Food startup industry is slowly catching up as many new startups can be observed to be emerging in the space. Among the lot many have already established a ground for themselves and many new ones are coming up following the trend. iamWire had an exclusive talk with Justeat’s Founder Ritesh Dwivedy, who has now moved on to launch another food startup Petoo, on his journey, learning and experience of the food industry since he was the first one to move into this space.
iamWire: What scope and opportunities do you see in online food ordering industry? What is the market size of this segment?
Food industry has lagged behind other fields in terms of adoption of technology, the processes followed at most restaurants are outdated and inefficient. Because of the fragmented and unorganised nature of the industry innovations in areas like menu designs, inventory management, supply chain etc have not happened till now. Changing all this is a mammoth and a time consuming task but eventually it holds massive opportunities. In the recent years most innovations have happened in the area of making small restaurants accessible to internet users (online food ordering), this plays a very small bit in the entire life cycle of an order, a lot is yet to be done.
Conservative estimates put food delivery market at around $1.6 billion, in India it is growing at 20% every year. On an average in large cities people eat out once every week. With increase in double income families this number is expected to grow at phenomenal rates in the immediate future.
iamWire: You were one of the first movers in this space (2006). How has this industry evolved? Do you think there has been more focus on food tech startups now than earlier?
Absolutely, the industry has evolved dramatically since 2006. Back in 2006, food was one of the last things expected to be purchased online. It was extremely tough selling the concept of online food ordering to restaurants during Hungryzone’s (Justeat) early days. Fast forwarding to 2015, the situation is very different, many restaurants have experienced the benefits of a marketplace for online ordering and hence they are now more willing to try out newer technology.
Online food ordering as an industry is here to stay and in future it will be the default method for ordering food across restaurants. This marketplace model has helped and provided a platform to small restaurants to reach out to their consumers cost effectively. Having solved the food ordering challenge the industry is now moving towards solving newer problems like efficient on demand delivery of food.
The focus on food businesses has certainly increased. Many VCs who scorned our business plan during our early days have now invested heavily into the same businesses. This has brought the industry into spotlight and hence new age entrepreneurs are identifying and trying to solve various inefficiencies in the system.
iamWire: Being a veteran in this space what do you feel is the biggest challenge in operating a food ordering and food delivery business models respectively?
The biggest challenge this industry faces is shown in the graph below. Unfortunately everyone feels hungry at the same time and rarely anyone plans his/her meal. This results in a burst of orders during short intervals of time (mainly during lunch and dinner time). The challenge is accentuated because these orders once received needs to be prepared and delivered within minutes. In food you do not have the luxury of delivering products in hours. This is a humongous challenge to solve and requires razor sharp focus on execution enabled by technology.
iamWire: How did you feel about JustEat’s acquisition by Rocket Internet? Do you think with some additional funding it could have instead given a competition to Food Panda (especially when it was near to attain profitability)?
Acquisition of JustEat completed the cycle of entrepreneurship for me. It was an amazing learning experience building something from the scratch and growing it up to a level which was extremely valuable for investors, customers and partners. It was also very satisfying to see thousands of restaurants depending on us for a large portion of their business.
At the time of acquisition JustEat was the largest food ordering platform in India. Our processes and systems were efficient and had evolved over the period of 9 years. We set benchmarks in the industry which others including our acquirer are now following and trying to emulate. As an entrepreneur I couldn’t have expected a better outcome of an almost a decade long fight.
iamWire: With what new aspirations have you begun ‘Petoo’?
The aspirations are very clear and quite simple: to build a bigger and a more valuable company. I feel this time around I am better equipped than I was when I started hungryzone. Better equipped because now I have the experience of building a company, learnings from the innumerable mistakes and the deep understanding of the food delivery space.
iamWire: Who are your biggest competitors?
All small/large/internet/non-internet restaurants or food joints are our competition.
iamWire: How big is your new team? What kind of responses have you received from the people? Expansion plans?
We started operations two and a half months months ago. We are present in six zones and accept orders only through the online market places. The initial response has been very encouraging, we are doing on an average 150 orders a day. These are early days but our re-order rates in the first few weeks have been extremely encouraging. The focus right now is on expanding our reach, we plan to be present in all the top zones in Bangalore in the next few months. After which we start our efforts on building our brand and focusing on increasing orders.
iamWire: Do you plan to raise any funding in the near future?
Yes, we will start working on our fund raising in a few months.
iamWire: You mentioned that you get maximum orders from restaurant aggregators. How much do you need to pay these aggregators?
The commissions are upwards of 10% on the order value. The commission percentage vary depending on whether the orders are delivered by us or by the aggregators. This success based model on order generation and completion is now fairly established and all aggregators follow a similar process with minor tweaks.
These aggregators enable Petoo on their platform in zones where we have dispensing outlets. When a customer places an order from any of those zones using their platform, the details are received by us at our central hubs either on mobile applications or desktop applications or manual phone calls. The orders received by us are then re-punched in Petoo’s ordering system (right now manually as there is no API integration with the aggregators yet). The orders once placed in our system are then assigned to our delivery agent who would be delivering the order. In cases where the aggregators themselves deliver food order is placed to Petoo and then picked for delivery by their delivery agents.
iamWire: What do you think are the scalability challenges for models like restaurant aggregators and chef aggregators?
The biggest bottleneck in this marketplace model is the small window of operation (2-2.5 hours of lunch and dinner). All orders need to be processed within seconds and delivered within minutes. Solving this when you are working with thousands of restaurants who are unorganized and not tech friendly is a humongous challenge. The earnings per order are pretty low and hence it is mandatory to have extremely efficient and automated processes. One additional call to a customer for a clarification on address and you start incurring losses in those orders! There is very little leeway for errors or inefficiencies.
Subscription solves this problem to an extent but then the earnings per meal drops as the ticket size for subscription meals are lower. Overall, I feel that the model is challenging but once solved then the business can be scaled rapidly.
iamWire: What advice would you give to young aspirants who want to get into this segment?
My very frank advice is to not get into a me too restaurant aggregator business. The existing players have deep pockets and have good experience in the market, for a new player to beat them would require substantially large investments and extremely efficient execution. This business takes time to set up and hence, is better be avoided at this stage.
Having said this, I believe that food is an attractive space and there are many other related opportunities waiting to be taken up. Wholesale solutions for restaurants, food packaging, analytics & CRM for individual restaurants etc are pretty big untapped opportunities waiting to be solved.