Delivery Hero Exits German Delivery Business in Reversal
(Bloomberg) -- Delivery Hero SE will exit its food delivery business in Germany and plans to divest its Japanese operations, marking a quick reversal after short-lived attempts to compete in both markets.
The Berlin-based company had only announced plans to re-enter its home market in May, less than three years after it sold its local operations to Dutch competitor Just Eat Takeaway.com NV, while the Japanese business began operations last September. Yet challenges including stepped up competition and rider shortages, and more attractive opportunities in areas like rapid delivery of convenience items pushed the firm to make the switch.
In Germany, Delivery Hero will exit six cities it had recently entered, leaving only a smaller presence near its headquarters focused on testing new innovations, Chief Executive Officer Niklas Oestberg said in an interview. Meanwhile the Japan unit -- which rose to be a mid-tier competitor in the country -- could be sold or shut down, Oestberg added.
The company plans to start divesting the Japanese unit in the first quarter of 2022, according to a statement. Shares in Delivery Hero gained as much as 6% in early trading Wednesday morning.
“We see a lot of opportunities in a lot of places,” Oestberg said. “The returns we can see from Germany as well as Japan is kind of limiting us a little bit to invest in those opportunities. And a lot of things have changed obviously since we launched.”
Around the same time that Delivery Hero announced plans to re-enter its home market, Uber Technologies Inc. also said it would expand its food delivery service to Germany. U.S. market leader DoorDash Inc. also recently launched operations there, while Just Eat has been dominant in Germany since 2018.
Along with facing heightened competition, Delivery Hero is contending with increased difficulty recruiting riders and “more expensive” capital as high-growth technology stocks trade lower. The company’s share price has dropped more than 20% this year, better than some competitors but far from the out-sized gains during the start of the pandemic.
“This decision to exit was not expected by the market,” Morgan Stanley analysts wrote in a research report. “We see this as a positive signal for market rationality.”
Oestberg said he sees opportunity for the company to invest in rapid delivery of convenience items, and that Delivery Hero recently established its one-thousandth micro-fulfillment center globally.
As the company withdraws much of its German operations, it is working to find new jobs for affected riders and employees. The innovation presence it will keep in Berlin could be tested on new warehouse technology including potential robotic solutions, and trials around different kitchen concepts and even more sustainable packaging.
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