In a faltering food-tech ecosystem, startups are either shutting shop due to surmounting losses or choosing the path of consolidation in an attempt to turn around their business. Following a similar trend, Foodpanda has today disinvested in its Russian business and sold 100 percent of the same to leading internet service provider, Mail.ru.
Both tech behemoths have signed an agreement which isn’t subject to any third-party approvals and transfers the ownership of Russian ‘Delivery Club’ to Mail.ru. This transaction has been valued at $100 million, all cash. Mail.ru needs to shell out $90 million in November to acquire 90 percent of the Russian operations, while the acquisition of the remaining 10 percent needs to be completed by early 2017.
Commenting on the sale of Delivery Club, Ralf Wenzel, Founder and CEO of the Foodpanda Group, says,
This transaction is a key milestone for Foodpanda and proves our ability to successfully build and scale market-leading food delivery businesses.
Rocket Internet-backed Foodpanda first stepped foot into the Russian market in 2012. And the company took to acquisitions to expand its scope and reach in the country — something we’ve to expect from Rocket Internet. The company acquired its local rival ‘Delivery Club’ in 2014. Now, after four years of operations, it is ending its vacation in Russia.
Though Foodpanda has restricted from attaching an exact value to this operation, the company has shared that it accounted for about 10 percent of the global revenue stream. It has also gone ahead to term the sale of its Russian operations as “a significant return on the original investment.” I’m not too sure but the company is continually taking pride in sharing that it led to the expansion of the food-tech ecosystem in the country.
Transitioning our business to Mail.ru, a local internet market leader, allows Foodpanda to focus more on the expansion in the Asian, Middle Eastern and Eastern European markets, solidifying and expanding our leading market positions,
comments Wenzel on the future plans of the company.
Dmitry Grishin Mail.Ru Group Chairman and co-founder also expressed his views on the acquisition of a premium Russian food delivery startup from Foodpanda:
While Mail.Ru Group has the lead in the Russian mobile space, the acquisition of Delivery Club further enhances our mobile offering. The food delivery market continues to show steady growth and the combination of our network, resources and expertise with the leading market position of Delivery Club will allow us to take this business to even further success.
For those unaware, Mail.ru Group is one of the largest Russian Internet companies which reaches over 94 percent of the country’s population via its popular products including mail service Mail.ru, social network Vkontakte — similar to Twitter or Facebook, messaging service ICQ, and Russia’s largest online games business.
The Russian tech giant is always looking to further expand the scope of its services to better serve the population of the country. The acquisition of Delivery Club also falls in line with the company’s efforts to build one of the largest networks of internet services in the country.
Foodpanda, on the other hand, though it says that it is profitable in two of its three broader regions, it still continues to struggle. It has recently disinvested its international holdings in Spain, Italy, Brazil and Mexico to Just-Eat for $140 million, and sold off its operations in SEA including Indonesia.
Talking about Asia, specifically India, the company had to resort to massive workforce layoffs and removal of close to 500 restaurants a month to stabilize operations. Foodpanda had also gobbled up over $100 million to support its operations and automate a large part of its workflow for a better grip on its existing market share within the country.