The $1.2 billion acquisition of rival Gorillas by grocery-in-minutes start-up Getir is a significant step toward market consolidation in Europe’s meal service market, where businesses are struggling during a post-COVID slowdown.
After seeing rapid growth, these companies were struck in March by a decline in delivery demand caused by lockdowns and by rising interest prices, while investors lost confidence in loss-making software enterprises.
In an effort to turn a profit, the food delivery companies started merging swiftly, reducing expenses, and leaving markets where they had weaknesses.
Businesses and industry watchers predict that the painful layoffs will continue, but survivors are beginning to notice the first signs of recovery.
The unit economics, particularly the order size of each delivery, is improving, according to Citi analyst Catherine O’Neill, who also noted that mergers and cost-cutting to eliminate excess capacity were happening more swiftly than anticipated.
But she claimed that Europe’s rising cost of living is still a significant drawback.
Getir, based in Istanbul, and Gorillas, based in Berlin, were two of the many venture capital-backed rapid commerce businesses vying to establish “dark stores”—delivery hubs for groceries—in city centres during the pandemic.
Though they are frequently viewed as competitors, more established companies that take restaurant orders and deliver food, including Just Eat Takeaway (TKWY.AS) or Uber Eats (UBER.N), are fundamentally distinct from the dark store model.
Getir is now the largest rapid commerce company in Europe thanks to the acquisition of Gorillas.
Due to its strong position in Turkey, where it is based, analysts estimated that Getir was valued at nearly $8.8 billion in the purchase on Friday, roughly seven times more so than Gorillas.
Inquiries for comment were not answered by Gorillas or Getir.
Flink, based in Berlin, and GoPuff, based in Philadelphia and active in both the US and Europe, are two further consolidators.
Gorillas and Getir are direct competitors in Germany. According to Boris Radke, a spokesman for Flink, “all the others have vanished.”
190 dark stores are run by Flink, versus 180 by Gorillas.
According to Radke, the success of Flink is a result of its close relationships with the supermarket chains REWE (REGRP.UL) in Germany as well as Carrefour (CARR.PA) in France, both of whom hold stock in the business.
Analysts estimate that a dark store centre begins to earn a profit at between 500 and 1,000 daily orders.
In light of the current economic crisis, Radke said it is appropriate to put any larger development ambitions on hold. A few hubs that were not lucrative have already been decommissioned.
However, based on his words, the amount of Flink hubs that are productive is increasing, and monthly sales growth is steady.
Since mid-2021, more than a dozen minor European fast commerce businesses have collapsed or been bought.
PitchBook data revealed venture capital firms made $125 million in two deals in the area in 2022, dropping from $1.3 billion in 13 deals in 2021.
The remaining food delivery and grocery businesses have decreased their expenditure on coupons and promotions as a result of less market rivalry and new money entering the sector.
While the majority of food companies have tried out rapid commerce, both sorts of businesses are now working together more regularly, which is a hint of things to come.
Getir and Just Eat Takeaway (TKWY.AS) agreed last month to list Getir’s products on the Takeaway app.
As a result, Getir will receive more deliveries and revenues from its dark locations, while Just Eat Takeaway would receive additional high-margin orders.
More activity is anticipated, whether it takes the form of mergers and acquisitions (M&A) or substantial business alliances, according to Larry Illg, head of food companies at technology investor Prosus (PRX.AS), which has a stake in Delivery Hero (DHER.DE).
Profits for privately held rapid commerce companies may still be a ways off, but all of Europe’s publicly traded meal delivery companies have formally set goals for profits before interest, taxation, degradation, and amortisation.
