In 2021, European speedy grocery companies experienced a massive surge in investments from venture capitalists, with a whopping $5.5bn being invested. This is almost double what the UK government has committed to quantum computing over the next decade. However, despite the initial boom, the grocery industry is now facing challenges. Many smaller and larger players have had to shut down, while those still standing, like Flink and Getir, are grappling with valuations much lower than their peak values.
Currently, Getir appears to be the strongest player in the European market, with a presence in more markets than any other remaining player. The Turkish company further expanded its market share when it acquired Gorillas, which has operations in Germany, the UK, Netherlands, the US, and France. Although it filed for a receivership in France last week, following a national crackdown on dark stores, Getir is still active in nine countries, including Turkey, Germany, the UK, Italy, Portugal, Spain, and France.
Despite its successes, Getir’s recent funding round valued the company at just under $12bn, but a Business Insider report suggests that the company’s valuation has dropped to $6.5bn. However, Getir has denied this, stating that it is “always in talks with its existing or potential investors for new funding.”
Flink, a German unicorn, confirmed that it reached €400m in sales in 2022 and expects to turn a profit by the end of 2023. The company is seeking fresh funding, but it is highly likely to raise a downround.
Zapp, which withdrew from France and the Netherlands last year, operates exclusively in the UK and has partnerships with UberEats and Deliveroo. After scaling down its operations in the UK, Zapp now focuses exclusively on London.
GoPuff, an American company, is currently only active in the UK in Europe after exiting France and Spain last year. The company entered the UK market in 2021 by acquiring Dija and Fancy, and it reportedly plans to expand its presence in Europe.
As the grocery industry continues to evolve, it remains to be seen which players will emerge victorious and how they will adapt to new challenges.
The grocery delivery market has witnessed a decline in the demand for speedy services, as evidenced by a significant drop in app downloads. According to Apptopia, Zapp has been hit the hardest, with a staggering 91% drop in downloads during Q1 2022 to Q1 2023. However, Zapp has disputed these figures, with a company spokesperson stating that they have experienced a three-fold increase in revenue and orders over the past year with limited marketing.
Another major player in the industry, Getir, has also witnessed a considerable drop in downloads, with an 82% decline during the same period. In response to these findings, Getir has argued that it is “much less dependent” on downloads for growth, as the majority of its orders come from existing customers. Furthermore, a decrease in digital advertising spending across the industry, coupled with the decrease in competition, has led to a more organic slowdown in app downloads.
Flink has downplayed the significance of app data, stating that “marketing efficiency is our big focus” and therefore, app downloads are not a relevant key performance indicator. Apptopia has explained that the sharp rise and fall in app installs for speedy grocery companies in 2021 was driven by transactional offers, such as steep discounting and significant app install advertising budgets, which have now mostly disappeared, as reflected in the current app download numbers.
The food delivery industry has been impacted by the reduction in demand as people prefer to go to supermarkets themselves or use traditional supermarket delivery services, which are cheaper and have a wider selection. Peter Backman, a food delivery analyst, predicts that the rapid grocery delivery sector will grow modestly at 5-10% this year. Meanwhile, restaurant delivery giants like UberEats and Delivery Hero are getting into this market and pose a challenge to existing players.
As demand wanes, remaining players are focusing on specific locations and slimming down dark stores to stay afloat. Getir has shut down some of its UK stores due to overlapping with Gorillas’ network, and the company has also undergone layoffs in the US and UK. On the other hand, Sifted reports that Zapp’s aim is to become London’s leading 24/7 delivery service that focuses on premium products before expanding to other major cities. Zapp is already operationally profitable, and the next goal is to reach group-level profitability. Flink declined to comment.
Despite the consolidation that has already occurred, investors and analysts suggest that more mergers could be on the horizon. Backman believes that bigger companies like Getir, which have so far relied on investor funding, will continue to raise funds. However, larger players working at scale will likely suffer more this year than smaller, local players that have a more efficient and low-cost model. Backman suggests that companies will need to decide whether to acquire struggling companies or let them go to the wall and pick up the pieces.
While some new players are reverting to the traditional delivery model of days or hours, not minutes, other companies like France’s La Tournée and Italy’s Babaco Market have raised seed rounds in December 2022 by offering more sustainable, zero-waste grocery delivery services and flexible subscriptions for fruit and vegetable boxes from Italian farmers. It remains to be seen whether these offerings will be enough to sustain the grocery delivery dream, or if the industry is back to its pre-2021 state.
As Backman notes, “Rapid delivery companies are kept alive by investment…investors don’t seem to be too happy with the outlook at the moment, but they’re still prepared to support them…probably on the assumption that one day, one of these companies is going to come and dominate and they want to be invested in that company.”