Glovo Acquires Delivery Hero Brands in the Balkans for $208M

On-Demand Food Delivery: Glovo Expands in Central and Eastern Europe

The competitive landscape of on-demand food delivery continues to evolve, with Barcelona-based Glovo recently agreeing to acquire three food delivery brands from Berlin-based Delivery Hero in Central and Eastern Europe. The total value of these transactions is estimated at €170 million (~$208 million).

Acquisition Details

Specifically, Glovo is set to incorporate Delivery Hero’s foodpanda brand, operating in Romania and Bulgaria, into its portfolio. Additionally, the Donesi brand, serving Serbia, Montenegro, Bosnia and Herzegovina, and Pauza in Croatia will also be acquired.

A Reciprocal Exchange

This move mirrors a previous transaction where Delivery Hero acquired several of Glovo’s brands in Latin America for $272 million. Glovo had begun to withdraw from that region as part of a strategy focused on achieving profitability.

Glovo’s Strategic Focus

Glovo has articulated a strategy centered on concentrating resources in “key markets” where it can establish a sustainable, long-term business and offer its diverse multi-category services to customers.

Recent Expansion

Earlier this month, Glovo also announced the acquisition of Ehrana, a delivery company based in Slovenia. This demonstrates a recent trend of strategic acquisitions to bolster its local presence.

Geographic Footprint and Future Potential

Glovo currently operates in markets across South West Europe, Eastern Europe, and Sub-Saharan Africa. Its expansion into the Balkans indicates a belief in the potential for profitability within Central Europe.

Transaction Timelines

The acquisitions in Bosnia and Herzegovina, Bulgaria, Croatia, Montenegro, and Serbia are anticipated to be finalized “within the next few weeks,” contingent upon fulfilling standard closing conditions and securing necessary regulatory approvals.

The Romanian acquisition is dependent on competition authority approval, with no specific completion timeline currently available.

Financial Backing

This expansion is supported by a recent $528 million Series F funding round in April, providing Glovo with substantial venture capital to facilitate its growth.

Executive Commentary

Oscar Pierre, CEO and co-founder of Glovo, stated that focusing on markets with clear leadership opportunities and sustainable business models is central to their long-term strategy. He highlighted the strong adoption of on-demand delivery in Central and Eastern Europe and Glovo’s excitement about strengthening its presence in the region.

Delivery Hero’s Perspective

Delivery Hero emphasized its focus on other strategic priorities. Niklas Östberg, CEO and co-founder, believes Glovo is better positioned to enhance the customer experience in the Balkan region.

Return to the German Market

Delivery Hero is currently prioritizing a re-entry into its home market of Germany, utilizing its foodpanda brand, starting in Berlin with plans for national expansion.

Past Exit and Current Re-entry

Notably, Delivery Hero previously sold its German operations to Takeaway.com in 2018 for $1.1 billion. This included brands like Lieferheld, Pizza.de, and foodora, temporarily exiting the German market. Takeaway.com has since merged with Just Eat to form Just Eat Takeaway.

Long-Term Strategy in Germany

Delivery Hero’s return to Germany is driven by market size and the expiration of a two-year non-compete clause with Just Eat Takeaway. Östberg indicated a commitment to a long-term strategy, aiming to become the clear number two challenger in the German market.

The Marathon of Food Delivery

Success in the food delivery sector is described as a marathon, requiring sustained investment and effort.

Consolidation and Competition

The broader industry trend points towards potential consolidation, with successful companies potentially acquiring competitors to maximize economies of scale and profitability. However, this is subject to scrutiny from competition regulators.

Challenges and Considerations

The thin-margin food delivery business faces challenges related to worker rights and the need for favorable operating conditions. Political attention to gig economy worker rights in Europe could lead to increased costs.

Sustainability and Profitability

Achieving sustainability, or profitability without continuous venture capital funding, remains a significant hurdle. This may require market consolidation and a shift in consumer behavior towards increased reliance on app-based delivery for a wider range of shopping needs.

Focus on Fast Grocery Delivery

Glovo is actively expanding into fast grocery delivery, building networks of inner-city dark stores to facilitate convenient in-app shopping. Delivery Hero is also increasing its focus on groceries, having acquired InstaShop for $360 million last year.

Strategic Advantages

Glovo’s concentrated market footprint in Central Europe aims to drive operational efficiencies and strong order margins through an integrated meal delivery and dark store model.

Potential Acquisition Target

If successful, Glovo could become an attractive acquisition target for a larger global player seeking to expand its regional presence.

Future Possibilities

Delivery Hero could even be a potential future suitor, given their previous market interactions. However, this remains speculative.

Broader Implications

The on-demand app-based convenience model raises broader questions about the future of urban environments and the impact on local retail. Competition and urban regulators will need to carefully consider these implications.

Threat to Traditional Retail

Consolidation in the delivery sector could potentially disadvantage smaller players and threaten traditional High Street businesses, particularly family-run shops, which are already facing challenges from Internet giants like Amazon.

The convenience of app-based delivery comes with wider costs that must be considered.