Foodpanda grows revenue by 2.5x, but profit is still some distance away

Foodpanda, one of the largest food delivery startups in Asia outside of China, continues its growth momentum.

The startup, which was acquired by Germany-based Delivery Hero in 2016, saw its revenues grow by over 2.5x in 2020 compared to the previous year, according to its latest annual report.

A Foodpanda executive at Pandamart giving groceries to a delivery person / Source: Foodpanda

Foodpanda sustained its high growth in the first quarter of this year, with Delivery Hero reporting US$766 million in revenue for Asia, which is nearly half of its 2020 revenue for the region.

However, the Q1 2021 figure includes the revenue of South Korean delivery startup Woowa Brothers, a US$4 billion acquisition that Delivery Hero had completed in March this year. Woowa reported that it made US$971 million in sales last year, which works out to an average of US$243 million per quarter.

Intense heat in Asia

Globally, however, most food delivery businesses such as GrabFood and UberEats are still finding their way toward profitability.

See also: Can online food delivery ever be profitable?

Foodpanda is no exception. Arun Makhija, its chief financial officer for APAC, tells Tech in Asia that the company was making a loss on a per order basis at the start of 2020. But by the middle of the year, it managed to turn things around.

This can be seen in Foodpanda’s contributing margin, which is the total sales revenue minus variable costs, in this case expressed as a percentage of its gross merchandise value (GMV). This figure turned positive in Q3 2020 and has risen close to 5% in Q1 2021.

Delivery Hero’s contribution margin before voucher costs / Source: Delivery Hero

Voucher costs refer to the marketing costs incurred in order to acquire new users or to retain existing ones.

However, with their inclusion, Delivery Hero’s Asian operations are yet to achieve positive contribution margins. The company had noted in its 2020 earnings report that marketing expenses grew by 28% in 2020 to reach US$769 million due to “higher investments, particularly in Asia.”

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