Instant grocery delivery’s future looks murky as Getir, Gorillas & Zapp announce cuts

“Instant” grocery delivery is the latest sector to suffer from the current tech slowdown, with three European startups this week announcing layoffs and other cuts. All of these companies rose to prominence during (and arguably because of) the Covid-19 pandemic, promising grocery and household items in minutes to home-bound consumers in search of convenience.

• Turkish startup Getir, which promises deliveries “in minutes,” announced it will cut 14% of its staff globally (more than 4,000 people) and scale back on plans to further expand the service. Getir, valued at around the $12 billion mark, operates in the UK, Germany, France, Italy, Spain, Netherlands, Portugal, and the US in addition to Turkey.
• England’s Zapp is in talks about layoffs and said roughly 10% of its staff faces redundancy (between 200 and 300 people). The company has already shuttered operations in Cambridge and Bristol and will do the same in Manchester if redundancies go through.
• Gorillas is also cutting staff; about 300 people at its headquarters. The Berlin-based company said it is “looking at all possible strategic options for the Gorillas brand” which could include pulling out of some markets. Gorillas currently offers services across the UK, US, Germany, France, and the Netherlands in addition to Spain, Denmark, Italy, and Belgium.

Last month, GoPuff announced it would cut 3% of its workforce, or about 15,000 people.

These instant grocery services typically enable consumers to order food, drinks, and some household items online, which are delivered in 10, 15 or 20-minute windows, enabled by micro-fulfillment centers in densely packed urban areas.

Instant grocery investment by the numbers:

Underscoring the enthusiasm around the sector in the wake of Covid-19 demand, investors have pumped billions into instant grocery delivery over the last couple years and there have been some eye-watering, large funding rounds for these capital-intensive businesses. Here are a few examples:

• Gorillas raised more than $1 billion in 2021.
• Getir has raised over $1 billion in total funding so far, including a $768 million Series E from March 2022.
• US-based GoPuff raised more than $2 billion in 2021 and at last check had a valuation well over $10 billion.
• Wheee!, which focuses specifically on Latin American and Asian cuisine, has raised nearly $1 billion in total including a $425 million round in February of this year.
• Flink Foods, another German company, raised $990 million in 2021, across its seed, Series A and Series B round, which all closed within months of each other.

Total venture investment for the whole e-Grocery category was $18.5 billion in 2021, making it by far the biggest investment category of the year for agrifoodtech. Instant grocery delivery companies contributed a large portion of this total, and the majority of the biggest e-gGrocery deals done last year, according to the 2021 AgFunder Agrifoodtech Investment Report. [Disclosure: AgFunder is AFN‘s parent company.]

Why it matters:

The above mega-deals all took place in a more optimistic investment environment than the companies face now. Tech as a whole is in a downturn after a remarkable, and often unbelievable bull run, that reached its peak earlier this year. Steeply rising inflation, continued supply chain issues exacerbated by the war in Ukraine, and an end to the pandemic, are among the drivers of the tech downturn, which commentators aren’t far off calling a depression.

Those factors don’t bode well for instant grocery startups that are largely been propped up by venture capital and have a very uncertain road to profitability. Earlier this year, the Wall Street Journal called the sector’s unit economics “underwhelming” and said investors “might be chasing a mirage.” If consumers start cutting costs on the back of increasing unemployment and food prices, the convenience of instant delivery will likely be one of the first things to go.

As Mark Durno from early-stage investor and accelerator group Rockstart recently told the audience at the FoodHack summit in Switzerland, in this macro environment and given the far larger climate challenges ahead of us, “who cares about getting their groceries in 15 minutes? I’m happy to wait.” More important is ensuring groceries can reach people in food deserts globally, he added.

Durno and others expressed frustration that some of that funding was not being directed to more impactful technologies. If the above lay-offs are anything to go by, it’s looking likely that valuations will drop and investors will back away from instant eGrocery for the remainder of the year; maybe they can re-direct some of that funding to technology startups solving real-world problems.