Delivery Hero's reach in everywhere but North America
Plus a look at the hot trends of the global online food delivery market
Trading on the Frankfurt Stock Exchange, Delivery Hero (DHER) is a multinational online delivery service hailing from Berlin with a market cap of $17.31 billion. The operations of Delivery Hero’s dozens of subsidiaries stretch from Latin America, Europe, Middle East to Asia. Since its founding in 2011, the company has grown its network of online food ordering sites to over 500,000+ restaurant partners, but its global presence in 40 countries is evidently absent from North America - which is a principle reason why Delivery Hero goes unnoticed by American media when analyzing the heated delivery space landscape, and why you have probably never heard of its name.
As reported by Delivery Hero, the company doubled its order numbers on a year-on-year basis during Q1 2020, delivering more than 3 million orders in a single day, equating to 125,000 orders per hour. The company frequently gloats about its ability to delivery products within the hour, labelling the service they offer as “instant delivery.” Delivery Hero is the driving force behind fostering the next generation of e-commerce: what they call q-commerce (quick commerce), a method of service focused on speed, quantity batching and convenience. So which companies exactly, are owned by Delivery Hero? Odds are, if you’ve lived or travelled to these continents before, you’ve unknowingly became a Delivery Hero customer.
Asia:
foodpanda (Bangladesh, Hong Kong, India, Laos, Malaysia, Myanmar, Pakistan, Philippines, Singapore, Taiwan, Thailand), Baedaltong (South Korea), Foodfly (South Korea), Yogiyo (South Korea)
Europe:
Foodora (Finland, Norway, Sweeden), Mjam’s (Austria), NetPincér (Hungary), foodpanda (Bulgaria, Romania), Clickdelivery (Greece), Deliveras (Greece), efood (Greece), Donesi (Serbia), DameJidlo.cz (Czech Republic), Pauza (Croatia)
Middle East:
Carriage (Qatar), Domicilios (Colombia, Ecuador, Peru), Foody (Cyprus), Hungerstation (Saudi Arabia), Talabat (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia, United Arab Emirates, Jordan), Yemeksepeti (Turkey), Otlob (Egypt)
Latin America:
Appetito24 (Panama, Costa Rica), PedidosYa (Argentina, Bolivia, Chile, Panamá, Paraguay, Uruguay)
Missing from the list of European countries, surprisingly, is Delivery Hero’s home court Germany. It was announced in 2018, that the Dutch giant Takeaway.com would buy out all of Delivery Hero’s business in Germany for the hefty price tag of $1.1 billion.
The global delivery market is not short of competition. As technological barriers in emerging economies continue to be lowered, only more people will gain access to platforms like food delivery. With countless local players vying for their share of the pie, I suspect we will see more consolidation in large established markets where startups viciously outcompete one another (Germany), and spin-offs in less established markets where there’s a growing demand but the need for hyper-local attention and offerings (India). A good example of this happening is when Delivery Hero sold off foodpanda's business in India to Ola for $45 million in late 2017. Unfortunately, however, Ola resorted to suspend operations just last year as the company failed to keep foodpanda in pace with the other players.
Recently in April, we witnessed a large merger in the food delivery space when Takeaway.com merged with Just Eat, a British online food delivery platform servicing 13 countries. Not only did the pair emerge with a valuation of $7.6 billion, but subsequently announced $756 million in new funding raised. This was merely a week following Amazon leading a $575 million round for Deliveroo UK, another aggressive food delivery competitor. The same trends parallels in North America, with the Uber-Grubhub deal still in pending. If approved, Uber’s offer would see an all-stock takeover of the number-two player in the US. The $4.5 billion Grubhub company will reportedly be absorbed into Uber’s own Uber Eats platform.
Besides heavy consolidation, sprinkling a pandemic with lockdown laws and social distancing into the recipe produced a spike in demand for these delivery services - consequently attracting a slew of new investors or investments in the space. The prime example is grocery delivery service, Instacart. In May 2020, capitalizing on the explosive growth the service experienced due to COVID-19, Instacart lined up venerable investors like Andreessen Horowitz and Tiger Global to raise a new round that would value the company at $14 billion, a 50% mark-up from Instacart’s last valuation during its 2018 financing round. Investors are not shying away from these significant jumps, and as a matter of fact, believe that high valuation in the online delivery space is justified.
The online food delivery industry continues to grow at inexplicable rates. Delivery Hero, as an aggressive expansionist, needs to identify top high-level trends and proactively prepare for them in order to maintain and excel as a leader. They are flowing with resources apt to perform M&A activity, but it’s imperative the company focus on the different needs that are hyper-specific to local markets. Delivery Hero, at the end of the day, is still making decisions from a top-down level with a bird’s eye view of the globe. It’s extremely difficult to conquer a market without fully understanding the day-to-day lives, cultures and habits of the people who live there. Even if Delivery Hero does continue to gobble up other services, I recommend the German company to leave the smaller startups independent, and simply supply the abundance of resources needed for them to execute and prosper amongst competitors.
The crowded space for food delivery companies have led to predatory pricing, harmful monopolies post-consolidation and little breathing room for local restaurants that see a considerable cut of their income handed to these companies. Delivery Hero and its colleagues have certainly benefitted from current events that decreased consumer options when it comes to filling their stomachs. Moving forward, it becomes about what they can do with its freshly obtained growth. Delivery Hero must ask themselves - do I want to expand my breadth (new countries, new continents) or depth (deep knowledge and ownership in the markets they’re already in)? Then based on this, to prioritize their investments accordingly. And who says they can’t accomplish both in soon time?
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All figures in USD ($).