advantage of its fleet of drivers.

The drivers themselves are not employed by the platform but work on a contractual basis, meaning they only get paid whenever they complete a job.

Using Foodpanda is as simple as it gets. Customers simply download the app, which is available for Android and iOS, and enter all the relevant information such as their address and payment details.

Then, they simply select and order whatever they would like to eat or drink. The order is then normally delivered within less than 30 minutes.

Foodpanda partners with over 115,000 restaurants while having a total of 80,000 drivers delivering for it.

How Foodpanda Started: Company History

Foodpanda was founded in 2012 by Benjamin Bauer, Christian Mischler, Felix Plog, Kiren Tanna, Ralf Wenzel, Rico Wyder, Rohit Chadda, and Simon Schmincke.

What all of these names have in common is that they’ve worked for startup incubator Rocket Internet at the time.

The Germany-based company, founded by brothers Oliver, Marc, and Alexander Samwer, became known for its copycat model in which it would take proven business ideas and implement them within other regions of the world.

Prominent examples include companies like Zalando, a European e-commerce provider, which was mimicked after Zappos in the United States, or HelloFresh, which had a Swedish predecessor.

Rocket would then go on to either establish these companies as clear market leaders across Europe or sell them for a quick buck. However, around the turn of the decade, Rocket had exhausted much of the European market and began looking for opportunities abroad.

One of those opportunities was spotted in Southeast Asia where it soon began to incubate various businesses. In 2012, it launched Zalora (ironically a copycat of Zalando), Lazada (an eBay-like online marketplace), as well as Foodpanda.

One of Rocket’s key hypotheses was to hire people with exception CVs who had stints at leading banks or consulting firms like Goldman Sachs and McKinsey. These employees would then be placed in the local markets the businesses were based in and given resources, both in the form of funding as well as advice, to build up the business. All of the above-mentioned founders fit the mold of a prototypical Rocket founder.

In April 2012, Foodpanda launched in a variety of (Southeast) Asian markets, including Malaysia, Singapore, and even India. Over the course of the coming year, it added dozens of new markets in an effort to gobble up market share.

Within a year, Foodpanda had managed to partner up with 15,000 restaurants globally while being active in 27 countries. As a result, it successfully raised its first official round of funding from Rocket, Kinnevick, and Russia’s Phenomen Ventures, netting them $20 million.

The money was put to immediate use as Foodpanda acquired Dine, a Singapore-based rival, which marked the firm’s first-ever acquisition. Another acquisition, this time of Brazilian competitor Janamesa (August) as well as a funding round of $8 million (September) capped off a very successful 2013.

2014’s theme was certainly no different. Foodpanda began the year by announcing its third round of funding (in February), which saw the company receive another $20 million from Phenomen Ventures and others.

The platform, furthermore, continued to expand in new countries. It doubled down on Southeast Asia by launching in the Philippines and Hong Kong in June. That same month, it also purchased Delivery Club to strengthen its position in Russia.

Then, two months later, most of its existing investors (plus a few new ones like Falcon Edge Capital) poured another $60 million into the company. Yet again, the funding was used to acquire competitors, this time in Brazil (Entrega Delivery in September) and India (TastyKhana in November).

However, the biggest purchase in the company’s history occurred in February 2015. Foodpanda paid a whopping €80 million to acquire Madrid-based delivery company La Nevera Roja.com. The acquisition was likely informed by two successive funding rounds.

In March and May 2015, Foodpanda raised another $110 million and $100 million respectively. At the time, Foodpanda was present in 40 countries and totaling 580 cities. More than 60,000 restaurants were furthermore part of the platform.

Around the same time, Foodpanda also began to revamp its business model. In the early days, it launched as an aggregator platform where it would simply list available restaurants in the customer’s proximity. The deliveries would then be conducted by the restaurants themselves. Platforms like Grubhub had successfully ridden this model all the way to IPO.

The emergence of smartphones, however, soon led to a shift in consumer expectations. Companies like DoorDash had popularized a new model in which the platform itself would provide the driver supply and therefore allow all kinds of restaurants to offer takeaway options.

After pouring hundreds of millions into expansion, Foodpanda vis-à-vis Rocket Internet soon realized that scaling this model in a profitable manner across the world would prove extremely costly. By the end of 2015, the company began to divest from a variety of markets.

For instance, in December, it shut its doors in Vietnam. That same month, it laid off 300 employees (equal to 15 percent of its workforce) from its Indian business. In February 2016, Foodpanda sold various businesses in Spain (including La Nevera Roja), Italy, Brazil, and Mexico for €125 million in cash to London-based competitor Just Eat.

Nevertheless, in the markets that it deemed important, Foodpanda continued to pour money in. In March 2016, it acquired the operations of delivery.com in Hong Kong for an undisclosed sum. In both Hong Kong as well as Singapore it began facing additional pressure from the likes of Deliveroo and Uber Eats.

Foodpanda, furthermore, expanded its offering beyond just food delivery. For example, it launched a corporate food delivery service for business clients. Because of its continued focus on profitability, it also sold off its Indonesian business in August where Grab and Gojek had been dominating food delivery.

Eventually, in December, the company had to finally give in to the consolidation that was sweeping across the global food delivery market. Delivery Hero, now one of the world’s biggest online delivery companies and heavily backed by Rocket as well, purchased Foodpanda for $500 million.

Both Delivery Hero and Foodpanda were headquartered in Berlin, thus allowing for easier integration between the two. Furthermore, Rocket, which had become a public company two years prior, had seen investors question the legitimacy of its investments. Therefore, the startup incubator likely pushed the two companies to merge to further boost profitability.

In May 2017, Foodpanda vis-à-vis Delivery Hero raised $431.45 million from Naspers (which had become renowned for its early investment in Alibaba) to continue fueling its growth plans.

Regardless of the additional capital, profitability was still a big theme. As such, Foodpanda sold off its Indian business to ride-hailing platform Ola in December 2017. It could simply not sustain competing against bigger and local players like Swiggy and Zomato.

Over the coming years, Foodpanda continued to double down on the markets it remained competitive in. In August 2019, it moved its headquarters to Singapore (from Berlin) to remain close to its best-performing markets.

More importantly, Foodpanda also expanded its product line from restaurant deliveries towards grocery and everyday-item delivery through its pandamart brand.

Across 2020, Foodpanda’s business was propelled to new heights altogether. The coronavirus pandemic led to the worldwide closure of dine-in options, thus forcing customers to order their meals through various apps. As a result, the company was able to grow revenues almost threefold.

Moreover, the pandemic allowed Foodpanda to expand into new markets again. In September 2020, the platform launched in Japan. Months prior, despite political unrest, it had also expanded into Myanmar.

Its commitment to the (Southeast) Asian region was exemplified through the opening of a new tech hub in Taiwan in May 2021, which is intended to expand and diversify its local talent pool.

However, the biggest news likely came a few months later in the summer of 2021. Delivery Hero decided to re-enter the German market again. Just Eat’s Lieferando had been roaming freely for close to three years (after Delivery Hero sold off its existing businesses there).

It would launch in Germany under the Foodpanda brand, which would be its first presence outside of Asia. In September 2021, Delivery Hero also rebranded its previous acquisition NetPincer into Foodpanda, giving it a second presence in Europe (Hungary, more precisely).

How Does Foodpanda Make Money?

Foodpanda makes money via (restaurant) commissions, delivery fees, subscription fees, as well as grocery sales.

Foodpanda operates on a marketplace business model where it matches supply (here: mainly riders and restaurants) with existing demand. The platform then handles aspects such as payment processing, delivery, as well as product sorting to maximize orders.

Let’s take a closer look at each of its revenue streams in the section below.

Commissions

The bulk of the revenue that Foodpanda generates comes from the commissions that it charges restaurants.

Normally, the platform charges anywhere between 25 percent to 30 percent for an order. If a customer orders food worth $10, then Foodpanda gets to keep around $3.

In return, restaurants get to take advantage of the platform’s delivery fleet, which allows them to serve a greater number of customers. Second, Foodpanda’s app is accessed by millions of people, thus providing restaurants with almost immediate demand.

Also, restaurants don’t have to bother with money collection as the funds are stored within their respective accounts.

However, it must be noted that the above rate does not apply to every partner. Worldwide renowned chains like KFC can likely command much lower rates as a result of their branding power.

Foodpanda, in return, benefits from a substantial increase in demand as these restaurant chains provide brand recognition as well as added trust.  

The same, in all likeliness, applies to its partners on the grocery side where Foodpanda works together with brands like 7-Eleven.

Delivery Fees

The second driver of revenue is the delivery fees that customers pay whenever they order something.

Delivery fees vary depending on the market itself (order food in Singapore is much more expensive than in Thailand) as well as the customer’s proximity to the restaurant.

In most cases, delivery fees simply cover the cost of the driver who gets paid for completing the order.

In the past, Foodpanda drivers in Malaysia and Thailand (amongst others) have protested due to a decrease in pay. Unfortunately, given the lack of opportunity, these protests did not lead to a change in legislation.

Apart from the food and grocery delivery, Foodpanda has also introduced pandago, which allows businesses to use its rider fleet for their own deliveries. Given that Foodpanda does not benefit from commissions, its delivery fee for pandago is substantially higher.

Subscriptions

In 2021, Foodpanda introduced a premium subscription service that grants customers access to a variety of benefits.

Customers pay a monthly fee, which varies depending on the country of residence. In exchange, they can take advantage of various benefits, which include a limited number of free deliveries, various discounts, as well as access to exclusive offers.

Customers, however, are not the only ones profiting. Offering subscriptions likely increases their desire to order repeatedly, which in turn drives revenue and customer loyalty for Foodpanda.

Grocery Sales

Over the course of 2019 and 2020, Foodpanda has introduced its very own grocery delivery service called pandamart.

Customers can order thousands of daily essentials, including groceries, fresh produce, household essentials, and more, directly from Foodpanda.

The company thus operates its own localized warehouses in which it stores the products. As such, Foodpanda generates revenue through the sale of those products.

Moreover, much like its American and European counterparts Gopuff or Getir, it can be assumed that Foodpanda is marking up prices, thus leading to increased profitability.

Foodpanda Funding, Revenue & Valuation

According to Crunchbase, Foodpanda has raised a total of $749.5 million across eight rounds of venture capital funding.

Notable investors include Delivery Hero, Rocket Internet, Falcon Capital, Kinnevik, Goldman Sachs, and many others.

The last time Foodpanda’s valuation has been disclosed was during the firm’s acquisition by Delivery Hero, which paid $500 million.

Delivery Hero currently does not disclose detailed revenue figures for Foodpanda. However, its mother company did generate $766 million in revenue for Asia, which includes Foodpanda as well as Woowa Brothers.

Who Owns Foodpanda?

Foodpanda is wholly owned by Delivery Hero SE, a Berlin-based multinational food delivery service that operates in 50 countries across the globe.

Delivery Hero acquired Foodpanda back in December 2016 for $500 million in cash. The platform’s previous majority owner was Rocket Internet.  

Hi folks, my name is Viktor! By day, I lead a tech team of 10 for an e-commerce startup. At night, I work on expressing my weird thoughts through this blog. And if there's time, I cuddle my cat..