Why Germany is such a difficult terrain for food delivery
DELIVERY HEROES has had a good run for the past two years. In August 2020, he went up to DAX, the stock market index of the most valued German listed companies. It is present in 50 countries on four continents. Third-quarter revenue was 1.8 billion euros ($ 2 billion), an 89% jump from the same period in 2020. âWe grew 100% before Corona, 100% during Corona and we will grow 100% after Corona, âsays Niklas Ostberg, Swedish CEO of the Berlin-based company.
In terms of the number of orders, Delivery Hero is more than twice the size of DoorDash, its great American rival. Even so, DoorDash’s market cap is $ 58 billion, more than that of Delivery Hero ($ 31 billion) and Just Eat Takeaway.com ($ 13 billion), the two major European food delivery companies. reunited. European stocks tend to underperform US stocks in general. But another reason for investor caution is more specific to food delivery. Strict labor laws, a tradition of union organizing, expensive unskilled workers and stingy customers, who buy little and rarely tip, make Europe the toughest of all continents on the business.
Mr Ostberg says high labor costs have become less of a problem in Europe as delivery efficiency has improved dramatically in recent years. European consumers have also become less parsimonious amid the pandemic boom in online shopping of all kinds. As a result, Delivery Hero reversed its decision to exit the German market entirely, transferring its domestic activities, Foodora, Lieferheld and Pizza.de, to Takeaway.com (a Dutch company which later merged with Just Eat) in order to become focus on fast growing Asia. In the summer she launched a new app, Foodpanda, in Berlin, Frankfurt, Hamburg and Munich.
When it comes to other work-related issues, however, things may be about to get even more difficult. If a draft proposal in preparation in the European Union (EU) becomes law, up to 4 million concert workers delivering meals or transporting motorists could be reclassified as employees. This would entitle them to a minimum wage, sick and paid leave, unemployment benefits, long-term health and care coverage, and pension insurance contributions.
the EU estimates that reclassification could cost companies in the global economy around 4.5 billion euros per year. Like his counterparts in the business, Mr Ostberg insists that many of his runners choose to be independent because it allows them to work as much as they want, when they want to. âAlmost anyone can work for us at any time of the day,â he says. But such arguments cut the mustard less and less. In February, Britain’s highest court ordered Uber (which runs both food delivery and rideshare apps) to reclassify its drivers in London as employees. Delivery Hero’s share price fell nearly 3% on December 3 following reports from the project EU proposal.
Such developments help to explain why couriers are asserting themselves more and more. The Riders of Gorillas, a German online grocer with a presence across Europe, clashed with management for months over working conditions and pay. In October, the company sacked hundreds of runners who had taken part in strikes, further fueling tensions. At the end of November, a German labor court rejected management’s attempt to prevent Gorillas riders from electing an internal works council, which they duly did. Company executives had no choice but to reluctantly say they would work with the workers’ representatives.
All of this is happening as competition in Germany intensifies. Delivery Hero will need to invest some 120 million euros in sales and marketing in Germany in 2022, estimates JÃ¼rgen Kolb of Kepler Cheuvreux, a financial services company. It now competes with Lieferando, which dominates the German market (and is owned by Just Eat Takeaway.com), Uber Eats, launched in April, and Wolt, a Finnish company recently acquired by DoorDash for â¬ 7 billion. Last month DoorDash launched under its own brand in Stuttgart. The next few years look set to be dog eaters in German food delivery. Consumers can count on full bellies courtesy of the concert companies. Their shareholders might be hungry. â
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This article appeared in the Business section of the print edition under the headline “How Can We Be Heroes?”