FOOD INDUSTRY

Reality bites: meal delivery company Foodpanda lays off 15 per cent of its Hong Kong staff

Company entered local market in 2014 and expanded its presence with two acquisitions last year

PUBLISHED : Monday, 15 February, 2016, 5:54pm
UPDATED : Tuesday, 16 February, 2016, 8:34am

Start-up foodpanda laid off 15 per cent of its staff in Hong Kong on Friday as the company attempts to reboot its strategy in the city’s crowded food-delivery service market.

The dismissal of about 18 employees was confirmed to the South China Morning Post by foodpanda Hong Kong chief executive officer Alexander Roth, who said those let go were mostly from the operations side of the business, as opposed to its sales and account management departments.

Backed by Frankfurt-listed Rocket Internet, foodpanda entered the Hong Kong market in 2014. It acquired local food delivery companies Koziness and Dial a Dinner in February last year to quickly expand its local operation.

READ MORE: ‘It’s basically not been touched’: foodpanda and Deliveroo join menagerie of online food delivery start-ups vying for Hong Kong’s young market

“Management announced [that they will] let go of some of us to cut cost and to ensure that the company will become more profitable,” said one dismissed employee who declined to be named.

Another ex-employee said the cuts were made to boost margins for foodpanda, adding that the company was yet to turn a profit as it competes with other food-delivery companies in the market.

Roth declined to comment on foodpanda’s profitability.

Following the integration of Koziness and Dial a Dinner, we decided to streamline our team now to better align operational activities
Alexander Roth, foodpanda

“Over the last year, we have continuously optimised our processes and built tech innovations which have automated our order processing, rider and restaurant management systems,” he said.

“Following the integration of Koziness and Dial a Dinner, we decided to streamline our team now to better align operational activities.”

He also confirmed that an undisclosed number of employees responsible for customer care at foodpanda’s call centre were let go ahead of Friday’s layoffs.

The job cuts made by foodpanda marked the latest move by the company to stay competitive in Hong Kong amid its apparent struggles in other markets.

In December, foodpanda shut down its Vietnam operations as its financial situation deteriorated, Truong Duy Linh, the company’s ex-general director for that country, said.

Earlier this month, foodpanda sold its food delivery businesses in Brazil, Mexico, Spain and Italy to London-based rival Just Eat for US$140 million to focus on its core markets in Asia, the Middle East and Eastern Europe.

James Giancotti, the chief executive at start-up ratings firm Oddup, said foodpanda’s job cuts came as no surprise after London-headquartered food delivery firm Deliveroo launched in Hong Kong late last year to heat up the local competition.

Deliveroo in Hong Kong promised food deliveries within 32 minutes. Shortly afterwards, foodpanda halved its delivery time in the Central and Sheung Wan areas from an hour to 30 minutes.

“Deliveroo entered Hong Kong in a big way, [with] multiple advertising points and has been receiving overall good feedback,” Giancotti said. “Given the number of delivery services in Hong Kong – Deliveroo, foodpanda, foodora and Delivery Republic – this model will not sustain itself.

“Similar to the storage facility start-ups of last year, this [food-delivery services market] will be an exercise of who stays above water the longest.”

Foodpanda Hong Kong launched its sister company foodora in the city last September.

Both Deliveroo and delivery.com told the Post told they had no plans to lay off staff.

“We are still quite aggressively hiring, and have made a few more hires in the last two weeks,” said Justin Landsberger, co-general manager at Deliveroo Hong Kong. “We are also continuing to expand our coverage area and will be launching in North Point and Quarry Bay in the first two weeks of March.”

Linda Wang, head of sales and business development in the Asia-Pacific region for New York-based delivery.com, said the firm was continuing to grow its business “sustainably”, with a focus on corporate clients. It recently started deliveries on the south side of Hong Kong island for customers who had used the service at work and now wanted delivery to their homes.

READ MORE: German start-up foodora plans to take Hong Kong’s online food-courier services upmarket

Despite the layoffs, foodpanda’s online career page still listed 20 job openings for Hong Kong as of Monday afternoon, including positions in the operations department for Web content and vendor care.

Roth said foodpanda would continue to hire depending on the needs of each department, while recently investing in new delivery bikes.

“We always need people, especially people to help with delivery and related tasks,” he said. “We’re investing a lot because we still see [Hong Kong] as a top-tier market of ours, and we’re growing very quickly.”

According to investor Rocket Internet’s report to investors, foodpanda globally was profitable as of the third quarter last year and had a gross profit margin of 93.2 per cent.