Nigeria’s YC-backed Chowdeck hopes to scale meals supply, a notoriously powerful market, with $2.5M funding

Meals is critical to Nigerians, with households spending almost 60% of their revenue on it, the very best globally, in response to official reports. This sturdy affinity for meals, coupled with the rise of on-line buying, units the stage for Nigeria’s meals supply market to potentially reach $2 billion to $3 billion by 2032.

However regardless of the promising market dimension, there isn’t a transparent chief but. Now, Lagos-based Chowdeck, backed by Y Combinator and armed with a $2.5 million in seed funding, goals to make its mark in an area that has burned heavyweights like Jumia and Bolt.

Based by Femi Aluko, Olumide Ojo, and Lanre Yusuf, Chowdeck provides customers the comfort of ordering meals — primarily ready meals but in addition some groceries from grocers and supermarkets — and having it delivered to their doorstep inside a median of half-hour. CEO Aluko shared that the inspiration for launching the startup got here from his expertise of fast deliveries and distinctive customer support throughout a piece journey to Dubai.

“Ordering meals in Nigeria would normally take one or two hours,” he mentioned. “However every time I ordered meals throughout my three-month keep in Dubai, I constantly obtained it on time. If there have been any delays, the restaurant would name me to apologize. It was spectacular to see, and I questioned if we might replicate the identical degree of service in Nigeria.”

Capturing simply a number of the present market would signify a giant enterprise for a brand new meals supply startup. Within the first half of 2023 alone, Nigerians spent over ₦60 trillion ($43.5 billion) on meals and home items, per the nation’s top agency for official statistics.

Aluko and his co-founders initially experimented with the idea through the use of a couple of bikes and partnering with two eating places. After refining their strategy, they formally launched the primary model of the product in October 2021. Since then, the platform has skilled vital progress, with greater than 3,000 riders becoming a member of and over 500,000 customers (Aluko says over 100,000 are lively month-to-month on the platform).

Much less competitors, extra progress

Chowdeck’s outstanding progress is clear, particularly in a aggressive market the place, at its launch, main gamers like Jumia Meals and Bolt Meals already had a robust foothold with hundreds of shoppers.

Moreover, given the trade’s fame for skinny revenue margins and infrastructural challenges like visitors and poor roads inflicting delays in supply occasions, the important thing query was how Chowdeck supposed to navigate these obstacles and carve out its area of interest.

Later entrants in a market have the benefit of studying from the experiences of earlier gamers. In contrast to its predecessors, Chowdeck acknowledged the significance of sustaining constructive unit economics from the outset. Whereas different meals supply platforms usually relied on excessive reductions, Chowdeck opted for a unique strategy: optimizing its enterprise mannequin to make sure sustainability by minimizing reductions and solely providing them on behalf of its associate eating places when crucial.

“We took the time to determine the proper economics for our supply enterprise, which is why we’re not large on providing unrealistic reductions,” defined Aluko, a former principal engineer at Stripe subsidiary Paystack. “This strategy saved us centered on promoting and concentrating on the proper clients fairly than making an attempt to seize everybody, which might’ve compromised our economics and advertising and marketing methods.”

By the tip of 2023, Jumia Meals and Bolt Meals had exited the Nigerian market citing various business reasons, leaving Glovo as Chowdeck’s important competitors. Each exits partly contributed to Chowdeck’s virtually twofold consumer progress throughout the final six months.

Prioritizing comfort

Aluko stresses that Chowdeck’s enchantment lies in its comfort. Whereas not essentially essentially the most cost-effective choice, he added that Chowdeck targets clients who prioritize time and are keen to pay for quick deliveries.

The startup’s supply system depends on components corresponding to geotagging, providing various automobile choices from bicycles to motorbikes, and imposing strict rules on distributors and riders. (For instance, distributors should settle for orders inside a five-minute window; failure to take action results in order cancellation and decreased precedence for the seller.)

Equally, Chowdeck employs automated processes to streamline customer-rider connections, using in-house knowledge for day by day demand forecasting and required provide evaluation. If, for example, a median rider completes eight deliveries day by day and the platform anticipates 10,000 deliveries, at the very least 1,250 riders must be accessible for that day.

Chowdeck’s logistics setup not solely advantages small meals distributors and bigger quick-service eating places like Burger King and Hen Republic but in addition extends to supermarkets corresponding to ShopRite and pharmacies. The startup, working throughout eight cities, has utilized classes from its flagship enterprise to launch supply providers in grocery store/grocery and pharmacy verticals. In 2023, Chowdeck had greater than 1,500 lively distributors throughout the three verticals; moreover, it launched a relay service for intra-city bundle motion in Lagos.

Rider earnings

Final yr, the platform’s annual gross merchandise worth (GMV) throughout these verticals stood at over ₦7 billion ($5.8 million). That October, it hit a milestone, crossing the ₦1 billion ($830,000) mark for the primary time. By March 2024, it had doubled that determine, reaching ₦2.4 billion ($2 million). Lagos generates 80% of Chowdeck’s volumes, whereas the remaining 20% comes from different cities: Abuja, Port Harcourt, Ibadan, Benin Metropolis, Ilorin, Abeokuta and Asaba.

Chowdeck, with a take price of 24%, noticed its revenues, which come from vendor commissions, service charges, surge fees and supply charges, improve by 1,200% between 2022 and 2023, in response to Aluko.

As a fast-growing enterprise, Chowdeck intends to make use of the newly raised capital to enhance its operational effectivity and lengthen its attain to extra cities throughout Nigeria. But, the on-demand supply service can be dedicated to leveraging the funding to raised the expertise for its clients, distributors, and significantly supply riders, whose earnings currently exceed three to five times Nigeria’s monthly minimum wage, Aluko famous.

“After a couple of months of constructing Chowdeck, it was clear the extent of affect we have been going to have and teething issues we might resolve at scale within the nation, particularly round earnings,” remarked Aluko. “For many individuals, together with us, it was attention-grabbing to see our riders getting paid between ₦100,000-200,000 month-to-month ($83-$170) recurrently and profitably.”

The seed spherical attracted funding from notable backers, together with YC, Goodwater Capital, FounderX Ventures, HoaQ Fund, Levare Ventures, True Tradition Funds and Haleakala Ventures. Founders corresponding to Simon Borrero and Juan Pablo Ortega (of Rappi), Shola Akinlade and Ezra Olubi (of Paystack) additionally joined the investor record.