Foodpanda, the food delivery startup backed by Rocket Internet, is selling its operations in Indonesia and evaluating its presence in the rest of Southeast Asia as part of a push towards profitability.
Multiple sources close to the company told TechCrunch that its business in Indonesia, the world’s fourth most populous country, is available to potential acquirers for less than $1 million — and an all-cash deal isn’t even a requirement. Foodpanda, which is active in 500 cities across five continents worldwide, has slashed the asking price for its Indonesia operations to basically zero after more than a year of unsuccessfully trying to offload it, one source added.
The intention mirrors the sale of its business in Vietnam last year. The company reportedly tried to offload its India business earlier this year without success.
Foodpanda did not reply to a request for comment.
Indonesia may be Southeast Asia’s largest economy but it has proven to be a challenge due to factors including competition and local market conditions. Go-Jek, a motorbike taxi-on demand company that this month raised $550 million, is the primarily thorn in Foodpanda’s side. The company offers food delivery as one of its many services, and it is able to price that business competitively thanks to its massive fleet of 200,000 drivers and revenue from other services. Grab also offers services like food delivery, while Uber is tipped to follow suit.
One source close to Foodpanda added that Jakarta’s challenging traffic congestion and a lack of infrastructure have added complexities.
Reviewing regional presence
Foodpanda is actively seeking to cash out of Indonesia, but that may not be its only exit from Southeast Asia. TechCrunch understands from a source that the company is reevaluating its entire business across the region, and it has already made tentative efforts to sell in some countries. The company expanded in Asia via a series of acquisitions, which, in many cases, ironically leaves it without obvious suitors.
News of its reassessment of Southeast Asia comes just weeks after Foodpanda co-founder and CEO Ralf Wenzel claimed that the company is profitable in two of its markets — Europe and the Middle East — but not Asia.
Wenzel told Reuters his company is “focused on improving market share” in Asia, which has included asset exchanges with competitors, in order to turn its finances positive there.
“Over the next couple of months we will turn break-even and then profitable in the first Southeast Asian countries,” Wenzel added.
While the Foodpanda CEO claimed profitability in Asia is “just a matter of scale,” our sources said that discarding under-performing units — which Wenzel did not mention — is a very key part of the plan.
Challenging investment climate
Foodpanda raised $210 million last year — including a $100 million injection from Goldman Sachs and a separate $110 million round — but the climate for investment is tougher now. One source close to Rocket Internet told us that the venture builder is not optimistic about landing capital for many of its older, more capital-intensive businesses, including Foodpanda.
That’s evidenced by a recent round of capital for Global Fashion Group (GFG), a collection of Rocket Internet-backed fashion marketplaces worldwide. GFG raised $330 million but the capital came from a collection of trusted Rocket Internet entities and at a huge mark down. The group’s valuation plummet from $3.4 billion at its last raise to $1.1 billion.
Sources speaking at the time told us that GFG CEO Romain Voog met with more than 90 investors, but came home empty handed.
GFG had already preempted that challenge by discarding some of its unprofitable business units in Southeast Asia — does that sound familiar?! — which included the sale of Zalora Thailand and Lazada Vietnam for low prices and triggered high-level execs to leave. Rocket Internet isn’t alone to struggle in Southeast Asia, though. Groupon sold its Indonesia business to fitness membership startup KFit, a fairly unorthodox acquirer, after it had already exited other Asian markets.
Now it looks like Foodpanda is following a similar approach. While Southeast Asia is often noted for its 600 million cumulative population and growth potential, today its nascent digital economy is challenging for many online retail companies.
This year has marked a different approach for Rocket Internet in Asia. This summer, it finally offloaded Jabong, its fashion marketplace in India, to rival Myntra in a $70 million deal this summer, while Alibaba bought a majority stake in Amazon-like Lazada for $1 billion in April. Despite a seemingly decent outcome on the face of it, many Lazada investors were left disappointed and the company itself ran out of money thanks to spiraling loses.