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It came to Hungary in 2019, became very famous in 2020 during the Corona crisis and since then the food delivery service Kifli.hu has been operating with steadily increasing sales, whose cars and couriers can be seen in more and more places in Budapest. It made headlines during the coronavirus epidemic because it was one of the first companies in the home delivery sector, it is now the market leader and, at first glance, a very successful company.
According to official reports, despite growing sales, the company was unprofitable for a long time after its founding, making a loss of around five billion forints in 2021 and 2022. That means a loss of 22 percent in 2021 and 15 percent in 2022, which few companies can afford.
The situation was not made any easier by the fact that couriers could no longer pay withholding tax from September 2022. At that time, Kifli.hu offered all of its couriers the opportunity to work as employees instead of paying taxes, but 150 of their 350 couriers left the company. Since then the situation has changed, now they would increase the number of their couriers from 500 to 600 and they also indicated that with extreme workload you could earn up to a million forints a month with them.
The company’s brutal losses and simultaneous net salaries of one million seem to be a very special business strategy. That’s why we contacted Kifli.hu to explain exactly how they envision the future of their company.
We managed to get into the profit zone
In context, it is important to note that in industries such as food delivery, it is not uncommon for companies to operate at a loss for an extended period of time, as a huge infrastructure needs to be built to operate optimally, which has cost a lot of money. According to this, Amazon, for example, burned investors’ money for years until it generated its first positive dollar, but the Hungarians Wolt and Foodora have not yet made any significant profits. (These two companies typically bring financial statements close to zero.) The question for companies like this is whether they can return to profitability or whether one day investors’ money will run out and they will go bankrupt.
The former happened at Kifli.hu. According to company boss Gabriel Makki, the gigantic loss reported in previous years’ reports is misleading, because after setting up such a company, a lot of money goes into investments: you have to buy the cars, the software necessary for them, you have to improve their operations, they have to build their warehouse, they have to train the drivers and all the staff from scratch. These are investments that will only pay off after years and with expansion, which is not yet apparent in the current company report for 2022.
However, these investments paid off last year, and Kifli has been profitable since fall 2023. From here on out, it’s just a matter of increasing sales so that they can eventually recoup the costs of their previous investments. According to Gabriel Makki, food delivery companies in Europe are typically still operating at a loss, with most companies still focused on capturing the market. On the other hand, Kifli.hu’s parent company was already profitable in the Czech Republic before Covid-19, and its Hungarian subsidiary also arrived there last fall.
Gabriel Makki – Photo: Kifli.hu
Kifli became the market leader in online retail in 2022 and today more than 7,000 orders are delivered daily. At the beginning they only delivered to the inner districts of Budapest and the agglomeration, but now they also deliver to the surrounding areas of Székesfehérvár and Veszprém.
Various occupations
Online delivery companies like Kifli are experimenting with different employment models around the world, and it’s no different here. Foodora and Wolt, for example, only work with subcontractors, so most of their couriers are sole proprietors who pay a flat rate or employees of intermediary companies.
At Kifli you are more flexible: your cars are entirely yours, but they belong to your couriers:
- sole proprietor;
- employees of subcontractors;
- and also our own employees.
Everyone can choose between sole proprietorship and employee status depending on how much they want to work and how they want to be taxed. Apart from that, the wages are quite similar: couriers can book so-called tours within specified time windows. Depending on the distance and size of the order, orders are delivered to approximately 12 locations per tour. And while working, they receive a base salary for the tour, which is supplemented by a performance fee for each successfully delivered package.
Couriers also have to adapt to a strict reward and punishment system: if they receive good customer feedback, their salary increases, if there are complaints about them, it decreases. In addition, it should be noted that there is a surcharge on top of the basic tariff for evening and weekend rounds, but money will also be deducted in the event of delays.
The couriers can then choose when and how many rounds they make: some make just one such round every afternoon after a different order, while others work hard throughout the day and even make four at certain times. However, most people take 2-3 rounds a day, which is usually how much they can fit into a workday.
Accuracy and unique products
Kifli’s business strategy is clearly to offer a high quality service at a slightly higher price than discounters. This price difference varies from product to product, it is usually very small, but as a customer you may come across the fact that Kifli sells some specialty products for one and a half times more than regular stores.
Kifli.hu’s growing number of customers don’t seem to mind this, they are either willing to pay more for Kifli’s larger offering or are more satisfied with the delivery. In the opinion of many, the latter is crucial: at Kifli you can set a quarter or one hour time window for delivery, which the company’s couriers can usually adhere to.
We asked Gabriel Makki about this and he believes good organization is key. Software is used to combine addresses and delivery locations and schedule delivery times backwards, ensuring accuracy and efficiency. The idea is to avoid consecutive slip-ups by keeping a small buffer for each order and trying to estimate car traffic as best as possible.
Kifli now wants to become more attractive to customers by selling as many unique products as possible. For example, according to Makki, they used to not be able to compete with the best butchers, but now their premium quality meat is also available at Kiflin.
There are still interesting challenges before food delivery, one of which is, for example, redeeming products with a deposit fee. This is an important question because if someone only buys with home delivery, for example, they will certainly not want to walk to the nearest store with just the deposit bottles and boxes. According to Makki, Kifli’s couriers can already do this physically, but the system needs to be adapted to the legal regulations invented for traditional grocery stores. Kifli is now working on a solution that also suits Mohu, the Mol subsidiary that operates the redemption system. They hope this will happen in the foreseeable future.
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