In October 2023, Foodpanda announced yet another round of layoffs, marking its third downsizing in the past two years. This move follows the decision by its parent company, Delivery Hero, to sell Foodpanda’s operations in several Southeast Asian countries for a reported $1.07 billion, signaling a shift in strategy aimed at optimizing its portfolio by focusing on more profitable regions.
The decision to sell operations in Singapore, Cambodia, Laos, Malaysia, Myanmar, the Philippines, and Thailand comes as Delivery Hero looks to offload businesses that face intense competition and narrower margins. In these markets, Foodpanda has been struggling to maintain profitability amid fierce competition from other players. Industry insiders suggest that Grab, Southeast Asia’s largest super-app, is the most likely buyer, aiming to consolidate its hold on the regional food delivery market.
Delivery Hero’s broader strategy revolves around streamlining its focus on areas with stronger market dominance and better financial returns. In the first half of 2023, Asia contributed 56.7% of the company’s gross merchandise value (GMV), amounting to €12.64 billion. However, this growth was primarily driven by Baedal Minjok, the South Korean food delivery service that Delivery Hero acquired, rather than by Foodpanda. In fact, Baedal Minjok alone is expected to generate €500 million in free cash flow by the end of the year, highlighting its critical role in the company’s overall profitability.
In contrast, Foodpanda’s operations in Southeast Asia have faced sluggish growth. Competition in these markets has made it difficult to increase GMV significantly, and the thin margins have turned these countries into prime candidates for divestment as Delivery Hero shifts its focus to markets where it can more easily boost revenue and profitability.
Despite these developments, Foodpanda Pakistan remains largely unaffected by the sale. Pakistan represents one of the company’s few markets where it enjoys near-monopoly status, allowing it to exercise more pricing power after years of focusing on growth and market capture. However, challenges persist due to lower average order values and the continued depreciation of the Pakistani rupee, which dilutes revenue when converted back to foreign currencies.
Foodpanda Pakistan has begun to shift its strategy to improve profitability. This includes raising delivery charges, introducing platform fees, and featuring in-app advertisements, all aimed at increasing the company’s revenue streams. These moves are part of a broader effort by Delivery Hero to diversify its income, with delivery fees now projected to surpass commissions as the company’s largest revenue source by 2024. In-app advertising has also emerged as a lucrative new income stream, contributing 10.07% to Delivery Hero’s revenue in the first half of 2023.
Looking forward, Delivery Hero may continue to divest in other regions, with analysts from JP Morgan and Barclays speculating that the company might sell its operations in the Americas. This would further bolster its balance sheet and allow the company to concentrate on more profitable markets, such as South Korea and Taiwan.
For Foodpanda users in Pakistan, the shift in focus to profitability means potential increases in delivery costs and changes to the customer experience, such as longer delivery times due to batch deliveries. While Foodpanda remains a dominant force in the Pakistani food delivery market, the company will need to continue balancing its growth ambitions with the need to remain profitable in a challenging economic landscape.
As Delivery Hero refines its global strategy, the future of Foodpanda in Pakistan seems secure, although it will be shaped by the company’s drive for higher margins and a more sustainable business model. The local market’s resilience, coupled with strategic changes, could help the company thrive despite broader economic challenges.
