India's largest cab aggregator Ola on Tuesday announced the acquisition of food-tech company Foodpanda's India business in exchange for Ola stock.
The deal has been in the making for a quarter now and underlines what to expect in 2018: More big ticket consolidation as investors look for exits and poorly run firms get kicked out of the system.
Why Ola acquired Foodpanda, which has gone through many ups and downs, may seem surprising to begin with. However, it begins to make sense when you think of both as essentially logistics businesses.
Ola is a platform play. Foodpanda, which aggregates restaurants also is one, but at a much smaller scale. The food tech firm is present in 100 cities and has 15,000 restaurants on its platform. Ola, in contrast, is in 110 cities with nearly a million cabs or drivers. Such scale generates many capabilities, such as better inventory optimization and product experience. Neither Zomato, or Swiggy, Foodpanda's primary rivals in India, will have the advantage of Ola's scale.
The acquisition is a diversification for Ola, a company that is building big data capabilities. Going ahead, there will be cross-selling opportunities. A customer who is dropped home late, may need a midnight snack, or someone who reaches office at noon, would require a quick lunch.
Ola said it would invest $200 million into Foodpanda's India business. Expect the app experience to improve. The food tech firm, will press the growth accelerator from now on. How Ola helps it achieve that without burning too much cash, will determine the success of this acquisition.