Pop Meals (formerly DahMakan) is a Malaysia-based ‘full-stack’ food delivery startup. The company's online food ordering application lets users to order fresh, healthy and ready-to-eat lunch and dinner meals made by culinary chefs from a daily changing menu and get them home or office delivered, enabling customers to have balanced meals delivered at their door step.
Techcrunch noted on 27 February 2020: “Operational costs for food delivery companies are notoriously high and eat away at profitability, but Pop Meals is among several startups that use “cloud” kitchens, located closer to customers, to reduce delivery costs. The foundation of the startup’s full-stack platform is an operating system that controls nearly every step of its operations, from recipe development to last-mile delivery, and its cloud kitchens are part of “satellite” hubs placed around different cities to be closer to customers. Instead of delivering from restaurants, Pop Meals creates its own meals, offering about 40 options each week from a database of 2,000 dishes. It selects its weekly menu based on customer data, including food preferences and spending habits, along with market research.”
Most Recent Financing Status (as of 05-May-2020)
The company raised $18 million of Series B venture funding from Rakuten Capital, Woowa Brothers and Korea Investment Partners on February 27, 2020. White Star Capital, JAFCO Investments Asia, Partech Partners, Y Combinator and Golden Equator Capital also participated in the round. The company plans to use the new funds to further develop the operating system that powers its end-to-end business. (source: Pitchbook)
PC: Jonathan, how would you describe what Pop Meals does?
JW: We call it an end to end, fully vertically integrated food delivery service. So, we allow customers, typically office workers, to order ready to eat hot meals delivered to them, no matter where they are, through our website or our app. I guess the really unique thing is really that we control the entire value chain. It starts with the sourcing, so we select our own ingredients, source in bulk so we can get significantly better prices than restaurants, and then we make our own food. We have a central kitchen and a bunch of satellite kitchens. We also control the last steps of delivery to the customer. Technologies are developed in-house, we do our own marketing, and as an end result, we can save a lot of costs across the value chain and then we can pass that savings onto the customer to make it much more affordable than was possible in the past.
PC: Was this the model that you had in mind when you founded the company? The original idea was doing the end to end service in the way that you've just described it?
JW: Yes. So, I was previously working with a food delivery marketplace in Southeast Asia, and one of the big learnings was really that food delivery is going to be incredibly big, worldwide, especially in Southeast Asia. So yes, we were looking to how can we could build the food delivery brand that really takes advantage of all of this new setup. We have learned so much along the way, and heavily moved across different operating models. The mission statement remains the same. We have learned a lot in terms of how the supply chain works, we had some delivery experience but definitely not as much real cooking experience, especially larger scale operating experience on the food side, so there have been a lot of learnings and tweaks because again, we're doing something very new. There are a bunch of role models we're taking from different industries and different companies within different segments within the industry, but a lot of the stuff we had to puzzle together.
PC: Was it you on your own that founded the company? Do you have any co-founders or partners?
JW: There are three co-founders including myself. I'm the CEO taking care of marketing, fundraising, HR and operational aspects, then cofounder Jessica Li is COO, who is taking care of the entire food side. Then our CTO, Christian Edelmann, focuses on technology, product and a lot on the operations side, because we use technology across the entire chain. The app and the website are really only around 10% of the technology we use.
PC: When did you found the company?
JW: In 2015 we were bootstrapping. We cooked food ourselves, we delivered ourselves. Just to find out what the customers wanted.
PC: How did you do everything yourselves? How did you scale in the early days and get the word out? Was it just word of mouth? Did you find that you had a few initial customers that would just try this bootstrapped homegrown service and they liked it? Was it the food that tasted great? Or did you focus on the speed of delivery? What was the thing you prioritised to ensure that people would talk about it to get the word out?
JW: Definitely not the speed of delivery. At the start you had to pre order and there was a lot of friction. Essentially, we got the first customers from going on the street, and just talking to people, going into cafes where we thought ‘okay, this could be a potential customer’ during lunchtime. We would see someone, and give them a card with our website URL. One of the big memories for me was one of the customers who was from London, based in Kuala Lumpur…we told him about the service and he said he would definitely order. I thought ‘okay because he's just nice guy, he’s just saying that’, and the next day we saw he placed an order. First, he ordered for himself for the whole week, by our pre-ordering model. Then he started ordering for his fiancee and co-workers, so it was incredible, we couldn't believe it. So that's how we spread the word, organic referrals.
PC: And then you raised your first round in 2018 of $2.6 million. Was that the first financing round?
JW: So, we first had several smaller five figure USD amounts to get the business going, so we could get a bit of day to day operations going, to hire someone who supplies the groceries and ingredients. Our first institutional round was then a couple of family offices/micro VCs. Then we got into Y Combinator, which was super exciting for us as a company as we were the first Malaysian startup in Y Combinator. This helped us onto the global scene so from there we also were able to connect more with global investors. I think now we have received a good mix of VC money, some Silicon Valley based as well as Southeast Asia based VCs. We have some incredible angels, industry experts, and another very high-profile angel investor from one of the largest catering companies in the world, who invested, and obviously that helped to nurture the network among these critical areas.
PC: What do you think it was that attracted Y Combinator in the early days, what did they see in you?
JW: Typically YC is really early stage, so what they're looking for is the team, right. You have multiple co-founders, and they definitely loved the stories of us doing everything ourselves, thinking really small in a sense…including doing things that don't scale immediately, growing through the early grind. I grew up in Germany, Belgium, Netherlands, the same as my other cofounders, and we started this in Malaysia in a different market. I think this gave him a lot of confidence that we can get not just through the good times, but we’re also willing to take the difficult things. We also had a good product, very strong metrics and attractive user behavior.
PC: How do you think you overcame the concerns of a competitive market?
JW: I think it's really because we are a food brand, not a logistics company. So, it's definitely not like a Facebook or LinkedIn type where it's winner takes all. The food space is a massive trillion dollar market. If you think about the fast food chains and billion dollar companies that essentially have the same product line up, like a McDonald's, Burger King, Wendy's, Five Guys, all these kinds of billion dollar companies are essentially doing the same thing. So, I think that when it comes down to it, it’s all about how well you are executing, how good is your product and how your users respond, and that's how you differentiate.
PC: Can you tell me a bit about your plans for the next couple of years? How do you see the next one, two three years?
JW: I think what we see is right now we are we at bit of an inflection point, especially on the operations side, because a lot of the pieces and technologies are pretty hard to build. We spend a lot of time and resources on getting that right. In essence we are about to combine all of these pieces. This allows us to achieve an inflection point in terms of product offering and service quality and grow in Malaysia, and Thailand which is our second market, but then also to go beyond these countries. The first step is other cities, then the next step is across the region. One very big step we are making in terms of the business model is moving into a franchising model, which allows us to scale differently than just a corporate structure.
PC: How important in your mind is the quality of the food or the fact that maybe the food is a bit more healthy than other alternatives? How important do you think that is to the customer?
JW: So, we broke into the market with a healthy food offering, but we have since then very much diversified the product offering, so now you will find on our website fried chicken, bubble tea etc.
PC: Did you do that because the customer was asking? Did you find people said ‘why don't you have this kind of food’, so you've added it because of demand?
JW: Yes, I think what we realized first was to find a very niche target customer, like many other companies do it that way. For example, Facebook initially started as a student offering right at Harvard, then later looking to other schools and settings. People like to eat healthy on a Monday or Tuesday but then the rest of the week it’s more heavy in a sense. So I think that was a big realization in the early days, we wanted to offer a service that you can use on a frequent basis and helps to make life easier, so we realised we needed to offer other products.
PC: So the diversity of product ranges is important. What about the taste the taste of the food, very important?
JW: Yes super important, because if they like it, they want to order more.
PC: Do you have enough data to be able to see what the return or churn rate is? Are you able to track the return rates? Do most customers continue ordering?
JW: Yes, I think that's a beautiful thing about online, right? We can track on a dish level, you know, and we can look as granular as ‘this customer wanted that dish, then they gave this rating, and then what did they want next? What was their following behaviour’? I think we have very different users; some are more casual users then you have some really heavy users. It sounds crazy but we have guys that have ordered 200 times, 500 times and it’s amazing, that's more than I’ve eaten our food! I think that's super interesting. I think also that this is a huge aspect in terms of how we can help to evolve the industry, because you have so much data that was previously inaccessible. In a restaurant, it's very difficult to get really good data on what people think about the foods on an aggregated or real-time, significant basis.
PC: Coming back to this question of the food itself, you would have had a choice in the beginning to partner with restaurants to have their branded food. As I understand it, you may use the space of certain restaurants where you can cook the food locally in a local kitchen as part of the cloud kitchen concept. But you would have had the choice to partner to deliver that branded food, but you decided you're going to create your own brand, have your own food, is that because you had an instinct that that was the right thing to do? Or you wanted to be in control that if you could find the right chefs, the right equipment and the right way to cook the right food with the right recipe. You could control the taste and the quality of the food?
JW: Exactly. So, one of the big theories that we’re built on is that by getting the scale we can also get the highest caliber of chefs. We'll be able to attract them, bring them into our kitchen, and use data to create with them the most amazing dishes. That's really the one of the fundamentals.
PC: So how did you attract some of the better chefs as you say? To create the best tasting food, but do that economically without too high of a cost, because most restaurants, if they're paying for the better chefs, then there's a higher cost and then there's a higher price at the other end so how are you able to do that cost effectively?
JW: So typically in most restaurants there aren’t even chefs themselves cooking, much more like their chef comes in as a consultant to design the menu, and then he creates the first SOPs, trains the staff and then you have regular kitchen staff, but definitely not like asking for 10 years’ chef experience. Normally there are 50, 100, 200 people in a restaurant, so the unit economics don’t work, whereas we are very different because we have scale, so I can stretch the expensive chef salaries to many more meals at the same time, and also get them to focus more on using all the feedback from the customers to continuously improve the food. That's very, very crucial. I think the other way we attract amazing chefs is this ability to have much bigger impact. We are not afraid to put our chefs out there. When some restaurants are very scared someone will steal their chefs in the kitchen, we are very different. So, we have an app where you can see who the chef is, so we give them that a bit of branding and visibility. We love to do Q&A sessions on Instagram Live with our chefs, so in a sense it elevates their status because they're the stars, right? I think food is a general interest in so we can tap into that.
PC: Do you train the chefs so that you have very, very precise recipes to achieve a certain taste, presumably almost like a McDonald's would do it? You mentioned franchising earlier but presumably that's the way you're doing some of it now in the facilities, you've got a very precise recipe? Do you have any kind of programme for this?
JW: Yes, absolutely. I think that's one of the big learnings in the early days of running a really professional food operation is really that we need to put a lot of effort into all of these aspects; training, recipes etc...to make sure you have consistency right. On the other hand it helps to manage your costs and that's exactly how franchises like McDonald's do this. They’re a huge inspiration for us, in terms of the level of detail in their specifications for outsourcers. Meanwhile, we're not on that level yet, but consistent great food is what we’re all about.
PC: What about speed of delivery? How important has that been? What do you say to the customer is the average time it will take for them to get that food delivered to them from the time they order it?
JW: We have come a long way and a very different way. So I think especially right now in the market space, it's delivery speed that’s everything, and a lot of players have jumped ahead of the curve in terms of you know, being the fastest, but then retrospectively trying to make unique models work for them, but many are still struggling doing that and shutting down in certain countries. Deliveroo left Germany because it couldn’t make the unit economics work, but we came the other way. We started with a very difficult ordering experience in the early days, to say the least. So you had to pre order two days in advance, which is terrible, and excludes a lot of customers, as many people cannot plan ahead but we knew from our previous experiences that we wanted to focus first on unit economics and then build our model and improve the service and technology to better operations, not kind of hoping that scale would make it work. So, we made various improvements in terms of the technology and routing, especially with the entire logistics system for delivery. So, eventually you had to preorder the night before and then four hours ahead. Then it was two hours ahead and in the past week we just moved to a new setup where you can get your food within 27 minutes, 30 minutes, 40 minutes. So that's the range, 20 to 45 minutes now, and again, the most important thing is we need to be able to do that without having delivery costs that break the business model.
PC: So that's quite interesting that customers were sticking with you. In the early days, we can understand it, right? But once you're scaling up to the four hours and the two hours, the fact that customers were still willing to wait and order two hours in advance, says something about presumably the quality of the food, right, that it's healthy, it's tasty. It's better than maybe the alternative would be even if they got it faster, they would rather wait. Would you say that was a conclusion that you had early on, that your customers must really like your product, if it’s still growing and they're ordering it consistently or they're ordering, they're not leaving our service, even if it takes four hours or two hours?
JW: I think it's a combination. I think also the value. It's significantly lower delivery fees and no markups on the prices. These are priced in an affordable way, with a focus on high value as we can invest more in terms of ingredients, portion size, etc. But I think also to be realistic here, especially in the early days, it's a certain type of user segment. On top of that, I think people who can plan to have a certain use case can work towards a cut off on a Sunday night for example. People are comfortable ordering Pop Meals for tomorrow for Wednesday on Friday. So, in the early days it was very organized people, obviously.
PC: I’ve read that on average, you can achieve prices that are 30% below market price?
JW: Yes, it’s difficult to say. So, it ranges by dish, but I would definitely say for some of the dishes we’re definitely 10% or 20% cheaper than if you were dine-in and, of course, if you order delivery it is a completely different story and prices are significantly different. I think that also explains especially why we are serving different segments, which makes us quite complementary to other food delivery services. So if you think about McDonald's, Domino's or Deliveroo, for them, Saturday night and Sunday night is the craziest time, whereas for us it's more during the week, especially for lunchtime, where people are looking for a way to get a convenient meal and might not be able to use a more expensive food delivery alternative. Therefore it's quite interesting to see also how complimentary the services are, what are patterns etc.
PC: So some of the dishes delivered would actually be lower price to the consumer than if they were ordering at a restaurant or delivered from the restaurant?
JW: Yes, for some of the dishes for sure. It depends a bit on geography. In a city centre it's definitely the case.
PC: So it's the food, it's the variety, the diversity. It's ultimately the speed now you're going to get there faster. It's the quality, it's the taste. It's the lower price to them. It sounds like what you're really trying to do is the Holy Grail. Where does this end? I mean, if you are able to deliver a wide variety of food, and it's coming cooked and it's coming relatively quickly now, let's say in 20 to 45 minutes. As we get new technologies and one day drones, that'll be super, super fast. And it's lower cost than what the alternative is. Can you keep all those factors in place? When you've scaled to 10 times the size or even 100 times the size, is this fully scalable? I know you're talking about franchising, but is it fully scalable, and you just keep going and growing this brand? Certainly locally in Malaysia, but also over time, presumably in the rest of Southeast Asia? Is that what you're pushing for and you think it's possible?
JW: Yes, I don't think we can be everywhere. For sure, we operate best in bigger cities and I think for certain areas, we might have to adjust our case. That's clear. Otherwise, I think the fundamental pillars work and should actually work even better at higher volumes. Cooking, sourcing, in terms of the price you can get from suppliers for ingredients, and especially on delivery times, our system is built heavily in favour of higher density of orders.
PC: What's the biggest challenge would you say? The execution….but what's the biggest obstacle to growing 10x however long that takes? What is the one thing that worries you the most or that you as a company, as a team and yourself focus on the most to be able to overcome?
JW: Yes, I think it's all about finding the right balance, you’re growing, you're investing, you want to make sure your fundamentals are very healthy when you don’t want to go too fast or stretch yourself. So, I want to make sure I am getting amazing people that want to help you grow. Obviously, this is critical in franchising, you hear many success stories, but also many, many warning signs.
PC: So it's people? It's being able to recruit?
PC: Do you think this model that you've developed there in Malaysia, do you think that could work in Western Europe at all? Do you think it's possible?
JW: Yes, to me it’s funny. In Germany, it seems to me that food delivery behavior is less strong than in other markets. So it could work, particularly in larger cities.
PC: Do you think it would be relatively unique or distinct as a model in in Europe? We’ve been reviewing a company in the Middle East that Delivery Hero invested in called Sweetheart Kitchen. In the US, you've got ex-Uber, Travis Kalanick, setting up secretive CloudKitchens that is supposedly valued at $5 billion, but in Europe, we haven't yet really seen any model quite like this. But from what you know, do you think your model would be unique to many cities compared to how food is delivered today, whether it's meal kit or the traditional Just Eat model?
JW: Yes. It's interesting, in the cloud kitchen space. It's something where we see in, McDonald's, pioneered and brought this QSR system into the global stage and I think that's something that we see now analogous in the food delivery space, a very different model, and also to offer different product and value.
PC: Thank you Jonathan. You’re developing quite an exciting new model in the food industry and we look forward to keep track of your progress!