Delivery Hero exits Germany for second time, citing high costs
Berlin-based Delivery Hero is withdrawing from the German market for the second time in three years, citing rising rider costs and increased competition in the food delivery business in its home country.
The ten-year-old company, which is Germany’s most valuable listed start-up, said it would wind down its Foodpanda brand in Europe’s largest economy, and sell a subsidiary in Japan, in order to “shift its resources to highly attractive growth opportunities in other markets”.
“Despite having built up two fantastic Foodpanda teams showing great progress, it has become increasingly difficult to create true value for our ecosystem in these countries,” said chief executive Niklas Ostberg.
He said the company was “facing a very different reality now than we did entering these markets”.
Ostberg told the Frankfurter Allgemeine Zeitung newspaper that while Delivery Hero could compete in Germany if it decided to invest more, raising capital has become expensive, and the company “doesn’t have an infinite supply of money”.
Delivery Hero, which makes most of its revenues in Asia, first exited the German market in 2019 after selling its domestic business to Just Eat Takeaway.com. Other competitors, such as Deliveroo, left Germany soon after.
In May, however, after Finnish rival Wolt launched in several German cities and Uber Eats said it would start a service in the country, Delivery Hero announced that it would rebuild its German operations.
Half a year on, Foodpanda will leave six German cities — Cologne, Düsseldorf, Frankfurt, Hamburg, Munich and Stuttgart — with only a small service remaining in Berlin, to act as an “innovation hub”.
The food delivery market in Germany has become more crowded, with DoorDash launching last month in Stuttgart. A plethora of grocery delivery apps, such as Gorillas, Flink and Getir, have also increased demand for riders, forcing companies to offer higher wages and incentives.
“Once the impact of the dark store operators is considered, it is a market that has seen a lifetime of change in only a few months,” said Jefferies analysts.
Delivery Hero has increasingly been focusing on growing markets in Asia and the Middle East. It finalised a $4bn takeover of South Korea’s Woowa earlier this year, after buying Dubai grocery app InstaShop in 2020.
The group has also hedged its bets with a number of investments in rivals such as Gorrilas and Deliveroo.
Shares in Delivery Hero, which are down almost 30 per cent in the year to date, rose 5 per cent in Frankfurt on Wednesday on news of the German exit.
The company, which is yet to make a profit, raised €1.25bn via a convertible bond sale in September to fund new investments.