Rocket Internet-backed food delivery business Foodpanda is divesting yet more of its international holdings. Today the company announced that it would sell Russian Delivery Club, its operations in Russia, to Mail.Ru Group for $100 million.
Foodpanda said the sale would help it “further focus in our core regions”, by way of investing the proceeds in its other operations. It comes as Mail.Ru looks for more services it can sell to its large audience in Russia. Mail.ru says it touches 94% of the country’s Internet-using population across properties like Mail.ru; VK.com, the Facebook-like social network popular in Russia; and ICQ.
It was a relatively short stay in Russia for Foodpanda. It first entered the Russian market in 2012 and bulked up in 2014 when it acquired local player Delivery Club.
It’s not clear what the valuation of this individual operation was but Foodpanda said it contributed 10% of Foodpanda’s revenues. The company is positioning it as a win: “a great return” in its words.
But it comes as one of its parent companies, the now-publicly traded Rocket Internet, which owns 49% of Foodpanda, continues to try to whittle down its many-tentacled, loss-making business of incubating and growing dozens of e-commerce startups around the world, which has proven to be a challenge. Foodpanda now will be active in 20 markets.
Other Foodpanda sales this year have included selling holdings in Spain, Italy, Brazil and Mexico to Just-Eat for $140 million, and selling off operations in Southeast Asia including Indonesia.
It’s also been part of a bigger consolidation play that Rocket Internet calls (in its charismatic way) the Global Online Takeaway Group, which has seen the company make an investment in Delivery Hero as well as swap assets with this one-time rival.
It’s not clear if the Russian business was profitable in itself but more generally, it’s a sign both of the difficulties of scaling profitably in the market for online takeaway and delivery services, and of the challenges these days of raising external cash to bridge the gap.
Indeed, this is a way for Foodpanda to finance itself. “The cash proceeds will be re-invested to continue the expansion in Foodpanda’s core regions in Asia, Middle East and Eastern Europe,” the company writes.
And the core is definitely something that Foodpanda needs to focus on now, because even if Foodpanda now plays nice with Delivery Hero, there are a number of new competitive threats on the horizon, including Deliveroo, Uber Eats and now Amazon Restaurants.
Uber Eats is a big new priority for the formidable Uber transportation business, and this summer it hired a new exec in Asia to build the business out there.
Foodpanda has disclosed in total some $318 million of external funding. “Disclosed” because it may be more, since there has been a lack of transparency about much of the funding for Rocket-incubated startups. This is all that has been disclosed publicly.
“This transaction is a key milestone for foodpanda and proves our ability to successfully build and scale market-leading food delivery businesses,” said Ralf Wenzel, Founder and CEO of the foodpanda Group, in a statement. “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.”
For Mail.Ru, it’s another sign of how the company is trying to diversify its business and add more services on top of its existing business, which includes Russia’s most popular email client (mail.ru) as well as social network VK.com, known as “the Facebook of Russia,” and messaging platform ICQ.
In addition to other services like games, Mail.Ru is borrowing a page from Google and Yandex and now building more transactional services leveraging that huge audience.
“While Mail.Ru Group has the lead in the Russian mobile space, the acquisition of Delivery Club further enhances our mobile offering,” said Dmitry Grishin Mail.Ru Group, the Chairman and co-founder, who last week stepped down from his role as CEO to focus on more of these strategic moves.
“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.”
Interestingly, this also highlights another trend: while there is some downsizing among some e-commerce companies in the area of their legacy food commerce holdings, others just starting to move into the space in earnest.
Just yesterday, Amazon clone Lazada (once also a Rocket Internet company but now majority owned by Alibaba) announced that it acquired RedMart, an Instacart clone in Singapore.Featured Image: Africa Studio/Shutterstock