By Toby Sterling and Nadine Schimroszik
AMSTERDAM (Reuters) – The grocery delivery sector is facing a painful period of adjustment following momentum at the height of the pandemic, and investors say only a handful of companies are likely to survive in each market.
During the pandemic, investors have pumped billions into “fast trade” companies that have committed to delivering grocery products in minutes.
But with the easing of health restrictions, rising costs of living and profitability still nebulous, the injection of capital has slowed and companies have shifted from expanding to cutting spending.
Turkey’s Getir, Germany’s Gorillas and Britain’s Zapp have said in recent weeks they are cutting staff, while Germany’s Flink has also cut back on hiring.
London-based Jiffy said last month it was winding down delivery operations, with Zapp, which raised $200 million in January, taking over its customers.
Larry Illg, chief executive of the online food business at tech investor Prosus NV, which has a 9.8% stake in Flink, said the shakes would ultimately benefit surviving companies.
“We’re seeing slower launches of new ‘dark stores’, lower levels of marketing investment and reduced competition discounts,” he said.
A boost from large, well-known meal delivery companies like Deliveroo, Just Eat Takeaway and Uber Eats into the market is already happening as these companies close delivery deals with convenience stores and supermarket chains.
Some are joining forces with existing delivery companies. US-based DoorDash last week closed its $3.5 billion acquisition of Finnish food delivery and fast-food company Wolt.
The German Delivery Hero also managed to take control of the Spanish Glovo. Both have fast operations in markets.
Other delivery companies have strengthened through acquisitions within the industry, such as Flink, which raised $750 million at a valuation of $2.85 billion in December, buying France’s Cajoo for an undisclosed sum last month.
Flink declined to comment, but two investors told Reuters the company does not plan to enter other new markets.
Gorillas Chief Executive Kagan Sumer told Reuters the company is prioritizing profitability. Gorillas will cut 300 office staff and is “reviewing” its operations in Italy, Spain, Denmark and Belgium.
Getir is cutting 14% of the staff, but said it will not leave any of the nine countries where it operates. The group raised $768 million at a valuation of $12 billion in March, with backers including Sequoia Capital and Tiger Global.
(By Toby Sterling)
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