Bengaluru: Ride hailing service Ola (ANI Technologies Pvt. Ltd) has shut down its food delivery business Ola Café, a year after launching it in Delhi, Mumbai, Bangalore and Hyderabad. The Café tab has now disappeared from the Ola app.

Mint reported on 2 March that the company was likely to shut Café and its hyperlocal grocery delivery service, Ola Store, in a month. Ola launched the grocery delivery business in three cities—Bengaluru, Hyderabad and Gurgaon—in June last year with a separate app.

According to two people aware of the development, though Ola Café scaled up in the first few months after the launch, it failed to meet expectations as the vertical faced stiff competition from other food delivery businesses such as Swiggy (Bundl Technologies Pvt. Ltd), Tinyowl Technology Pvt. Ltd and Zomato Media Pvt. Ltd.

Unlike others, who offer customers the entire menu of a restaurant to choose from, Ola used to offer a few particular items from a handful of restaurants in the consumer’s vicinity, as the focus was on quick delivery more than providing consumers an array of options. Ola’s cab drivers used to buy food from the partner restaurants and drove around, delivering whenever there was an order from a nearby locality, said one of the two persons cited above.

Expansion for Ola Café had been frozen for the last four to five months, said this person.

Ola did not respond to an email seeking comment till the filing of this report.

Food delivery has proved to be an expensive proposition for start-ups, which are losing money on every delivery fulfilled. The average order value in India is about 300. While the delivery companies charge restaurants about 10-15% of the order value on an average, the cost of delivery is no less than 50, said several industry executives.

With a slowdown in funding since late last year, a number of food tech start-ups have either shut shop or have been acquired. While Internet-first kitchen Spoonjoy (Emvigo Technologies Pvt. Ltd) was bought by hyperlocal delivery start-up Grofers (Locodel Solutions Pvt. Ltd) in October last year, another start-up, Dazo, shut shop the same month. Eatlo Tech Solutions Pvt. Ltd closed down in December.

InnerChef, which operates in the ready-to-cook and ready-to-eat meals segments, has acqui-hired two food start-ups, Flavour Labs in Gurgaon and EatOnGo in Bengaluru.

Bigger businesses such as Zomato and TinyOwl have pruned their workforce. While Zomato laid off about 300 employees in October last year, TinyOwl let go off more than 200 employees between September and November last year.

Though Ola entered the food delivery business following in the footsteps of bigger rival Uber Inc., which launched UberEats in Los Angeles in 2014, it is likely to focus on cabs for the time being. Uber is fast catching up on Ola in India, said the people cited above.

In July last year, Uber said the company will invest as much as $1 billion in India in six to nine months. Ola, which acquired smaller rival TaxiForSure in March last year to wrest market share from Uber, has so far raised close to $1.2 billion from Tiger Global management, DST Global and SoftBank, among others.

The two companies have been rolling out services such as ride sharing, carpooling and even bike taxis and slashing fares in an attempt to acquire customers. To be sure, Ola has a far bigger penetration in India with a presence in 102 cities, as against 29 cities for Uber.

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