Yahoo Finance Glovo to double down African investment in the next 12 months -- but will it stay put?
Spanish on-demand delivery platform Glovo today announced plans to double its investment in Africa and expand its operations on the continent.
The Barcelona-based company has invested up to €25 million ($30 million) by bringing its food delivery service to six African countries -- Morocco, Uganda, Kenya, Ghana, Côte d'Ivoire and Nigeria.
Glovo is available in more than 40 cities with more than 300,000 users, 8,000 restaurants and 12,000 couriers in these countries. Earlier this year, it launched operations in Lagos, Nigeria and Accra, Ghana before expanding to Tema, another Ghanaian city last month.
Over the next 12 months, Glovo says it will invest an additional €50 million ($60 million) to drive expansion into more cities on the continent and move into new markets like Tunisia, where it plans to launch in Tunis next month.
According to a statement released by the company, the expansion will make Glovo's services available to 6.5 million people. Co-founder Sacha Michaud believes these markets are currently underserved, and Glovo has found the right opportunity to work with local restaurants, bringing them online to reach new customers in a bid to "make everything, within all towns and cities, available to everyone."
The attention on Africa follows a series of regional moves Glovo has pulled this year. After its mammoth $528 million Series F raise, it acquired several of Delivery Hero's businesses in Central and Eastern Europe for $208 million.
Glovo's expansion activities this year have notably come on the back of regulatory challenges it is facing in its home country, Spain. In May, the European country announced a deal recognizing all riders working with Glovo, Deliveroo and other delivery companies as salaried staff instead of contractors or gig workers.
It's a deal that the rest of Europe might follow. However, in markets like Africa, there are fewer concerns regarding the working conditions of riders, which undoubtedly appeals to what these global players fancy.
Now present in 23 countries, Africa represents 30% of the company's geographical footprint. And the Spanish company plans to be live in 30 countries before the end of next year, a decision in part due to an IPO target in three years.
Glovo says it is a market leader in 80% of the countries where it has operations. The company's grocery service arm has grown the fastest and revenue has been increasing significantly after a steady rise in orders. To meet customers' growing needs, Glovo has had to invest heavily in dark stores and launched virtual brands for restaurants in July.
It's not clear if Glovo will extend these add-on services to Africa where it has its largest market in terms of population size: Nigeria. Yet, the West African nation does not come without its own fair share of troubles, like poor logistics infrastructure and an unpredictable regulatory environment.
Despite that, a couple of food delivery platforms like Gokada and Jumia Food, a subsidiary of e-commerce giant Jumia, have tried to scale, finding varying degrees of success doing so.
While Glovo will have to compete for market share with these players, it is bullish because of its multi-category strategy, for which grocery sales account for half of its business in some African markets.
That said, Glovo's performance in emerging markets is questionable. Last year, the company pulled out of all the Latin American countries -- Argentina, Ecuador, Peru, Panama, Costa Rica, Honduras, Guatemala and the Dominican Republic. It sold operations in these markets to Delivery Hero for $272 million.
The company also exited the Middle East and North Africa (Egypt and Turkey) and Uruguay and Puerto Rico in January 2020.
Over the past couple of years, Glovo has said it wanted to achieve profitability in a short amount of time. The delivery space is a thin-margin business and it is thinner in emerging markets. This played a part in why Glovo exited both the Middle East and Latin America. The market isn't any different in Africa, and time will tell if the Spanish delivery startup will stay put, exit or close shop.
Whatever the case, Glovo says it is "committed to continuing its policy to hire top local talent" on the continent and plans to double its number of staff and add an extra 200 employees before the end of next year.
“Our expansion in Nigeria, Ghana, and our upcoming launch in Tunisia is something we’ve been looking at for some time now, so it’s great to be able to make it official. There’s been an unprecedented spike in the on-demand delivery business in Africa and the expansion of our services to new countries and cities is both a reflection of that trend and a testament to our commitment to the continent. We’re looking forward to making food, groceries, pharmaceuticals, and retail products available to our new users at the touch of a button,” William Benthall, Glovo's general manager of sub-Saharan Africa, said in a statement.
