One of the most competitive sectors in the start-up scene is food delivery. While competition is fierce and huge sums of cash have been invested, companies are burning cash.
In Germany, the most recognisable player is Foodora. But it is Foodora’s UK-based competitor that has been growing rapidly. Having just lodged accounts for 2016, the company has reported dramatic growth. Deliveroo had sales of GBP 128.5m compared with GBP 18m in the previous year. Growth in sales came primarily from expanding into new cities, including in Germany.
Deliveroo recently announced plans to expand into nine new German locations. Prior to this, the company was already active in six major German cities. According to Deliveroo’s Germany chief, Felix Chrobog, Deliveroo is growing on average by 20 percent per month. The company has big plans:
“Our goal is to become long-term market leader in Germany.”
However, both Deliveroo and Foodora reported large bottom-line losses in 2016 at GBP 129m and €58m respectively. Whether the losses are simply part of the drive to expand or an overly optimistic approach to a low margin high expense business remains to be seen. For the time being, there is no shortage of investors who are willing to provide cashflow to these start-ups.