Woowa Brothers vows to risk operating loss for growth

[THE INVESTOR] Woowa Brothers, the operator of food delivery app Baedal Minjok, said July 13 that the company returned to profit in the first half of this year after suffering an operating loss for two years.

The Korean start-up posted 900 million won (US$750,000) operating profit during the half year with its sales coming in at 34.9 billion won.

The company attributed the operating profit in the first half to reduced marketing costs and surging orders. In May, the total number of monthly delivery orders on its food delivery app surpassed 7.5 million -- the highest since the company started the service in 2011.

Riding the momentum, it is forecast to easily achieve 2-billion-won worth of total transactions on the app this year, up 50 percent from a year earlier.

However, Woowa Brothers could post an operating loss “on purpose,” this year again, Kim Bong-jin, the CEO of the firm said.

“The food tech sector is still in a fledgling stage, and the company will not hesitate to make investments to achieve innovation. There could be the ‘planned’ operating loss along the way,” the CEO said.

The announcement of the half-year earnings was aimed at quelling investors’ concerns over its below-par profits over the past couple years amid fierce competition in the mobile food deliver app sector.

Despite recording 49.5 billion won in revenue in 2015, up around 70 percent from the 2014, the company’s operating loss widened from 15 billion won to 24.9 billion won for the two years.

The company recently launched new services: Baemin Riders for delivering dishes and drinks from up-scale restaurants and cafes that do not provide delivery service; and Baemin Fresh that delivers fresh salad and fruits to the doorstep.

The company also plans to launch Baemin Cook next year to provide food ingredients with customized recipes, reflecting the rising popularity of cooking in the country.

In 2014, investment firm Goldman Sachs invested $40 million in the Korean food delivery app company.

By Park Yuna (yunapark@heraldcorp.com)