$1bn Gorillas fundraising shows appetite for growth in rapid grocery delivery sector

It has been one of the most dramatic developments in retailing during the last year.

The “rapid grocery delivery” sector has seemingly sprung up overnight with names that were barely known 12 months ago, such as Gorillas, Getir, Zapp, Jiffy, Weezy, Fancy, Asap and Dija, suddenly becoming ubiquitous.

To them can be added offerings from more established operators such as Whoosh, which is provided by Tesco; Chop Chop, which is a service created by Sainsbury’s and Hop, which is a partnership between Morrisons and Deliveroo.

Uber Eats has also branched into the field.

The rise of the industry, which was given impetus by COVID lockdowns, has been fuelled by billions of dollars of investment from the venture capital sector.

And that appetite to invest shows no sign of waning, as highlighted today by Berlin-based Gorillas, which announced it had raised $1bn from backers in a Series ‘C’ funding round valuing it at $2.1bn.

Among those participating was Delivery Hero, the German online takeaway delivery platform, which invested $235m.

The interest from Delivery Hero, which competes with the likes of Just Eat Takeaway and which recently snapped up a 5% stake in Deliveroo, is seen as reflecting its desire to build influence in other markets, such as the UK, in which it is currently not represented.

Niklas Östberg, the co-founder and chief executive of Delivery Hero, said: “Delivery Hero is on a mission to advance quick commerce globally and we see Gorillas as one of the leaders in Europe and the US.

“The Gorillas team has an exceptional customer focus driving the highest retention rates we have seen in the industry.

“This has enabled them to reach over $300m revenue run-rate in only one year with continued double digit monthly revenue growth.

“We truly believe that investing in innovative q-commerce players will benefit the entire industry and set a new standard for what a great customer experience looks like.”

Gorillas is not the only business attracting large sums of investment.

The big daddy of the sector in Europe is Getir, founded in Istanbul as long ago as 2015, which was valued at $7.5bn at its most recent funding round, in June, which saw the US tech investment giants Silver Lake, Tiger Global and Sequoia taking shareholdings along with Mubadala, the sovereign wealth fund of Abu Dhabi.

In the US, the biggest player is Gopuff, which was founded eight years ago by two Philadelphia students, whose backers include the likes of Softbank, Fidelity and Blackstone and which was valued at $15bn at its most recent funding round, also in June.

While the streets of some UK cities, particularly London, may seem to be teeming with rapid grocery delivery cyclists and moped drivers, the key battleground in Europe is shaping up to be Germany, where Getir (which is Turkish for “bring”) and Gorillas are scrapping it out with another big local player.

Flink, which means “quick” in German, is in 40 German cities and 15 in the Netherlands and has also been dipping its toe in the market in Paris.

It raised $240m in a funding round in June that again included Mubadala among the investors and which also saw an investment by Prosus, the Dutch investment company, which early last year lost out to Takeaway.com in the $7.8bn takeover battle for Just Eat.

Flink’s other backers include Rewe, one of Germany’s biggest supermarket chains, which has also become a supplier to the company.

Flink is now in the midst of a fresh funding round which, according to a Reuters report last month, will see DoorDash, the US online food delivery and takeaway ordering platform, investing $400m.

DoorDash had reportedly considered investing in Gorillas earlier this year.

The challenge, with so many players out there, is how to establish a point of difference in the minds of customers.

Joe Falter, the co-founder of London-based Zapp, said his point of difference with competitors was the assortment of products sold – ones that were needed on specific “occasions”, such as nappies at 2am, rather than seeking to replicate the typical weekly grocery shop.

This has been compared by industry analysts as being more similar to the business model deployed by Gopuff.

But Mr Falter said the key difference would be the quality of service.

He told Sky News today: “We’re on a 10-20 year journey here and we think what is going to win in this category is customer experience.

“That’s why we’ve set out from the start to build an incredibly sophisticated supply chain that’s able to deliver thousands of products to hundreds of millions of customers in minutes, 24/7.”

He went on: “People have been used to a delivery service where they have to expect product substitutions, and products out of stock, and promising [delivery in] 20 minutes and getting [their goods] delivered in 40, 45 minutes.”

Mr Falter said Zapp – whose backers include Silicon Valley-based investor Lightspeed and Atomico, the venture capital firm launched by Skype’s founder Niklas Zennstrom – would allow people to “live in the moment” and facilitate “busy and spontaneous lives”.

As things stand, though, none of these companies are making money.

While sales growth in the sector has been explosive, most of the money being deployed by investors is going on a “land grab”, with the players involved spending heavily on advertising their brands and on outdoing each other with discount offers.

That means, eventually, the market will consolidate.

There are already signs of it happening.

Germany is essentially already down to three players – Gorillas, Flink and Getir – while the UK is also beginning to coalesce around fewer, larger players.

Gopuff bought Fancy in May, following this in August with the acquisition of Dija, a business founded only eight months previously by former Deliveroo employees and which had been backed by UK venture capital firms such as Index Ventures and Blossom Capital.

The US, meanwhile, remains more fragmented, with New York a key battleground.

Apart from Gopuff, which is now in more than 1,000 US cities, Gorillas and Getir are both fighting for prominence with a host of other players, including the locally-based 1520 and Fridge No More, as well as the likes of Latin America-focused Jokr, founded by Ralf Wenzl, who previously launched another business in the field called Foodpanda that was subsequently bought by Delivery Hero.

The big question is whether the more established food delivery businesses will eventually become predators in the sector.

The recent investment in Flink by DoorDash and today’s investment in Gorillas by Delivery Hero suggests they will.

And, in time, perhaps the bigger moves to watch will come from the likes of Amazon and Uber.