Food is very essential to Nigerians – households spend almost 60% of their income on it, the highest amount in the world – according to a study official reports. This robust passion for food, coupled with the rise of online shopping, is setting the stage for the Nigerian food delivery market potentially reach $2-3 billion by 2032
Despite the promising market size, there is no clear leader yet. However, based in Lagos Chowdeckbacked by Y Combinator and armed with $2.5 million in seed investments, aims to make its presence felt in a space that has they burned heavyweights like Jumia and Screw.
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. Aluko’s CEO said he was inspired to launch the startup after his experience with swift deliveries and exceptional customer service during a business trip to Dubai.
Aluko explained: “Ordering food in Nigeria usually took one or two hours. But every time I ordered food during my three-month stay in Dubai, I always received it on time. If there were any delays, the restaurant would call me to apologize. It was impressive and I wondered if we could replicate the same level of service in Nigeria.” In the first half of 2023 alone, Nigerians spent over ₦60 trillion for food and household products, per country the best official statistics agency.
Aluko and his co-founders initially experimented with the concept, using several bicycles and partnering with two restaurants. After refining their approach, they officially launched the first version of the product in October 2021. Since then, the platform has seen significant growth, with over 3,000 users joining and over 500,000 users (Aluko claims over 100,000 are dynamic on the platform).
Less competition, more development
Chowdeck’s remarkable growth is evident, especially in a competitive market where major players such as Jumia Food and Bolt Food already had a robust presence among thousands of customers at the time of launch.
Additionally, given the industry’s reputation for low profit margins and infrastructure challenges such as traffic and bad roads causing delays in delivery times, a key question was how Chowdeck was going to overcome these obstacles and find its niche.
Later market entrants have the advantage of being able to learn from the experiences of earlier entrants. Unlike his predecessors, Chowdeck recognized from the beginning the importance of maintaining a positive unit economy. While other food delivery platforms often relied on steep discounts, Chowdeck opted for a different approach: optimizing its business model for sustainability by minimizing discounts and offering them on behalf of its partner restaurants only when necessary.
“We’ve taken the time to figure out the right economics for our delivery business, so we’re not substantial on offering unrealistic discounts,” explained Aluko, former chief engineer at Stripe subsidiary Paystack. “With this approach, we focused on sales and reaching the right customers rather than trying to win over everyone, which could have jeopardized our economics and marketing strategies.”
By the end of 2023, Jumia Food and Bolt Food had exited the Nigerian market citing different business reasons, leaving Glovo as Chowdeck’s main competition. Both exits have partially contributed to Chowdeck’s user base almost doubling over the past six months.
Comfort priority
Aluko emphasizes that the Chowdeck’s appeal lies in its comfort. While it’s not necessarily the most cost-effective option, he added that Chowdeck is aimed at time-sensitive customers who are willing to pay for swift delivery.
The startup’s delivery system relies on factors such as geotagging, offering a variety of vehicle options from bicycles to motorcycles, and enforcing strict regulations on sellers and passengers. (For example, suppliers must receive orders within five minutes; failure to do so leads to order cancellation and reduced supplier priority.)
Similarly, Chowdeck uses automated processes to streamline customer-passenger connections, using internal data for daily demand forecasting and required supply assessments. For example, if the average passenger makes eight deliveries a day and the platform anticipates 10,000 deliveries, there must be at least 1,250 passengers available on that day.
Chowdeck’s logistics structure not only benefits diminutive food retailers and larger quick-service restaurants like Burger King and Chicken Republic, but also extends to supermarkets like ShopRite and pharmacies. The startup, which operates in eight cities, used learnings from its flagship company to launch delivery services in the supermarket/grocery store and pharmacy industries. In 2023, Chowdeck had over 1,500 dynamic suppliers across three industries; additionally introduced a relay service for intra-city parcel flow in Lagos.
Rider’s earnings
Last year, the platform’s annual gross merchandise value (GMV) in these industries was more than 7 billion yen ($5.8 million). In October this year, it reached a milestone by crossing the 1 billion yen ($830,000) mark for the first time. By March 2024, it had doubled that number to 2.4 billion yen ($2 million). Lagos generates 80% of Chowdeck’s volume, the remaining 20% comes from other cities: Abuja, Port Harcourt, Ibadan, Benin City, Ilorin, Abeokuta and Asaba.
According to Aluko, Chowdeck’s revenues, with a collection rate of 24%, which come from vendor commissions, service fees, ancillary fees and delivery fees, will escalate by 1,200% in 2022-2023.
As a rapidly growing company, Chowdeck intends to operate the newly raised capital to improve its operational efficiency and expand its reach to more cities across Nigeria. Still on-demand delivery service is also committed to using its investments to improve the experience of its customers, suppliers and especially carriers earnings now exceed three to five times the monthly minimum wage in Nigeria– Aluko noticed.
“After a few months of building Chowdeck, it was clear what kind of impact we would have and what initial problems we would be able to solve on a immense scale in the country, especially in terms of wages,” Aluko noted. “For many people, including us, it was compelling to see how our riders made money in between ₦100,000-200,000 per month ($83-170) regularly and profitably.”
The seed round attracted investments from notable backers including YC, Goodwater Capital, FounderX Ventures, HoaQ Fund, Levare Ventures, True Culture Funds and Haleakala Ventures. Founders such as Simon Borrero and Juan Pablo Ortega (of Rappi), Shola Akinlade and Ezra Olubi (of Paystack) also joined the investor list.
