foodpanda employees will be transferred to positions within the Delivery Hero Group. Credit: Jonathan Kemper on Unsplash.

German online food delivery service Delivery Hero is set to shrink Foodpanda operations in Germany as well as plans to sell Foodpanda Japan in Q1 2022.

In Germany, Foodpanda will operate in only select cities including Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart.

However, it will continue to operate its Berlin-based hub to trial new product features and technologies.

Delivery Hero co-founder and CEO Niklas Östberg said: “Scaling down our operations in Germany and planning to divest our Japanese business have not been easy decisions.

“Despite having built up two fantastic foodpanda teams showing great progress, it has become increasingly difficult to create true value for our ecosystem in these countries. I have nothing but gratitude and admiration for the accomplishments both teams have achieved in the last months.”

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Delivery Hero launched the Foodpanda service in Berlin this summer, and later expanded its operations to other German cities.

However, the online food delivery service firm faced challenges in the market such as rising number of competitors, and shortage of riders.

The company has now identified new potential markets with better returns on investment (ROI) and new verticals, primarily in quick commerce.

Affected Foodpanda staff will be transferred to positions within the Delivery Hero Group, its industry partner network or get a severance package.

In Japan, the company’s decision to divest Foodpanda is said to be part of its focus on other growth priorities.

In August this year, Delivery Hero signed an agreement with a consortium to sell its Korean unit for an enterprise value of $687m.