eGrocery Valuations: What's in store? A critical look into a category struggling to make a profit

eGrocery Valuations: What's in store? A critical look into a category struggling to make a profit

By
Sam Panzer
June 14, 2021

All eyes on eGrocery startups 👀

No sector has inspired as much interest lately as the grocery delivery (eGrocery) category. Massive valuations, huge investment rounds, and a parade of new entrants flooding cities with a rainbow of delivery uniforms (and slamming my inbox with “here’s €10 off your first order!” promotions). 

This month alone, we’ve seen Germany’s Flink raise a $240M Series A just 6 months after launching. And in Istanbul, Getir recently raised $550M on a $7.5B valuation to expand into the US and Europe. Yep, that’s “B” for Billion –– and they’re active in a mere 21 cities.  

It’s a crazy time to be covering this space, with plenty of headlines dominating the news and seemingly a new eGrocery unicorn every week. But today, we’re asking: what’s next?

We think the best way to look ahead here is to look back. And so today, we’re looking at the history of a space comparable to eGrocery: restaurant delivery platforms (i.e. Delivery Hero, Just Eat, and Uber Eats). 

The restaurant delivery story is a story of investment, rapid growth, and acquisitions –– and no profitability. We can learn a lot from the perils and promise of restaurant delivery, and what it means for eGrocery founders, funders, and consumers.

Strap on your helmet, it’s time to go back to the future.

📈 By the Numbers: Restaurant Delivery

85. That’s the number of acquisitions made by the world’s 4 biggest restaurant delivery platforms alone since the industry first boomed in 2011 (according to Crunchbase data).  

The M&A wave never stopped, only slowed. In the last year, there were 7 acquisitions. That’s a good indicator that companies late to the eGrocery party still have a good shot at a liquidity event. 

The last year saw two major restaurant delivery acquisitions: Just Eat Takeaway acquiring Grubhub for $7.3B, and Uber acquiring Postmates for $2.65B.  

DoorDash walks away with a mere 2.5% of a customer’s bill, and that meager helping is perhaps the strongest in the industry. DoorDash became profitable for just one quarter (its first ever) during the pandemic, when orders were booming in the peak of lockdown. With a decade of experience and billions of dollars pumped in, restaurant delivery still can’t figure out how to actually earn money.

Even with those slim earnings off customer bills, restaurant delivery still eats up 15-30% of each order as commission. That’s a brutal bite out of a restaurant’s earnings, especially in the last year when takeaway became a restaurant’s core business instead of an additional stream.  

Restaurant Delivery, followed by Groceries dominate the FoodTech Unicorn Charts. Source: Digital Food Lab

🤷 What: The eGrocery Pitch

The eGrocery herd is pretty consistent, with dozens of startups offering the same format:

  • Dark stores
  • Small delivery radius
  • Smaller (but often localized) product offering
  • Bike, scooter or e-van deliveries

So how do e-grocery businesses stand out from the pack? Generally, by being the first to market and focusing on customer acquisition through hefty promotions and aggressive advertisements. Some startups emphasize their delivery time (i.e. the 10 or 15 minute offerings), while others focus on a broader inventory or premium products. 

📚 What can meal delivery teach us?

The restaurant delivery space evolved over four stages:

  1. Land grab: the wild west. New startups trying to cover as many cities as possible.
  2. Consolidation: acquisition time, with the most financed companies buying up little guys to expand their markets.
  3. IPOs: with enough size, the biggest players list their stocks, minting a few millionaires.
  4. Maturity: where we are now: large companies with a decade of experience, working to cut operational costs to the bone and trying (and failing) to earn a profit.

We’re in the land grab phase in eGrocery today. We’re seeing an unprecedented funding velocity that will soon include costly acquisitions. Looking ahead, we might observe the following in eGrocery:

Liquidity events are likely
. There are plenty of ways for an eGrocery company to exit successfully –– often it’s by occupying enough market share that a big player decides to simply buy them out. 

Nobody is safe
. Restaurant and grocery delivery companies (especially venture-backed newcomers) are still willing to lose money per order. That means any competitor can blanket a city with $10 vouchers and eat market share away from the incumbents (even if they burn heaps of cash doing so).

Profitability will stay out-of-reach.
With an arms race of low prices and high customer acquisition costs, few companies have a clear vision of profitability. And with only one major restaurant delivery player reporting a profitable quarter during the pandemic, there’s no cause to expect eGrocery to perform better.

Logistics networks scale poorly
. What works in Paris won’t work in Porto. And most of the resources behind an order (driver time and equipment, warehouse space, the food itself) do not become much more efficient with scale. Big players have a slight advantage in their increased buying power for both food suppliers and tech vendors, but it ain’t much. 

🤔 What's different in eGrocery?

More incumbents: while early delivery platforms were mostly competing against restaurant staff running their own deliveries, eGrocery already has a range of incumbents: in-house grocery chain delivery services, personal shopper services like Instacart, and restaurant delivery platforms expanding into grocery (like DoorDash’s DashMart)

Better loyalty: with better control of the vertical, eGrocery businesses have better control over customer satisfaction and better opportunity to keep consumers on their platform.

Better scale advantages: while logistics networks won’t scale well, larger eGrocery firms get to behave like grocery stores. That means demanding lower prices and earning additional revenue from brands (i.e. paying for better listings on a search page). In restaurant delivery, big platforms don’t have a major advantage other than customer data and the chance at big deals like exclusive distribution for restaurant chains.

Higher cost + higher earnings
: by controlling the entire supply and not relying on a third party (restaurants), e-grocery stands ready to earn higher margins (and has more room for creative discounting and loyalty to delight their users). 

Wider spread of basket size: while restaurant orders are typically in the €20-40 range only increasing by the number of people dining, grocery baskets can easily climb to 3 digits for weekly orders (or sink to single-digits for the “forgot the milk” demographic). Bike delivery networks are largely confined by the size of the rider’s backpack, however –– which means fewer beverages that tend to drive higher margins.

E-GroceryInnovators: From bikes (Gorillas), to scooters (Getir) to e-vans (Picnic)

Sponsored by Big Idea Ventures

Last few hours before applications close ⏰

Big Idea Ventures, the part-VC/part-accelerator is calling on the most innovative companies working on plant-based food or ingredients, food technology, and cellular agriculture technology to apply to their accelerator.

Selected startups benefit from:

  • An investment of $200K USD in each participating company.
  • Access to BIV's LP's including AAK, Bühler, Givaudan, Tyson Ventures, and more.
  • Unparalleled support from their team of in-house experts.
  • Ample mentorship from a network of industry professionals.

Apply here before the end of today, June 14th at 11:59pm EDT.


💡 Who: Early Leaders

The herd of eGrocery unicorns are aiming to expand, fast. The “land grab” phase is highly dependent on investment, so don’t expect the companies with hundreds of millions to leave the fundraising game. Note: we’re focusing here on true eGrocery companies, not secret shopper delivery platforms like Glovo, Instacart, or HappyFresh.

  • Gorillas: following their €290M Series B in March, Berlin-based Gorillas is now ramping up in the US following their NYC launch. 
  • Flink: with a fresh $240M Series A, Flink is already live in 30 cities (mostly in their home country of Germany) with more in the pipeline.
  • Wolt: with over $800M in funding, the Helsinik-based restaurant delivery platform is expanding into grocery, mostly through partnerships with grocery and convenience stores. 
  • Dija: the London startup is active in Spain and France. While still working with Seed funding ($20M), Dija was one of the first to acquire a competitor (Genie in March).
  • Getir: the Turkish unicorn has hauled in a full $1B in funding, including a $555M round in June to fuel expansion in Germany and the US.
  • Oda: after a $265M round and a rebrand (formerly Kolonial), Oda is expanding first to FInland and later Germany, focusing on a wider range of items and larger cart sizes.
  • Rohlik: the already-profitable Czech grocery service is focusing on larger fulfilment centers than the typical dark convenience store, combining their own grocery service with items from local businesses.

👀 Who: Up-and-Coming eGrocery

The first unicorns are going to raise titanic sums from aggressive (and massive) investors, but there’s still a cohort of smaller eGrocery startups likely raising. Here are a few. Some of these have years of experience before the current era of eGrocery hype, with sustainable financial models unrecognizable to the cash-burning big players.

  • Bring.de: the Berlin-based startup brings deep logistics experience to the table, with their founder previously founding a successful taxi company. Their mixed fleet of mopeds and vehicles enables them to skew towards a much larger basket size than bike-only couriers, driving early profitability.
  • Cajoo: the French startup is seeking to scale up in the crowded market, but emphasizes proper rider treatment with basic amenities like a restroom and waiting area. This may be a key differentiation point as we see more workforce spats like this week’s Gorillas 200-rider walkout in Berlin.
  • Weezy: after their $20M Series A, the UK startup is looking to expand to 90 fulfilment centers by end of year.
  • Jüsto: the Mexican eGrocery startup is seeking to expand across Latin America, last raising $65M in February.
  • Food Rocket: after launching just 2 weeks ago in San Francisco, the startup (with just $2M invested so far) has its sights on San Jose, LA, and Chicago for later this year.
View the list of 30+ eGrocery players here

🔮 Predictions: What comes next?

It’s a wild time in eGrocery, but here’s our take: investment here is only going to pick up, and not just because of VC FOMO. It’s a solid investment with real possibility of major returns for investors, especially early-stage investors.

We’ll also likely see acquisitions pick up in 2021. The big players will run out of virgin soil, and cut checks to buy competitors rather than fight. 

Who wins in all this? Investors and founders. Rounds will come fast, pumping up the value of previous investments at a quick clip. A downturn will come and valuations will sink, but there’s likely a few cycles of raises, exits, and acquisitions ahead before any contraction. 

Who loses? Traditional grocery. Grocery chains are big, slow, and run on the tightest of margins. Now, investors are basically subsidizing groceries on the delivery apps, which mostly lose money on every order. That’s a race to the bottom traditional grocery cannot afford to run.  

What about the consumer? It’s a mixed bag. 

On one hand, we get to enjoy VCs subsidizing our grocery bills, and the crazy convenience of 15-minute delivery. 

On the other hand, consumers are taking a more passive role in getting our food. These businesses are all new, and often managed far away from where we shop. We need a food system that’s more transparent and participatory, and much of eGrocery seems to be moving in the opposite direction. 

VC-subsidized eGrocery is also a huge threat to grocery stores in urban cores, which might lead many to close. That’s a scary prospect. With many eGrocery businesses operating at unsustainable losses, this disruption may end up decreasing food security in cities.

And at the end of the day, pumping billions into startups that struggle to earn a profit might end up backfiring if the market turns and valuations collapse. There’s a word coming to mind here that starts with a “B” and rhymes with “trouble” 💭

FoodHack Database

Become a member

to get unlimited access

  • Weekly Trend Reports | Access 60+ Reports
  • Startups & Investors Database | Browse 500+
  • FoodHack+ Insiders Community | Coming soon

All eyes on eGrocery startups 👀

No sector has inspired as much interest lately as the grocery delivery (eGrocery) category. Massive valuations, huge investment rounds, and a parade of new entrants flooding cities with a rainbow of delivery uniforms (and slamming my inbox with “here’s €10 off your first order!” promotions). 

This month alone, we’ve seen Germany’s Flink raise a $240M Series A just 6 months after launching. And in Istanbul, Getir recently raised $550M on a $7.5B valuation to expand into the US and Europe. Yep, that’s “B” for Billion –– and they’re active in a mere 21 cities.  

It’s a crazy time to be covering this space, with plenty of headlines dominating the news and seemingly a new eGrocery unicorn every week. But today, we’re asking: what’s next?

We think the best way to look ahead here is to look back. And so today, we’re looking at the history of a space comparable to eGrocery: restaurant delivery platforms (i.e. Delivery Hero, Just Eat, and Uber Eats). 

The restaurant delivery story is a story of investment, rapid growth, and acquisitions –– and no profitability. We can learn a lot from the perils and promise of restaurant delivery, and what it means for eGrocery founders, funders, and consumers.

Strap on your helmet, it’s time to go back to the future.

📈 By the Numbers: Restaurant Delivery

85. That’s the number of acquisitions made by the world’s 4 biggest restaurant delivery platforms alone since the industry first boomed in 2011 (according to Crunchbase data).  

The M&A wave never stopped, only slowed. In the last year, there were 7 acquisitions. That’s a good indicator that companies late to the eGrocery party still have a good shot at a liquidity event. 

The last year saw two major restaurant delivery acquisitions: Just Eat Takeaway acquiring Grubhub for $7.3B, and Uber acquiring Postmates for $2.65B.  

DoorDash walks away with a mere 2.5% of a customer’s bill, and that meager helping is perhaps the strongest in the industry. DoorDash became profitable for just one quarter (its first ever) during the pandemic, when orders were booming in the peak of lockdown. With a decade of experience and billions of dollars pumped in, restaurant delivery still can’t figure out how to actually earn money.

Even with those slim earnings off customer bills, restaurant delivery still eats up 15-30% of each order as commission. That’s a brutal bite out of a restaurant’s earnings, especially in the last year when takeaway became a restaurant’s core business instead of an additional stream.  

Restaurant Delivery, followed by Groceries dominate the FoodTech Unicorn Charts. Source: Digital Food Lab

🤷 What: The eGrocery Pitch

The eGrocery herd is pretty consistent, with dozens of startups offering the same format:

  • Dark stores
  • Small delivery radius
  • Smaller (but often localized) product offering
  • Bike, scooter or e-van deliveries

So how do e-grocery businesses stand out from the pack? Generally, by being the first to market and focusing on customer acquisition through hefty promotions and aggressive advertisements. Some startups emphasize their delivery time (i.e. the 10 or 15 minute offerings), while others focus on a broader inventory or premium products. 

📚 What can meal delivery teach us?

The restaurant delivery space evolved over four stages:

  1. Land grab: the wild west. New startups trying to cover as many cities as possible.
  2. Consolidation: acquisition time, with the most financed companies buying up little guys to expand their markets.
  3. IPOs: with enough size, the biggest players list their stocks, minting a few millionaires.
  4. Maturity: where we are now: large companies with a decade of experience, working to cut operational costs to the bone and trying (and failing) to earn a profit.

We’re in the land grab phase in eGrocery today. We’re seeing an unprecedented funding velocity that will soon include costly acquisitions. Looking ahead, we might observe the following in eGrocery:

Liquidity events are likely
. There are plenty of ways for an eGrocery company to exit successfully –– often it’s by occupying enough market share that a big player decides to simply buy them out. 

Nobody is safe
. Restaurant and grocery delivery companies (especially venture-backed newcomers) are still willing to lose money per order. That means any competitor can blanket a city with $10 vouchers and eat market share away from the incumbents (even if they burn heaps of cash doing so).

Profitability will stay out-of-reach.
With an arms race of low prices and high customer acquisition costs, few companies have a clear vision of profitability. And with only one major restaurant delivery player reporting a profitable quarter during the pandemic, there’s no cause to expect eGrocery to perform better.

Logistics networks scale poorly
. What works in Paris won’t work in Porto. And most of the resources behind an order (driver time and equipment, warehouse space, the food itself) do not become much more efficient with scale. Big players have a slight advantage in their increased buying power for both food suppliers and tech vendors, but it ain’t much. 

🤔 What's different in eGrocery?

More incumbents: while early delivery platforms were mostly competing against restaurant staff running their own deliveries, eGrocery already has a range of incumbents: in-house grocery chain delivery services, personal shopper services like Instacart, and restaurant delivery platforms expanding into grocery (like DoorDash’s DashMart)

Better loyalty: with better control of the vertical, eGrocery businesses have better control over customer satisfaction and better opportunity to keep consumers on their platform.

Better scale advantages: while logistics networks won’t scale well, larger eGrocery firms get to behave like grocery stores. That means demanding lower prices and earning additional revenue from brands (i.e. paying for better listings on a search page). In restaurant delivery, big platforms don’t have a major advantage other than customer data and the chance at big deals like exclusive distribution for restaurant chains.

Higher cost + higher earnings
: by controlling the entire supply and not relying on a third party (restaurants), e-grocery stands ready to earn higher margins (and has more room for creative discounting and loyalty to delight their users). 

Wider spread of basket size: while restaurant orders are typically in the €20-40 range only increasing by the number of people dining, grocery baskets can easily climb to 3 digits for weekly orders (or sink to single-digits for the “forgot the milk” demographic). Bike delivery networks are largely confined by the size of the rider’s backpack, however –– which means fewer beverages that tend to drive higher margins.

E-GroceryInnovators: From bikes (Gorillas), to scooters (Getir) to e-vans (Picnic)

Sponsored by Big Idea Ventures

Last few hours before applications close ⏰

Big Idea Ventures, the part-VC/part-accelerator is calling on the most innovative companies working on plant-based food or ingredients, food technology, and cellular agriculture technology to apply to their accelerator.

Selected startups benefit from:

  • An investment of $200K USD in each participating company.
  • Access to BIV's LP's including AAK, Bühler, Givaudan, Tyson Ventures, and more.
  • Unparalleled support from their team of in-house experts.
  • Ample mentorship from a network of industry professionals.

Apply here before the end of today, June 14th at 11:59pm EDT.


💡 Who: Early Leaders

The herd of eGrocery unicorns are aiming to expand, fast. The “land grab” phase is highly dependent on investment, so don’t expect the companies with hundreds of millions to leave the fundraising game. Note: we’re focusing here on true eGrocery companies, not secret shopper delivery platforms like Glovo, Instacart, or HappyFresh.

  • Gorillas: following their €290M Series B in March, Berlin-based Gorillas is now ramping up in the US following their NYC launch. 
  • Flink: with a fresh $240M Series A, Flink is already live in 30 cities (mostly in their home country of Germany) with more in the pipeline.
  • Wolt: with over $800M in funding, the Helsinik-based restaurant delivery platform is expanding into grocery, mostly through partnerships with grocery and convenience stores. 
  • Dija: the London startup is active in Spain and France. While still working with Seed funding ($20M), Dija was one of the first to acquire a competitor (Genie in March).
  • Getir: the Turkish unicorn has hauled in a full $1B in funding, including a $555M round in June to fuel expansion in Germany and the US.
  • Oda: after a $265M round and a rebrand (formerly Kolonial), Oda is expanding first to FInland and later Germany, focusing on a wider range of items and larger cart sizes.
  • Rohlik: the already-profitable Czech grocery service is focusing on larger fulfilment centers than the typical dark convenience store, combining their own grocery service with items from local businesses.

👀 Who: Up-and-Coming eGrocery

The first unicorns are going to raise titanic sums from aggressive (and massive) investors, but there’s still a cohort of smaller eGrocery startups likely raising. Here are a few. Some of these have years of experience before the current era of eGrocery hype, with sustainable financial models unrecognizable to the cash-burning big players.

  • Bring.de: the Berlin-based startup brings deep logistics experience to the table, with their founder previously founding a successful taxi company. Their mixed fleet of mopeds and vehicles enables them to skew towards a much larger basket size than bike-only couriers, driving early profitability.
  • Cajoo: the French startup is seeking to scale up in the crowded market, but emphasizes proper rider treatment with basic amenities like a restroom and waiting area. This may be a key differentiation point as we see more workforce spats like this week’s Gorillas 200-rider walkout in Berlin.
  • Weezy: after their $20M Series A, the UK startup is looking to expand to 90 fulfilment centers by end of year.
  • Jüsto: the Mexican eGrocery startup is seeking to expand across Latin America, last raising $65M in February.
  • Food Rocket: after launching just 2 weeks ago in San Francisco, the startup (with just $2M invested so far) has its sights on San Jose, LA, and Chicago for later this year.
View the list of 30+ eGrocery players here

🔮 Predictions: What comes next?

It’s a wild time in eGrocery, but here’s our take: investment here is only going to pick up, and not just because of VC FOMO. It’s a solid investment with real possibility of major returns for investors, especially early-stage investors.

We’ll also likely see acquisitions pick up in 2021. The big players will run out of virgin soil, and cut checks to buy competitors rather than fight. 

Who wins in all this? Investors and founders. Rounds will come fast, pumping up the value of previous investments at a quick clip. A downturn will come and valuations will sink, but there’s likely a few cycles of raises, exits, and acquisitions ahead before any contraction. 

Who loses? Traditional grocery. Grocery chains are big, slow, and run on the tightest of margins. Now, investors are basically subsidizing groceries on the delivery apps, which mostly lose money on every order. That’s a race to the bottom traditional grocery cannot afford to run.  

What about the consumer? It’s a mixed bag. 

On one hand, we get to enjoy VCs subsidizing our grocery bills, and the crazy convenience of 15-minute delivery. 

On the other hand, consumers are taking a more passive role in getting our food. These businesses are all new, and often managed far away from where we shop. We need a food system that’s more transparent and participatory, and much of eGrocery seems to be moving in the opposite direction. 

VC-subsidized eGrocery is also a huge threat to grocery stores in urban cores, which might lead many to close. That’s a scary prospect. With many eGrocery businesses operating at unsustainable losses, this disruption may end up decreasing food security in cities.

And at the end of the day, pumping billions into startups that struggle to earn a profit might end up backfiring if the market turns and valuations collapse. There’s a word coming to mind here that starts with a “B” and rhymes with “trouble” 💭

All eyes on eGrocery startups 👀

No sector has inspired as much interest lately as the grocery delivery (eGrocery) category. Massive valuations, huge investment rounds, and a parade of new entrants flooding cities with a rainbow of delivery uniforms (and slamming my inbox with “here’s €10 off your first order!” promotions). 

This month alone, we’ve seen Germany’s Flink raise a $240M Series A just 6 months after launching. And in Istanbul, Getir recently raised $550M on a $7.5B valuation to expand into the US and Europe. Yep, that’s “B” for Billion –– and they’re active in a mere 21 cities.  

It’s a crazy time to be covering this space, with plenty of headlines dominating the news and seemingly a new eGrocery unicorn every week. But today, we’re asking: what’s next?

We think the best way to look ahead here is to look back. And so today, we’re looking at the history of a space comparable to eGrocery: restaurant delivery platforms (i.e. Delivery Hero, Just Eat, and Uber Eats). 

The restaurant delivery story is a story of investment, rapid growth, and acquisitions –– and no profitability. We can learn a lot from the perils and promise of restaurant delivery, and what it means for eGrocery founders, funders, and consumers.

Strap on your helmet, it’s time to go back to the future.

📈 By the Numbers: Restaurant Delivery

85. That’s the number of acquisitions made by the world’s 4 biggest restaurant delivery platforms alone since the industry first boomed in 2011 (according to Crunchbase data).  

The M&A wave never stopped, only slowed. In the last year, there were 7 acquisitions. That’s a good indicator that companies late to the eGrocery party still have a good shot at a liquidity event. 

The last year saw two major restaurant delivery acquisitions: Just Eat Takeaway acquiring Grubhub for $7.3B, and Uber acquiring Postmates for $2.65B.  

DoorDash walks away with a mere 2.5% of a customer’s bill, and that meager helping is perhaps the strongest in the industry. DoorDash became profitable for just one quarter (its first ever) during the pandemic, when orders were booming in the peak of lockdown. With a decade of experience and billions of dollars pumped in, restaurant delivery still can’t figure out how to actually earn money.

Even with those slim earnings off customer bills, restaurant delivery still eats up 15-30% of each order as commission. That’s a brutal bite out of a restaurant’s earnings, especially in the last year when takeaway became a restaurant’s core business instead of an additional stream.  

Restaurant Delivery, followed by Groceries dominate the FoodTech Unicorn Charts. Source: Digital Food Lab

🤷 What: The eGrocery Pitch

The eGrocery herd is pretty consistent, with dozens of startups offering the same format:

  • Dark stores
  • Small delivery radius
  • Smaller (but often localized) product offering
  • Bike, scooter or e-van deliveries

So how do e-grocery businesses stand out from the pack? Generally, by being the first to market and focusing on customer acquisition through hefty promotions and aggressive advertisements. Some startups emphasize their delivery time (i.e. the 10 or 15 minute offerings), while others focus on a broader inventory or premium products. 

📚 What can meal delivery teach us?

The restaurant delivery space evolved over four stages:

  1. Land grab: the wild west. New startups trying to cover as many cities as possible.
  2. Consolidation: acquisition time, with the most financed companies buying up little guys to expand their markets.
  3. IPOs: with enough size, the biggest players list their stocks, minting a few millionaires.
  4. Maturity: where we are now: large companies with a decade of experience, working to cut operational costs to the bone and trying (and failing) to earn a profit.

We’re in the land grab phase in eGrocery today. We’re seeing an unprecedented funding velocity that will soon include costly acquisitions. Looking ahead, we might observe the following in eGrocery:

Liquidity events are likely
. There are plenty of ways for an eGrocery company to exit successfully –– often it’s by occupying enough market share that a big player decides to simply buy them out. 

Nobody is safe
. Restaurant and grocery delivery companies (especially venture-backed newcomers) are still willing to lose money per order. That means any competitor can blanket a city with $10 vouchers and eat market share away from the incumbents (even if they burn heaps of cash doing so).

Profitability will stay out-of-reach.
With an arms race of low prices and high customer acquisition costs, few companies have a clear vision of profitability. And with only one major restaurant delivery player reporting a profitable quarter during the pandemic, there’s no cause to expect eGrocery to perform better.

Logistics networks scale poorly
. What works in Paris won’t work in Porto. And most of the resources behind an order (driver time and equipment, warehouse space, the food itself) do not become much more efficient with scale. Big players have a slight advantage in their increased buying power for both food suppliers and tech vendors, but it ain’t much. 

🤔 What's different in eGrocery?

More incumbents: while early delivery platforms were mostly competing against restaurant staff running their own deliveries, eGrocery already has a range of incumbents: in-house grocery chain delivery services, personal shopper services like Instacart, and restaurant delivery platforms expanding into grocery (like DoorDash’s DashMart)

Better loyalty: with better control of the vertical, eGrocery businesses have better control over customer satisfaction and better opportunity to keep consumers on their platform.

Better scale advantages: while logistics networks won’t scale well, larger eGrocery firms get to behave like grocery stores. That means demanding lower prices and earning additional revenue from brands (i.e. paying for better listings on a search page). In restaurant delivery, big platforms don’t have a major advantage other than customer data and the chance at big deals like exclusive distribution for restaurant chains.

Higher cost + higher earnings
: by controlling the entire supply and not relying on a third party (restaurants), e-grocery stands ready to earn higher margins (and has more room for creative discounting and loyalty to delight their users). 

Wider spread of basket size: while restaurant orders are typically in the €20-40 range only increasing by the number of people dining, grocery baskets can easily climb to 3 digits for weekly orders (or sink to single-digits for the “forgot the milk” demographic). Bike delivery networks are largely confined by the size of the rider’s backpack, however –– which means fewer beverages that tend to drive higher margins.

E-GroceryInnovators: From bikes (Gorillas), to scooters (Getir) to e-vans (Picnic)

Sponsored by Big Idea Ventures

Last few hours before applications close ⏰

Big Idea Ventures, the part-VC/part-accelerator is calling on the most innovative companies working on plant-based food or ingredients, food technology, and cellular agriculture technology to apply to their accelerator.

Selected startups benefit from:

  • An investment of $200K USD in each participating company.
  • Access to BIV's LP's including AAK, Bühler, Givaudan, Tyson Ventures, and more.
  • Unparalleled support from their team of in-house experts.
  • Ample mentorship from a network of industry professionals.

Apply here before the end of today, June 14th at 11:59pm EDT.


💡 Who: Early Leaders

The herd of eGrocery unicorns are aiming to expand, fast. The “land grab” phase is highly dependent on investment, so don’t expect the companies with hundreds of millions to leave the fundraising game. Note: we’re focusing here on true eGrocery companies, not secret shopper delivery platforms like Glovo, Instacart, or HappyFresh.

  • Gorillas: following their €290M Series B in March, Berlin-based Gorillas is now ramping up in the US following their NYC launch. 
  • Flink: with a fresh $240M Series A, Flink is already live in 30 cities (mostly in their home country of Germany) with more in the pipeline.
  • Wolt: with over $800M in funding, the Helsinik-based restaurant delivery platform is expanding into grocery, mostly through partnerships with grocery and convenience stores. 
  • Dija: the London startup is active in Spain and France. While still working with Seed funding ($20M), Dija was one of the first to acquire a competitor (Genie in March).
  • Getir: the Turkish unicorn has hauled in a full $1B in funding, including a $555M round in June to fuel expansion in Germany and the US.
  • Oda: after a $265M round and a rebrand (formerly Kolonial), Oda is expanding first to FInland and later Germany, focusing on a wider range of items and larger cart sizes.
  • Rohlik: the already-profitable Czech grocery service is focusing on larger fulfilment centers than the typical dark convenience store, combining their own grocery service with items from local businesses.

👀 Who: Up-and-Coming eGrocery

The first unicorns are going to raise titanic sums from aggressive (and massive) investors, but there’s still a cohort of smaller eGrocery startups likely raising. Here are a few. Some of these have years of experience before the current era of eGrocery hype, with sustainable financial models unrecognizable to the cash-burning big players.

  • Bring.de: the Berlin-based startup brings deep logistics experience to the table, with their founder previously founding a successful taxi company. Their mixed fleet of mopeds and vehicles enables them to skew towards a much larger basket size than bike-only couriers, driving early profitability.
  • Cajoo: the French startup is seeking to scale up in the crowded market, but emphasizes proper rider treatment with basic amenities like a restroom and waiting area. This may be a key differentiation point as we see more workforce spats like this week’s Gorillas 200-rider walkout in Berlin.
  • Weezy: after their $20M Series A, the UK startup is looking to expand to 90 fulfilment centers by end of year.
  • Jüsto: the Mexican eGrocery startup is seeking to expand across Latin America, last raising $65M in February.
  • Food Rocket: after launching just 2 weeks ago in San Francisco, the startup (with just $2M invested so far) has its sights on San Jose, LA, and Chicago for later this year.
View the list of 30+ eGrocery players here

🔮 Predictions: What comes next?

It’s a wild time in eGrocery, but here’s our take: investment here is only going to pick up, and not just because of VC FOMO. It’s a solid investment with real possibility of major returns for investors, especially early-stage investors.

We’ll also likely see acquisitions pick up in 2021. The big players will run out of virgin soil, and cut checks to buy competitors rather than fight. 

Who wins in all this? Investors and founders. Rounds will come fast, pumping up the value of previous investments at a quick clip. A downturn will come and valuations will sink, but there’s likely a few cycles of raises, exits, and acquisitions ahead before any contraction. 

Who loses? Traditional grocery. Grocery chains are big, slow, and run on the tightest of margins. Now, investors are basically subsidizing groceries on the delivery apps, which mostly lose money on every order. That’s a race to the bottom traditional grocery cannot afford to run.  

What about the consumer? It’s a mixed bag. 

On one hand, we get to enjoy VCs subsidizing our grocery bills, and the crazy convenience of 15-minute delivery. 

On the other hand, consumers are taking a more passive role in getting our food. These businesses are all new, and often managed far away from where we shop. We need a food system that’s more transparent and participatory, and much of eGrocery seems to be moving in the opposite direction. 

VC-subsidized eGrocery is also a huge threat to grocery stores in urban cores, which might lead many to close. That’s a scary prospect. With many eGrocery businesses operating at unsustainable losses, this disruption may end up decreasing food security in cities.

And at the end of the day, pumping billions into startups that struggle to earn a profit might end up backfiring if the market turns and valuations collapse. There’s a word coming to mind here that starts with a “B” and rhymes with “trouble” 💭

All eyes on eGrocery startups 👀

No sector has inspired as much interest lately as the grocery delivery (eGrocery) category. Massive valuations, huge investment rounds, and a parade of new entrants flooding cities with a rainbow of delivery uniforms (and slamming my inbox with “here’s €10 off your first order!” promotions). 

This month alone, we’ve seen Germany’s Flink raise a $240M Series A just 6 months after launching. And in Istanbul, Getir recently raised $550M on a $7.5B valuation to expand into the US and Europe. Yep, that’s “B” for Billion –– and they’re active in a mere 21 cities.  

It’s a crazy time to be covering this space, with plenty of headlines dominating the news and seemingly a new eGrocery unicorn every week. But today, we’re asking: what’s next?

We think the best way to look ahead here is to look back. And so today, we’re looking at the history of a space comparable to eGrocery: restaurant delivery platforms (i.e. Delivery Hero, Just Eat, and Uber Eats). 

The restaurant delivery story is a story of investment, rapid growth, and acquisitions –– and no profitability. We can learn a lot from the perils and promise of restaurant delivery, and what it means for eGrocery founders, funders, and consumers.

Strap on your helmet, it’s time to go back to the future.

📈 By the Numbers: Restaurant Delivery

85. That’s the number of acquisitions made by the world’s 4 biggest restaurant delivery platforms alone since the industry first boomed in 2011 (according to Crunchbase data).  

The M&A wave never stopped, only slowed. In the last year, there were 7 acquisitions. That’s a good indicator that companies late to the eGrocery party still have a good shot at a liquidity event. 

The last year saw two major restaurant delivery acquisitions: Just Eat Takeaway acquiring Grubhub for $7.3B, and Uber acquiring Postmates for $2.65B.  

DoorDash walks away with a mere 2.5% of a customer’s bill, and that meager helping is perhaps the strongest in the industry. DoorDash became profitable for just one quarter (its first ever) during the pandemic, when orders were booming in the peak of lockdown. With a decade of experience and billions of dollars pumped in, restaurant delivery still can’t figure out how to actually earn money.

Even with those slim earnings off customer bills, restaurant delivery still eats up 15-30% of each order as commission. That’s a brutal bite out of a restaurant’s earnings, especially in the last year when takeaway became a restaurant’s core business instead of an additional stream.  

Restaurant Delivery, followed by Groceries dominate the FoodTech Unicorn Charts. Source: Digital Food Lab

🤷 What: The eGrocery Pitch

The eGrocery herd is pretty consistent, with dozens of startups offering the same format:

  • Dark stores
  • Small delivery radius
  • Smaller (but often localized) product offering
  • Bike, scooter or e-van deliveries

So how do e-grocery businesses stand out from the pack? Generally, by being the first to market and focusing on customer acquisition through hefty promotions and aggressive advertisements. Some startups emphasize their delivery time (i.e. the 10 or 15 minute offerings), while others focus on a broader inventory or premium products. 

📚 What can meal delivery teach us?

The restaurant delivery space evolved over four stages:

  1. Land grab: the wild west. New startups trying to cover as many cities as possible.
  2. Consolidation: acquisition time, with the most financed companies buying up little guys to expand their markets.
  3. IPOs: with enough size, the biggest players list their stocks, minting a few millionaires.
  4. Maturity: where we are now: large companies with a decade of experience, working to cut operational costs to the bone and trying (and failing) to earn a profit.

We’re in the land grab phase in eGrocery today. We’re seeing an unprecedented funding velocity that will soon include costly acquisitions. Looking ahead, we might observe the following in eGrocery:

Liquidity events are likely
. There are plenty of ways for an eGrocery company to exit successfully –– often it’s by occupying enough market share that a big player decides to simply buy them out. 

Nobody is safe
. Restaurant and grocery delivery companies (especially venture-backed newcomers) are still willing to lose money per order. That means any competitor can blanket a city with $10 vouchers and eat market share away from the incumbents (even if they burn heaps of cash doing so).

Profitability will stay out-of-reach.
With an arms race of low prices and high customer acquisition costs, few companies have a clear vision of profitability. And with only one major restaurant delivery player reporting a profitable quarter during the pandemic, there’s no cause to expect eGrocery to perform better.

Logistics networks scale poorly
. What works in Paris won’t work in Porto. And most of the resources behind an order (driver time and equipment, warehouse space, the food itself) do not become much more efficient with scale. Big players have a slight advantage in their increased buying power for both food suppliers and tech vendors, but it ain’t much. 

🤔 What's different in eGrocery?

More incumbents: while early delivery platforms were mostly competing against restaurant staff running their own deliveries, eGrocery already has a range of incumbents: in-house grocery chain delivery services, personal shopper services like Instacart, and restaurant delivery platforms expanding into grocery (like DoorDash’s DashMart)

Better loyalty: with better control of the vertical, eGrocery businesses have better control over customer satisfaction and better opportunity to keep consumers on their platform.

Better scale advantages: while logistics networks won’t scale well, larger eGrocery firms get to behave like grocery stores. That means demanding lower prices and earning additional revenue from brands (i.e. paying for better listings on a search page). In restaurant delivery, big platforms don’t have a major advantage other than customer data and the chance at big deals like exclusive distribution for restaurant chains.

Higher cost + higher earnings
: by controlling the entire supply and not relying on a third party (restaurants), e-grocery stands ready to earn higher margins (and has more room for creative discounting and loyalty to delight their users). 

Wider spread of basket size: while restaurant orders are typically in the €20-40 range only increasing by the number of people dining, grocery baskets can easily climb to 3 digits for weekly orders (or sink to single-digits for the “forgot the milk” demographic). Bike delivery networks are largely confined by the size of the rider’s backpack, however –– which means fewer beverages that tend to drive higher margins.

E-GroceryInnovators: From bikes (Gorillas), to scooters (Getir) to e-vans (Picnic)

Sponsored by Big Idea Ventures

Last few hours before applications close ⏰

Big Idea Ventures, the part-VC/part-accelerator is calling on the most innovative companies working on plant-based food or ingredients, food technology, and cellular agriculture technology to apply to their accelerator.

Selected startups benefit from:

  • An investment of $200K USD in each participating company.
  • Access to BIV's LP's including AAK, Bühler, Givaudan, Tyson Ventures, and more.
  • Unparalleled support from their team of in-house experts.
  • Ample mentorship from a network of industry professionals.

Apply here before the end of today, June 14th at 11:59pm EDT.


💡 Who: Early Leaders

The herd of eGrocery unicorns are aiming to expand, fast. The “land grab” phase is highly dependent on investment, so don’t expect the companies with hundreds of millions to leave the fundraising game. Note: we’re focusing here on true eGrocery companies, not secret shopper delivery platforms like Glovo, Instacart, or HappyFresh.

  • Gorillas: following their €290M Series B in March, Berlin-based Gorillas is now ramping up in the US following their NYC launch. 
  • Flink: with a fresh $240M Series A, Flink is already live in 30 cities (mostly in their home country of Germany) with more in the pipeline.
  • Wolt: with over $800M in funding, the Helsinik-based restaurant delivery platform is expanding into grocery, mostly through partnerships with grocery and convenience stores. 
  • Dija: the London startup is active in Spain and France. While still working with Seed funding ($20M), Dija was one of the first to acquire a competitor (Genie in March).
  • Getir: the Turkish unicorn has hauled in a full $1B in funding, including a $555M round in June to fuel expansion in Germany and the US.
  • Oda: after a $265M round and a rebrand (formerly Kolonial), Oda is expanding first to FInland and later Germany, focusing on a wider range of items and larger cart sizes.
  • Rohlik: the already-profitable Czech grocery service is focusing on larger fulfilment centers than the typical dark convenience store, combining their own grocery service with items from local businesses.

👀 Who: Up-and-Coming eGrocery

The first unicorns are going to raise titanic sums from aggressive (and massive) investors, but there’s still a cohort of smaller eGrocery startups likely raising. Here are a few. Some of these have years of experience before the current era of eGrocery hype, with sustainable financial models unrecognizable to the cash-burning big players.

  • Bring.de: the Berlin-based startup brings deep logistics experience to the table, with their founder previously founding a successful taxi company. Their mixed fleet of mopeds and vehicles enables them to skew towards a much larger basket size than bike-only couriers, driving early profitability.
  • Cajoo: the French startup is seeking to scale up in the crowded market, but emphasizes proper rider treatment with basic amenities like a restroom and waiting area. This may be a key differentiation point as we see more workforce spats like this week’s Gorillas 200-rider walkout in Berlin.
  • Weezy: after their $20M Series A, the UK startup is looking to expand to 90 fulfilment centers by end of year.
  • Jüsto: the Mexican eGrocery startup is seeking to expand across Latin America, last raising $65M in February.
  • Food Rocket: after launching just 2 weeks ago in San Francisco, the startup (with just $2M invested so far) has its sights on San Jose, LA, and Chicago for later this year.
View the list of 30+ eGrocery players here

🔮 Predictions: What comes next?

It’s a wild time in eGrocery, but here’s our take: investment here is only going to pick up, and not just because of VC FOMO. It’s a solid investment with real possibility of major returns for investors, especially early-stage investors.

We’ll also likely see acquisitions pick up in 2021. The big players will run out of virgin soil, and cut checks to buy competitors rather than fight. 

Who wins in all this? Investors and founders. Rounds will come fast, pumping up the value of previous investments at a quick clip. A downturn will come and valuations will sink, but there’s likely a few cycles of raises, exits, and acquisitions ahead before any contraction. 

Who loses? Traditional grocery. Grocery chains are big, slow, and run on the tightest of margins. Now, investors are basically subsidizing groceries on the delivery apps, which mostly lose money on every order. That’s a race to the bottom traditional grocery cannot afford to run.  

What about the consumer? It’s a mixed bag. 

On one hand, we get to enjoy VCs subsidizing our grocery bills, and the crazy convenience of 15-minute delivery. 

On the other hand, consumers are taking a more passive role in getting our food. These businesses are all new, and often managed far away from where we shop. We need a food system that’s more transparent and participatory, and much of eGrocery seems to be moving in the opposite direction. 

VC-subsidized eGrocery is also a huge threat to grocery stores in urban cores, which might lead many to close. That’s a scary prospect. With many eGrocery businesses operating at unsustainable losses, this disruption may end up decreasing food security in cities.

And at the end of the day, pumping billions into startups that struggle to earn a profit might end up backfiring if the market turns and valuations collapse. There’s a word coming to mind here that starts with a “B” and rhymes with “trouble” 💭

FoodTech News Digested ✉️
Every Monday (12pm CET) & Friday (1pm CET) in your inbox

Reports

The 30+ companies utilising big data analytics in the food and drink world
The 30+ companies giving vending machines a healthy, high-tech makeover
‘Upcycled’ food and drink: the brands going circular and transforming trash into treasure
A brave new world: exploring how the Internet of Things (IoT) can help the food industry
Exploring the holy grail of alt-meat: whole-cut plant-based meat and seafood
Alt-Eggs: Meet the startups scrambling to hatch the latest egg substitutes
Fava Beans: Is the humble fava bean the next big thing in plant-based?
The final hurdle: the latest innovations in last-mile grocery delivery