Delivery Hero: Deliveroo shares rise after rival takes 5pc stake

10 Aug 2021

Image: Max Threlfall

As German company Delivery Hero takes a bite out of Deliveroo, the food delivery sector is going from strength to strength.

While the pandemic has seen areas such as travel tech suffer, those in the food, delivery and e-commerce space have benefitted from sudden shifts in consumer behaviour.

As Germany-based Delivery Hero announced plans to roll out its food and grocery delivery services in more German cities later this year, it was revealed that the company has taken a 5.09pc stake in rival Deliveroo.

This move has given the UK delivery company a much-needed boost to its share price following its stock market debut in March. Shares in Deliveroo, which disclosed the holding in a stock market notice on Monday (9 August), rose 11pc in trading that day.

In a Twitter thread, Delivery Hero CEO Niklas Oestberg said he has “huge respect” for what the Deliveroo team has built.

“We considered all possible scenarios back in April when we start acquiring our stake. In no scenario would this be a bad investment long term,” he said.

Delivery Hero also holds minority stakes in food delivery companies including Glovo, Just Eat Takeaway, Rappi and Zomato.

However, it doesn’t compete directly with Deliveroo in the UK, which is Deliveroo’s main market, having sold its UK business Hungryhouse to Just Eat in 2016. Meanwhile, Deliveroo exited the German market, Delivery Hero’s home turf, in 2019.

According to Reuters, the German company said it is always looking for new investment opportunities.

“We strongly believe in the future potential of the delivery industry as a whole and therefore decided to purchase shares in one of the companies that is at its forefront.”

Hungry for more

Food delivery companies have been growing over the past number of years, but their success has skyrocketed since the beginning of the pandemic.

The on-demand grocery delivery market has been heating up as well with funding and expansion announcements over the last 18 months, including Swedish grocery delivery start-up Kavall, which closed a funding round worth $5.8m yesterday.

Other food and grocery delivery success stories include Czech tech start-up Rohlik which hit unicorn status last month, Spanish company Glovo which scored €450m funding in April and Berlin-based Gorillas which joined the unicorn club in March.

And while Uber’s ride-hailing business suffered during the pandemic, it saw significant growth in its food delivery services last year.

According to Statista, the worldwide online food delivery market is expected to grow from $107.4bn in 2019 to $154.3bn by 2023.

However, while there is growth in the market, delivery services in Europe have been the target of regulatory scrutiny and criticism over how they deal with workers.

In June, Glovo joined with Wolt, Delivery Hero and Bolt to form a lobby group in the hope of shaping the EU’s regulations around the gig economy.

Jenny Darmody is the editor of Silicon Republic