The correct option is
C First extracellular and then intracellular
Digestion in hydra is primarily extracellular and the gut of Hydra has enzymes are produced by special cells in the endodermis and released into the gut cavity. These enzymes begin to break down the food into smaller particles. The rest is intracellular that happens via the amoeboid endodermal cells and inside food vacuoles. The products are diffused over the rest of the body.
So, the correct answer is 'First extracellular and then intracellular'.