Delivery Hero, the German food delivery giant, has announced that it will not be making any further investments in grocery delivery companies. According to the company’s CEO, Niklas Östberg, this decision comes after some poor performances by previous investments in this sector. “We wouldn’t be looking at taking on more losses or adding losses,” said Östberg. “We are in such a good path on profitability. We probably wouldn’t want to move there. In order for us to do something, we would probably want to make sure that it’s EBITDA positive.”
Delivery Hero was an investor in Gorillas, a rapid grocery delivery start-up that was recently acquired at a reduced valuation, down from $3 billion to $1.2 billion. Östberg stated that the company’s focus now is on making its own q-commerce business profitable. It currently operates around 1,000 delivery centers in several markets and will focus on improving these operations before expanding.
“Our hopes were that we could learn [from investing in other companies] and that that their focus would be a competitive strength, but it’s turned out that this seems to be difficult for those independent players. There is no one that has executed very well and they will burn a lot of money,” said Östberg.
Delivery Hero’s Q1 earnings showed first-quarter revenues of €2.5 billion, with gross merchandise value up 16% in all markets except Asia, where it dropped 7%. According to Östberg, this decline is due to the region’s slower emergence from Covid-19 restrictions and lockdowns. However, he believes that the Asian market will return to a more normalized growth rate in 12 to 15 months. Delivery Hero’s other markets of Europe, the Middle East, and the Americas saw revenue increases.
“On a group basis, we are, I would say, at breakeven, and then we will grow that profitability throughout the year,” said Östberg. He emphasized that maintaining a clear path to profitability is essential for the company’s growth and success. “We want to make sure that we prove to investors that this is a very profitable business before we go and expand.”