Food is important to Nigerians, with households spending almost 60% of their income on food, the highest level worldwide, according to official reports. With this strong affinity for food and the rise of online shopping, Nigeria's food delivery market could reach $2-3 billion by 2032.
Despite the promising market size, there is still no clear leader. But backed by Y Combinator and armed with a $2.5 million seed investment, Lagos-based Chowdeck is looking to make its mark in a field that has produced heavy hitters like Jumia and Bolt.
Founded by Femi Aluko, Olumide Ojo, and Lanre Yusuf, Chowdeck offers consumers the convenience of ordering food and having it delivered to their doorstep within an average of 30 minutes. CEO Aluko said the inspiration to launch the startup came from his experience with fast deliveries and excellent customer service during a business trip to Dubai.
Arko explained: “Ordering food in Nigeria usually takes an hour or two. But every time I ordered food during my three-month stay in Dubai, it always arrived on time. If there was a delay, I received a phone call from the restaurant apologizing. It was impressive and made me wonder if the same level of service could be replicated in Nigeria.'' According to the country's top official statistics agency, Nigerians… More than £60 trillion was spent on food and household goods in the first half of the year alone.
Arko and his co-founders initially experimented with the concept using a few bikes and partnering with two restaurants. After refining our approach, we officially released the first version of our product in October 2021. Since then, the platform has grown significantly, joining over 3,000 riders and adding over 500,000 users (according to Aluko, he has over 100,000 active users on the platform).
Less competition, more growth
Chowdeck's impressive growth is particularly evident in a highly competitive market where major players such as Jumia Food and Bolt Food already had a strong foothold with thousands of customers at the time of launch.
Additionally, given the industry's reputation for thin profit margins and infrastructure challenges where traffic jams and poor roads cause delivery delays, a key question is how Choudek can overcome these obstacles to create a niche market. The question was whether there were any plans to develop the business.
Late entrants to the market have the advantage of learning from the experiences of early players. Unlike his predecessors, Chowdeck recognized the importance of maintaining positive unit economics from the beginning. While other food delivery platforms often rely on steep discounts, Choudek chose a different approach. We have optimized our business model to ensure sustainability by minimizing discounts and providing discounts on behalf of partner restaurants only when necessary.
“We've taken the time to understand the right economics for our delivery business, so we're not aggressive about offering unrealistic discounts,” said the former principal engineer at Stripe subsidiary Paystack. Aluko explains. “This approach has allowed us to stay focused on selling and targeting the right customers, rather than trying to acquire every customer. This allows us to improve our economics and marketing strategy. It could have been damaged.”
By the end of 2023, Jumia Food and Bolt Food had exited the Nigerian market citing various business reasons, leaving Globo as Chowdek's main competitor. Both exits partially contributed to Chowdeck's nearly doubling of user numbers over the past six months.
Prioritize convenience
Aluko emphasizes that Chowdeck's appeal lies in its convenience. Although not necessarily the most cost-effective option, Chowdek targets customers who prioritize time and are willing to pay for quick delivery, he added.
The startup's delivery system relies on factors such as geo-tagging, offering a variety of vehicle options from bicycles to motorcycles, and strict regulations for vendors and passengers. (For example, a vendor must accept his order within 5 minutes, otherwise the order will be canceled and the vendor's priority will be lowered.)
Similarly, Chowdeck employs automated processes to streamline customer and passenger connections and leverages internal data for daily demand forecasting and assessing needed supply. For example, if an average rider completes 8 deliveries each day and the platform predicts his 10,000 deliveries, he must have at least 1,250 riders available that day.
Choudek's logistics system benefits not only small food retailers and large quick-service restaurants such as Burger King and Chicken Republic, but also supermarkets and pharmacies such as Shoprite. The startup, which operates in eight cities, applied lessons learned from its flagship business to launch delivery services in the supermarket, grocery store, and pharmacy spaces. As of 2023, Chowdeck had over 1,500 active vendors across three industries. Additionally, we have introduced a relay service for moving luggage within Lagos.
rider income
Last year, the platforms' annual gross merchandise value (GMV) in these sectors exceeded £7 billion ($5.8 million). In October of the same year, it reached a milestone by surpassing the £1 billion ($830,000) mark for the first time. By March 2024, that figure had doubled to £2.4 billion ($2 million). Lagos produces 80% of Chodek's production while the remaining 20% is produced in other cities (Abuja, Port Harcourt, Ibadan, Benin City, Ilorin, Abeokuta, Asaba).
Choudek's profit margin is 24%, and revenue from vendor fees, service fees, surge fees and shipping fees grew 1,200% between 2022 and 2023, Aluko said.
Choudek, a fast-growing company, plans to use the new funding to improve its operational efficiency and expand its reach to more cities across Nigeria. But on-demand delivery services are also committed to leveraging their investments to improve the experience of customers, vendors and especially delivery workers, whose incomes are currently three to five times Nigeria's monthly minimum wage. Mr. Aluko pointed out that the
“After several months of building Chowdeck, it was clear to us the level of impact we would have and the emerging problems we could solve at scale domestically, especially in terms of revenue,” Aluko said. I did. “For many, including us, it was interesting to see that our passengers regularly and profitably receive salaries of ₦100,000 to 200,000 ($83 to $170) per month. ”
This seed round attracted investment from notable backers including YC, Goodwater Capital, FounderX Ventures, HoaQ Fund, Levare Ventures, True Culture Funds, and Haleakala Ventures. Founders such as Simon Borrello and Juan Pablo Ortega (Lappi) and Shola Akinlade and Ezra Orbi (Paystack) also joined the investor list.