foodpod: prelude
the history and future of food delivery in Africa
Welcome to foodpod, a limited series about the history and future of food delivery in Africa. Ahead of the food delivery panel at Moonshot 2024, I’m releasing the intro to Chapter 1—about the opportunity (or not) for delivery in Nigeria 🇳🇬
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I’m often reminded of British science fiction writer Arthur Clarke’s third law (1968): “Any sufficiently advanced technology is indistinguishable from magic.”
How else would you describe the fact that I can tap the pane of glass in my hand, and atoms miles away will move to deliver what I want? My ancestors would have cooked up some fascinating explanations.
The African technology ecosystem has invested billions of dollars and millions of hours to transform the continent using magic. Africa has many problems; some, of its own making. But one reason for optimism in the past decade has been that you can start solving them with technology. Software has eaten communications, payments, credit, transportation, commerce, and a host of other sectors on the continent.
Perhaps it is time for software to eat food:
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🤔 Something feels… different about food delivery in Nigeria. In 2017, Jumia Food served three major cities: Lagos, Abuja, and Port Harcourt, with a fleet of just 80 delivery riders. Today, Chowdeck, a startup founded in 2021, less than three years ago, has over ten thousand riders making around forty thousand deliveries per day. Glovo, the Spanish multi-category delivery service, also launched in Nigeria the same year, after scaling in Morocco, Kenya, and Cote d’Ivoire.
It’s not just those two: delivery riders have become a constant feature of the Lagos city landscape. The COVID pandemic created the conditions necessary for many–people and businesses alike–to integrate delivery into their lives for the first time. And in the years since, a wave of new entrants (incl. FoodCourt, Chowcentral, Heyfood, GoLemon, MANO, Shoppr, Dropper, etc.) launched promising to deliver food and groceries to Nigerians quickly and/or conveniently. Of course, none of this is new: these problems have been tackled many times before. The difference is that today, delivery has reached a level of cultural penetration we haven’t quite seen before.
Between 2021 and 2024, Nigerian online food delivery grew at a compound annual growth rate (CAGR) of 187%(!), according to Paystack, which processes payments for all the major players in the space. In the same period, Y-Combinator accepted seven food tech startups from Africa into its accelerator; five of them enable food delivery. But perhaps the biggest evidence of this penetration is the fact that music artists like Ayra Starr and Tems have started experimenting with delivery platforms as a means of fan engagement:
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Profit v. Promise
The premise of food delivery is simple: that a restaurant can maximize the value from its kitchen by serving as many people as possible–many more than the dining area can take. Food delivery platforms write software to generate demand, handle payments, and facilitate the final meal delivery. For their trouble, they take a fee on each order, typically 20-30%.
But unlike pure software businesses, moving atoms also means incurring marginal costs: restaurants, riders, agents/support staff who must be paid to facilitate each transaction. No surprise, then, that logistics startups globally struggle to turn a profit. They trade off short-term earnings for a chance to build loyalty with customers.
Uber reported its first ever annual profit in Feb 2024–fifteen years after it was founded. DoorDash 🇺🇲, DeliveryHero 🇩🇪 (Glovo parent company), foodpanda 🇸🇬 (DeliveryHero subsidiary), iFood 🇧🇷 and Rappi are all still in the red after over a decade operating.
In Africa, Jumia and Bolt exited the delivery business last year, citing rising operational costs and “challenging market dynamics”.
There is also the small issue of a difficult macro-economic environment across the continent. Nigerians, in particular, have lost more than half their spending power in the past year alone as the naira continues to weaken against the dollar. And yet, like living costs, delivery numbers keep trending up and to the right.
So, has the market fundamentally changed? Will the new entrants make it to scale? Or will they follow their predecessors and flame out in a couple of years?
Can you build a business selling convenience in a market where money is more costly than time?
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foodpod is produced by The Subtext, in partnership with Paystack.
Edited by Ope Adedeji
Great read, very well-written
This is really a good read.