Singapore’s DealGuru spins out food delivery business; forms Food Runner

DealGuru, a Singapore-based e-commerce company backed by Michael Brehm of Rebate Networks, has announced that it is spinning out its food delivery business into a new company called Food Runner.

Led by CEO Lance Frey, who was CFO at DealGuru, Food Runner is managing the Room Service Deliveries brand, which DealGuru acquired last year and merged into its own food delivery service.

DealGuru started out as a daily deals company, then expanded into direct e-commerce in the fashion, electronics, cosmetics and household goods categories. It started operating its food delivery arm in March 2012.

“The (food delivery) business has been growing strongly. We felt it had reached a point where it made sense to operate with the greater flexibility and focus that a separate business provides,” said Lance, who adds that as an independent company, the CEO and management will be able to operate independently and make decisions unencumbered.

Operational in Singapore and Malaysia, Food Runner will be expanding to other parts of Southeast Asia, a food delivery market that Michael Brehm expects will hit USD 390M by 2015.

With over 50,000 registered users and ‘several’ million dollars worth of deliveries made, Food Runner claims to be the largest in Southeast Asia by food sales and revenue.

Assuming that the company is making USD3M in annual deliveries with an average transaction fee of 15 percent, that would work out to an estimated yearly revenue of USD 450k.

Lance, however, disputes the figure, claiming that the company is making more money than the estimate suggests. He is unable to disclose actual figures.

“We provide a comprehensive service model – marketing, order processing and delivery – our value to restaurants is greater, and we are therefore able to earn a multiple of the margin you estimated,” he said.

“As such, the company earns twice the commission revenue in dollars, compared to anyone else – and we mean anyone else – in Southeast Asia.”

Nevertheless, Food Runner is likely to make up only a small chunk of DealGuru’s main business Deal.com.sg, which made USD 40.3M in revenue in 2012. But that leaves it with much room for growth.

Industry insiders dispute the notion that DealGuru is the leading food delivery service in Asia. They brought up FoodPanda, a Rocket Internet venture which is already serving customers in six Southeast Asian countries.

FoodPanda has also been very active lately, acquiring SingaporeDine, a smaller player based in Singapore, as well as partnering with online grocery store RedMart and mobile loyalty card app Perx.