Thursday, September 16

The German Glovo shareholder who has entered Deliveroo: from “ugly duckling” to home delivery giant


The German company Delivery Hero, which owns 37% of the Spanish Glovo, has just acquired 5.09% of the British platform Deliveroo, a move that shows that the Teutonic firm is in an expansive phase that seems to have no end and that it comes after not a few sufferings.

In 2018, Delivery Hero sold its companies Lieferheld, for close to 1 billion euros, to the competition. Pizza.de and Foodora in Germany. The buyer was the Dutch Takeaway. Those were years of losses for the German company, which in that year registered a red number of 242 million. In 2019, they were 648 million and, in 2020, only in the first half a loss of 352 million was estimated. For this year, and after the boost that the health crisis has given to the home delivery business, it has just raised its billing forecast to a maximum of 6,700 million.

The company, founded in 2011 with the Swedish Niklas Östberg at the helm, seems to have never had problems financing itself. The concept that they defend the most in Delivery Hero is not common electronic commerce, but something like “fast electronic commerce”, in which orders are delivered between ten and fifteen minutes after having made the purchase. As in its Spanish subsidiary Glovo, it can not only be food, but also supermarket products and even medicines. You want to be a kind of ultra-fast Amazon.

“This all sounds so exciting and innovative that many investors are paying attention to Delivery Hero,” noted equity specialist Christoph Scherbaum at the Frankfurter Allgemeine Zeitung. That conservative newspaper has called the Östberg firm “Östberg” on the stock market, in view of the difficulties that the German platform was going through before the pandemic.

Now, and after the health crisis, Delivery Hero has numbers that many see as indicators of solidity. Just look at the share price of the German company. In 2017, when it went public, its securities were at 26.90 euros and its market value was around 5,000 million. Now the title is paid at 114.80 euros and its capitalization exceeds 28,500 million.

On the German Ibex via Wirecard

The Östberg platform was raised in the great storm caused in the tech business sector by the Wirecard scandal. This accounting fraud –Wirecard pretended to have 1.9 billion euros in its accounts to attract investors– led to the fall of the DAX electronic payment platform, the stock market index of large companies equivalent to the Spanish Ibex, just a year ago. Wirecard was replaced in that select group of companies by Delivery Hero, despite losses from previous years.

In accordance with the rules that govern the DAX, companies that want to enter it must arrive with a positive Ebitda (gross operating profit) in the last two years. It was not the case of Delivery Hero, a company that apparently in 2020 became the exception that confirms the rule. Hence, last year much of the media noise that this company generated then had to do with explaining “why a company without a penny of profits can enter the DAX”, according to the Berlin newspaper Der Tagesspiegel.

The fundamental reason for this entry surely has to do with the projection that the company seems to show, present in fifty countries, in which it employs some 25,000 people, with working conditions that, as is the norm in the sector, generate controversy.

Last year, the Der Tagesspiegel He remembered how the German platform left Canada after its delivery men there wanted to organize a union. “In many countries, for example, in Colombia, there were protests over poor working conditions and low pay,” wrote economic journalist Thorsten Mumme in the Der Tagesspiegel.

An issue that does not seem to worry Östberg, who has said that in the market for food delivery at home there is a lot of room for improvement. But not so much in their working conditions, as in the quality of the service.

“I do not know what their experiences are like, but when I order food, it always takes an hour or an hour and a half and then I receive a miserable container with aluminum foil whose contents have overflowed and … puh,” he said in an interview published in May in the economic pages of Frankfurter Allgemeine Zeitung.

With operations in about 50 countries, Delivery Hero is especially present in Asia and the Arab world, although it also has important businesses in Latin America and in several European nations, such as Sweden, the Netherlands, the United Kingdom or Spain, through Glovo, in whose capital entered in 2018.

In October, the group acquired 7.5% of Glovo from AmRest (owner of restaurant brands such as La Tagliatella) for 76.15 million euros and last April, it was reinforced in a capital increase in which it subscribed more than half of the amount of the operation, 229 million. Thus, its stake in Glovo increased to 37%, which these days is news in Spain due to the new payment system with falling prices for its distributors that this multinational has launched after the entry into force of the Rider Law.

Since this month, he has been working in Berlin for Delivery Hero, the food delivery company Foodpanda. The pandemic has encouraged Östberg and company to return to the German market, where a true free-for-all is being fought. In Berlin, for example, start-ups Gorillas and Flink occupy part of the market. The Turkish firm Getir promises shipments in 10 minutes and the American Uber Eats and the Finnish Wolt are also present in the Teutonic capital.

The presence of so many players in the sector shows that this “market is very, very attractive,” he declared to the economic weekly WirtschaftsWoche Artur Schreiber, Head of Foodpanda and Östberg’s henchman at Delivery Hero.



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