Ola to focus more on own private label food brands through cloud kitchens

Ride-hailing firm Ola said that it is not suspending its food delivery business Foodpanda and is pivoting towards focussing on its own private label brands through its cloud kitchens. A 'cloud kitchen' is one that does not offer dine-in facility and accepts food orders only through an online ordering system.

The Mint newspaper on Wednesday, quoting sources, said that Ola had suspended the company’s food delivery business Foodpanda, laid off about 40 mid- to entry-level employees and terminated the contracts of most of its 1,500 food delivery executives.

“Ola is not suspending its food delivery services. This is more of a pivot towards focussing on its own private label food brands,” said a source at Ola, who did not wish to be quoted. “The firm has not fired its employees or terminated the contract with the delivery executives because of bad food delivery business. If there has been any such development, it is mainly part of the natural churn to focus on its own brands. At the same time, the company is hiring people with culinary experience and looking at opening offline stores or restaurants,” said a source.

The SoftBank-backed company is building its online food delivery platform through Foodpanda’s India business, which it acquired from Germany-based Delivery Hero Group in December 2017. Ola had committed an investment of $200 million into Foodpanda India, and is competing with Uber Eats, Swiggy and Zomato in this space, while burning a lot of cash in the process, with rising competition. 

“One of Ola’s big investors has come down heavily on the company for investing so much money into Foodpanda business. They were trying to scale up quickly and giving heavy discounts,” a person familiar with the matter said. “Ola is now focusing more on in-house labels and cloud kitchens and they might absorb the Foodpanda employees into the company,” said the source.

Last October, Ola-owned Foodpanda said it had acquired Mumbai-based food-tech venture Holachef for an undisclosed amount. Through this collaboration, Foodpanda marked its strategic entry into cloud kitchens and had plans to launch its own brand of food products in different categories. Ola now runs private label food brands such as Khichdi Experiment, Flrt, Lovemade and Grandma’s kitchen. Currently, over 50 cloud kitchens of Ola make different varieties of ‘khichdis’,  variations of rice bowls across cuisines, biryanis and a range of desserts and shakes. These kitchens are spread across Bengaluru, Delhi, Mumbai, Pune and Chennai. 

A source at Ola said that in the future the company might not need its own delivery executives at all. “It may list its cloud kitchen food brands on food delivery firms such as Swiggy, Zomato, Uber Eats and Dunzo,” the source said.

An Ola spokesperson on Wednesday denied there had been any layoffs at Foodpanda but said as part of its “ongoing business repurposing initiatives” Ola was focused on building a portfolio of own food brands and curated food offerings through its fast expanding network of kitchens. Many of these offerings are already available in all major cities through the Ola and Foodpanda apps, according to the company

“We continue to invest in expanding our facilities and kitchens, as well as our portfolio of food offerings for customers. We remain committed to our mission of building a superior food experience for millions of our customers,” said the Ola spokesperson.

The concept of cloud kitchen has recently caught the attention of food tech companies and investors who are pouring millions of dollars into such facilities. 

Mumbai-based food-tech firm Rebel Foods, known for brands like Faasos and Behrouz Biryani, operates more than 205 delivery cloud kitchens and 1,600 online restaurants across 18 Indian cities. In the next two years, the company aims to have around 500 cloud kitchens. Rebel also runs brands such as Mandarin Oak that provides Chinese cuisine; Oven Story that is known for pizzas, and Sweet Truth that offers desserts. 

Bengaluru-based Swiggy, a Naspers and Tencent Holdings backed food delivery firm, is expanding its cloud kitchen platform Swiggy Access to metros, including Delhi, Mumbai, Kolkata, and Hyderabad. The platform enables its restaurant partners to set up kitchen spaces in locations where they don’t operate but have a high demand for their product. Swiggy Access houses brands such as Truffles, Vasudev Adigas, and Leon Grill as well as the company’s private label brands like The Bowl Company and Homely. It was also reported that Gurugram-based food delivery and restaurant discovery firm Zomato was also making strategic investments in Bengaluru-based Loyal Hospitality for its cloud kitchen project.

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