Food is of great importance to Nigerians. According to official reports, households spend almost 60% of their income on it, the highest in the world. This strong affinity for food, coupled with the increase in online shopping, is setting the stage for the food delivery market in Nigeria to potentially reach $2 billion to $3 billion by 2032.
Despite the promising market size, there is still no clear market leader. However, Lagos-based Chowdeck is looking to make its mark in a space where this is the case with the backing of Y Combinator and a $2.5 million seed investment burned heavyweights like Jumia and Bolt.
Founded by Femi Aluko, Olumide Ojo and Lanre Yusuf, Chowdeck offers consumers the convenience of ordering groceries and having them delivered to their doorstep within an average of 30 minutes. CEO Aluko shared that the inspiration for launching the startup came from his experience with fast deliveries and exceptional customer service during a business trip to Dubai.
Aluko explained: “In Nigeria, ordering food usually takes one to two hours. But every time I ordered food during my three-month stay in Dubai, I received it on time. If there was a delay, the restaurant would call me and apologize. It was impressive to see and I wondered if we could achieve the same level of service in Nigeria.” In the first half of 2023 alone, Nigerians overspent ₦60 trillion per year for food and household items the country’s leading official statistics agency.
Aluko and his co-founders initially experimented with the concept by using a few bikes 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 more than 3,000 joins and over 500,000 users (according to Aluko, over 100,000 are active on the platform).
Less competition, more growth
Chowdeck’s remarkable growth is evident, especially in a competitive market where major players like Jumia Food and Bolt Food already had a strong presence with thousands of customers when it launched.
Given the industry’s reputation for low profit margins and infrastructural challenges such as traffic and poor roads causing delays in delivery times, the key question was how Chowdeck was going to overcome these obstacles and carve out its niche.
Later market participants have the advantage of learning from the experiences of earlier market participants. Unlike his predecessors, Chowdeck recognized from the beginning the importance of maintaining positive unit economics. While other food delivery platforms often relied on deep discounts, Chowdeck decided to take a different approach: optimizing its business model to ensure sustainability by minimizing discounts and offering these discounts on behalf of its partner restaurants only when necessary.
“We took the time to find the right economics for our delivery business, which is why we don’t put much emphasis on offering unrealistic discounts,” explained Aluko, a former chief engineer at Stripe subsidiary Paystack. “This approach allowed us to focus on selling and targeting the right customers rather than trying to win everyone, which could have jeopardized our profitability and marketing strategies.”
By the end of 2023, Jumia Food and Bolt Food had exited the Nigerian market for various business reasons, leaving Glovo as Chowdeck’s main competitor. Both exits contributed in part to Chowdeck seeing double user growth in the last six months.
Put convenience first
Aluko emphasizes that Chowdeck’s appeal lies in its convenience. While not necessarily the most cost-effective option, he added that Chowdeck targets customers who value time and are willing to pay for quick deliveries.
The startup’s delivery system is based on factors such as geotagging, offering various vehicle options from bikes to motorcycles, and enforcing strict regulations for providers and drivers. (For example, vendors must accept orders within a five-minute window. Otherwise, the order will be canceled and the priority for the vendor will be reduced.)
Similarly, Chowdeck uses automated processes to optimize customer-driver connections and uses internal data for daily demand forecasting and required supply assessment. For example, if an average driver makes eight deliveries per day and the platform expects to make 10,000 deliveries, there must be at least 1,250 drivers available for that day.
Chowdeck’s logistics structure not only benefits small food vendors 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, has used lessons learned from its flagship business to launch delivery services in the supermarket/grocery and pharmacy industries. In 2023, Chowdeck had more than 1,500 active providers across the three industries; In addition, a relay service for intra-city parcel transport was introduced in Lagos.
Driver earnings
Last year, the platform’s annual gross merchandise value (GMV) in these industries exceeded 7 billion yen ($5.8 million). In October this year, it reached a milestone, crossing the 1 billion yen ($830,000) mark for the first time. By March 2024, this number had doubled, reaching ₦2.4 billion (US$2 million). Lagos generates 80% of Chowdeck volume while the remaining 20% comes from other cities: Abuja, Port Harcourt, Ibadan, Benin City, Ilorin, Abeokuta and Asaba.
According to Aluko, Chowdeck saw a 1,200% increase in sales between 2022 and 2023, with an acquisition rate of 24%.
As a fast-growing company, Chowdeck intends to utilize the newly raised capital to improve its operational efficiency and expand its reach to more cities across Nigeria. Still those On-demand delivery service is also committed to leveraging the investment to improve the experience for its customers, suppliers and especially delivery drivers, whose income currently exceeds three to five times Nigeria’s monthly minimum wage, Aluko said.
“After a few months of building Chowdeck, it was clear the impact we would have and the teething problems we could solve on a large scale in the country, especially in terms of revenue,” Aluko noted. “For many people, including us, it was interesting to see how our drivers were paid in between ₦100,000-200,000 monthly ($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 like Simon Borrero and Juan Pablo Ortega (of Rappi), Shola Akinlade and Ezra Olubi (of Paystack) also joined the investor list.