Foodpanda fires over 500 employees, will stop own delivery in six cities

Mumbai: Online food ordering start-up Foodpanda India has laid off close to 500 employees, according to two people aware of the development.

The layoffs ordered on Monday covered all business segments—sales, marketing, vendor service, customer delight, business intelligence, automation, on-boarding and an in-house call centre in Gurgaon.

Starting in January, Foodpanda will also stop food delivery in six cities, including Kolkata, Chennai, Nagpur and Coimbatore, the two people said on condition of anonymity. Mint could not ascertain the other two locations.

Foodpanda delivers 20% of its total orders on its own. The rest is outsourced to vendors, who pick up and deliver food. Or the restaurants listed on the site do it themselves.

Foodpanda is one of the world’s largest online food ordering marketplaces, present across India, Brazil, Russia, South-east Asia and Eastern Europe. It has raised almost $310 million since its launch in March 2012 from the Samwer Brothers of Rocket Internet and Goldman Sachs, a global bank.

“As a result of the many technological innovations, we have achieved over 98% automation in order processing. This resulted in lesser manual interventions, thereby leading to surplus manpower, which was not benefitting the business or our people’s careers,” Saurabh Kochhar, chief executive officer (CEO) of Foodpanda India, said in an emailed reply. “Therefore, unfortunately, we had to let go of around 250-300 people from our total manforce.”

“Re-organization of the business was done across every aspect from technology to processes to customer service. This has been a painstakingly difficult decision-making phase,” he added. “We continue to stand by our people and are doing the best we can to mitigate the fallout.”

While Foodpanda has disputed the number of people it has laid off, the two people cited earlier said the number is closer to 500. “The unit economics of this business has gone for a toss,” said one of the two, a Foodpanda executive. “We have burnt through a lot of money this year on marketing and hiring; so, it is not surprising that Rocket Internet and Goldman Sachs have cracked the whip.”

“So we were 180 people in February 2015. Today, we are at 1,300-odd people. That’s how fast we have grown. So these are not exact numbers but roughly we have fired 60 people in sales, 80 in vendor service, 10 in marketing, 20 in customer delight, 12 in finance, 5 in on-boarding, 25 in automation and about 250 people from the in-house call centre.”

In the six cities where Foodpanda will shut operations, the move will affect delivery boys who are not on the company’s payroll, the executive said. The delivery is outsourced to contractors.

Mint reached out to Ralf Wenzel, co-founder and CEO of Foodpanda (global). In an emailed reply, he said that Foodpanda has “reduced overall work force by about 15% over the last months”.

On whether this is a sign of trouble for the food tech space, Wenzel said it isn’t. “Ninety-nine per cent of the food-ordering market in India is still offline; only a small fraction is online. It’s still a very early market and we are exposed to one of the biggest opportunities in Internet overall. There is hardly any other industry that will see as much growth as online food ordering.”

Have the terminated employees been compensated? Is Foodpanda helping them land their next assignment? This part, too, is unclear.

“We have honoured our contracts with each and every employee,” Kochhar said. “Affected employees will be provided with due remuneration and will be further assisted to get a foothold in the industry by setting up a platform to help them discover a plethora of job options.”

The Foodpanda executive said it wasn’t entirely true. “The staff in Chennai is getting three months’ notice period pay. That’s because of the flood situation there,” said the official. “But not in any other locations. Those employees will get their December salary and a full and final settlement in January.”

In 2014-15, Pisces eServices, which operates Foodpanda, recorded a loss of Rs.36 crore on revenue of Rs.4.8 crore.

Wenzel, though, believes that Foodpanda’s future in India is bright. “Despite the very early stages, Foodpanda has achieved profitability across many countries already,” he said. “And even in India we have achieved positive unit economics across many cities and business segments. Marketplace business generally requires many years to turn profitable. We are happy to see this happening even faster at Foodpanda.”

In September, Mint wrote about multiple flaws in the culture and processes at Foodpanda.