Spotlight on the Georgian Food Delivery Market
The rise of digital technology has given customers worldwide the ability to shop online through apps and websites. According to a study done by McKinsey & Company, the food delivery market is expected to grow 14.9% annually by 2020. The market of food delivery in Georgia is definitely reshaping the traditional model where you place an order directly with the restaurant. The traditional model has proven to be inconvenient for many reasons, with restaurants unhappy with the lost expenses associated with logistics. So why is it that many still hold back from joining online delivery platforms? With the rise of delivery apps, restaurants can actually serve more customers at far lower costs.
The food delivery service offers unique new business opportunities to the Georgian market. Companies are always looking to make dining experiences more customized, with a personalized touch. As the market matures, the food delivery industry is becoming saturated. New online platforms are on the rise, trying to capture customers across the regions, expanding choice and convenience by offering a wide range of restaurant options just a single tap away. Yet, there are still many customers not fully utilizing the ease of having dinner delivered right to their door. Could this be attributed to the culture of Georgians who would rather dine out than spend money on delivery? Customers, especially in other cities of Georgia, may perceive ordering online as a luxury. Or is it that people are still accustomed to the traditional way of ordering?
To learn more about the market characteristics, business model behind delivery services and potential of the market, GEORGIA TODAY spoke to market leader, co-founder of Menu Group UK and director of Menu.ge, Stepan Aslanyan.
Menu.ge has been operating on the market for four years. Tell us about your experience
We initially started with only one team member and have increased to over 300 people in our Georgian team. Four years ago, the food delivery market was at a newborn stage. Before we entered the market, our previous competitor was already operating. But food delivery was not a usual thing for the Georgian market. It is still not typical and is currently progressing on a daily basis, but we have come a long way and see potential for the future.
How is the number of people ordering food at home increasing?
We feed around 5,000 people per day, but this is still a small amount. Per month, we’re gaining more than 10,000 new customers, and these customers are mostly those ordering for the very first time. Many still do not understand or see the benefit of a food delivery service as they are not used to it. Which is why some still hold back, perhaps on the misconception that typical Georgian food cannot be delivered to their door.
How does Menu.ge operate in the capital and in the regions?
The main turnover of HORECA business as well as food delivery is located in Tbilisi. However, potentially, all the cities that have restaurants in place with locals visiting leads us to believe that the delivery market can very well exist there. We already operate in seven other cities of Georgia, but more than 90% of business is placed in Tbilisi.
You recently launched a new website. Tell us about it
We launched a new website and new mobile application for Apple and Android. It is cardinally different from our previous system as we implemented AI technology to calculate the real estimate delivery time from a specific restaurant to a specific location. This does not only take into account the distance, but also the type of food being prepared and the amount of time it takes. However, this is still at the early stage and we are constantly working to develop and improve it. It is much better than our old version and our customers now have the chance to decide whether they want the food delivered in 15 minutes or can wait 45 minutes to order from a restaurant located further away or order food that takes longer to prepare.
What is the demand for delivery services in Georgia via online and mobile app?
If we compare the situation to 3-4 years ago, 90% of our customers order online, which is split into 50% website and 50% application orders. However, there is a difference when people order during the day as they are using their computers compared to the evening time when customers are using their mobile phones.
What are the major expenses for your company?
80% of our expenses are attributed to salaries.
Tell us about negative feedback Menu.ge has received on social media
HORECA and the delivery market is like a live organism and we observe many cases that can lead to failure. For instance, we have about 100 car or scooter accidents per month. Other reasons are attributed to technical problems, for instance bad internet connection or failure to find the correct address. Nowadays, less than 1% are failed orders, but sometimes even this 1% can be a lot. We always try to identify the situation and instead of removing negative comments from social media platforms, we try to find the problem and fix it. Our mission is to always take action and constantly improve.
How was Foodpanda acquired by Menu.ge?
Last year, FoodPanda left more than three countries, and Georgia was one of them. The exact price of the acquisition is non-disclosable but, at the moment FoodPanda was acquired, we had an investment of around $3 million as compared to their investment of EUR 2 billion. We managed to buy out FoodPanda because we offered them a large sum of money, but simply because they were leaving the market and we took action to speed up the process of their closing their operations. FoodPanda operates well on some markets, but not all business models of delivery service work with every country.
A few months ago, Menu.ge was audited and caught the interest of the Tax authorities. What turnover are we talking about?
Yes, there is a lot of interest because last year we started to have a 7-digit number of turnover per month which, for the HORECA market, is certainly no small amount. We are still in audit since September.
Menu Group received investments in the new round of about $3 million USD. Who are the current investors?
The main investors we had last year were a few US Venture Funds. One was a founder of a Russian delivery service who later sold the company to open a venture fund and invest in us.
Who are your biggest competitors and how is Menu.ge different from them?
I do not consider them as ‘competition,’ but rather an increase in the market of delivery and quality of our services. The market is very small right now, but there is potential to be bigger. Around 70% of restaurants do not even understand the benefits of delivery services.
They don’t see the coming consequences of the May 1 smoking ban. Around 25-35% of restaurant turnover is delivery, but many perceive that this will lead to a decrease in their sales. However, the market proves that it is always the opposite. Restaurants do not lose customers this way; it can actually increase their sales. Some customers are not even aware of these restaurants until they see them on our website.
We have always had competitors in the market: we just took a big share of the market by constantly delivering high quality services.
What is your long-term strategy in Georgia and internationally?
Our plan in the Georgian market is to make our services more useful and expand our customer base. Our plan is to offer a wider range of restaurants and a cheaper delivery service. We already have a free delivery service for some restaurants and we are available 24/7, except New Year’s Eve, in all areas of Tbilisi. Our strategy is to increase the quantity of high- and low-level restaurants and be available for everyone, everywhere. As for internationally, we already operate in Armenia and Belarus and are preparing to enter another market. It is not yet finalized, but we are in the process of expanding.
By Anna Zhvania