Ibadan-based food delivery startup HeyFood is setting its sights on expansion into Abuja and Benin, skipping the highly competitive Lagos market. This strategic move is part of the company’s goal to grow revenue while maintaining operational efficiency. Backed by Y Combinator, HeyFood has steadily expanded since its launch three years ago, now boasting over 1,000 listed vendors and 50,000 monthly active users.
Strategic Expansion to Avoid Lagos’ Intense Competition
While Lagos is Nigeria’s commercial capital and a hotspot for food delivery services, HeyFood has intentionally avoided this market. Instead, CEO Taiwo Akinropo and cofounder Demilade Odetara have focused on cities like Ibadan, Abuja, and Benin, where the competition is less intense, and customers are more willing to pay for a quality experience rather than constant promotional offers. This strategy has enabled the company to grow organically, with Akinropo stating, “In Ibadan, if you give customers a promo, they will take it. If you don’t, but offer a good experience, they will still take it.”
This approach is markedly different from that of competitors in Lagos, where discounts and exclusive partnerships are necessary to win over customers, often at a significant cost. In fact, heavy discounts from the likes of Jumia Food and Bolt Food are cited as one of the reasons these companies exited the market in late 2023.
Efficiency and Profitability Amid Challenging Unit Economics
Despite operating in an industry with tight margins, HeyFood is cashflow positive. Its gross merchandise value (GMV) fluctuates between ₦150 million and ₦400 million monthly, with an average order value of ₦7,000. Its margins range from 10% to 15%, impressive figures in a sector where many startups struggle to break even. Over the last 12 months, HeyFood’s GMV has grown fivefold, and the team aims to multiply that by 15 in the coming years.
Akinropo notes that the startup’s efficient use of capital has played a pivotal role in its profitability. “We have good capital efficiency and have achieved multiples with what we raised,” he said. “We run on the local naira we generate and do not lose any money on operations.”
This operational efficiency and profitability have drawn continued interest from investors, including Y Combinator, Voltron Capital, GoodWater Capital, and Ventures Platform. The company is currently raising additional funding to finance its expansion plans.
Building a Niche in Underserved Markets
HeyFood’s decision to bypass Lagos in favor of other cities is rooted in a strategy similar to that employed by U.S.-based food delivery giant DoorDash. Like DoorDash, which focused on suburban markets before tackling larger cities, HeyFood has prioritized gaining market share in Ibadan, Nigeria’s third-largest city, before expanding into Abuja and Benin.
Ibadan’s large middle class, including remote workers earning substantial incomes, has contributed to the success of the startup. As Akinropo pointed out, Ibadan’s demographic includes remote workers who earn up to $5,000 monthly and have relocated from Lagos to escape the city’s fast pace. This relatively high purchasing power has made Ibadan an ideal market for HeyFood, even when competitors like Chowdeck secured exclusive deals with major restaurant chains like Chicken Republic.
Unlike other food delivery platforms in Nigeria that rely heavily on big chains, HeyFood has focused on local vendors such as Iya Meta, Jollof Square, and Chef Kabz. This vendor diversity has strengthened the platform’s appeal and customer loyalty.
Retaining Riders and Managing Growth
While HeyFood has thrived in acquiring customers and vendors, it faces challenges in retaining riders, who are crucial to the platform’s fulfillment operations. Akinropo acknowledges that drivers are the “most fickle side of the business,” as competitors often lure them away with higher sign-up bonuses and weekly incentives. HeyFood drivers typically earn between ₦50,000 and ₦200,000 monthly, depending on the number of trips they complete, but competitors have offered bonuses of up to ₦50,000 on top of regular pay.
To combat this, HeyFood offers employee benefits like a healthcare fund, birthday celebrations, and other initiatives to improve driver satisfaction. However, recent fuel price hikes have added pressure on the company, prompting discussions around financing electric vehicles for riders to maintain attractive margins.
Looking Ahead: More Milestones to Come
HeyFood’s growth journey has been marked by significant milestones, from raising funding from top investors to capturing the Ibadan market. Akinropo fondly recalls how, in the early days, his cofounder would ask a friend to place an order just to help the startup reach 50 orders a day. Fast forward to today, and the company has far surpassed those early targets.
As the company prepares to expand into new territories, HeyFood’s strategic approach—prioritizing operational efficiency, focusing on underserved markets, and offering a superior customer experience—positions it for continued success in Nigeria’s dynamic food delivery secto