2018 was an intense year of rapid growth and market expansion for Barcelona-based food delivery company Glovo.
The company went from having an initial presence in three countries to 20 in the last 12 months, and now looks set to enter 10 more countries. Whereas Glovo’s services were limited to 14 cities in Spain, Italy, and France in 2017, today the startup has operations in over 80 cities, from Panama to Kiev and from Nairobi to Quito.
In July 2018, the company raised €115 million in a Series C funding round intended to boost product and market expansion. To align with investors’ expectations, the company will further invest in technology across three main areas: deliveries, users and establishments.
“One of our mistakes has been to not invest enough in technology. This situation generates a serious bottleneck as there are many people thinking about ideas and processes, and only a few focused on developments,” said Glovo CEO Oscar Pierre, raising a criticism that others in the sector reportedly agree with.
The management has pledged to expand its IT team, which currently accounts for only 4% of the personnel employed, by hiring more developers so that they comprise 300 of the 800 office staff by the end of the year, a tall order in a market with an already high level of imported tech talent and slow onboarding processes.
"We want to become the most important technological and data hub in Spain," Pierre told journalists in November. This may sound overly ambitious, given the fairly low rates the company charges – it has stated it only takes 5% of each order delivered – and the difficulty of expanding its tech team at speed.
Glovo is taking the battle to tech giants in its attempt to attract a high number of talented staff in a relatively short period of time. The company will be competing against Amazon with its plan to hire over 100 engineers for its new machine learning center in Barcelona as well as German bank N26, which is offering a highly competitive salary – in the range of €70,000 yearly in Spain – across its European branches.
“My main priority is to increase our tech team and continue optimizing the platform to offer the best service within our industry sector,” commented Pierre. Besides striving technologically, Glovo's post-founding objectives include diversification of services. The startup seems intent on reducing its dependence on commercial partners with the launching of two distinctive initiatives, CookRoom and SuperGlovo.
CookRoom helps Glovo to optimize order processing by renting small spaces for its partner restaurants so Glovo’s orders can be cooked directly, instead of being prepared alongside the restaurants' customers' orders. SuperGlovo, a supermarket that is not accessible to offline customers, was created to help online customers who want to purchase basic necessities 24/7.
The 200 sqm supermarket is located in the Tetuán district, in the northern metropolitan area of Madrid, and already boasts a product inventory of 1,000 bar-coded products. Glovo will stock its own inventory with products sourced directly from suppliers.
"We tried for so long to implement a marketplace with our retailers but we were struggling a lot with integration," said Pierre, who noted that building its own supermarket will allow the company to be more profitable in the long run.
Besides Madrid, the model is currently being tested in Barcelona and will be eventually be launched in the Latin American countries where Glovo has established a stronger market positioning.
Uncanny investors group
To date, Glovo has raised a total of €152.1 million over six funding rounds. The latest Series C round involved previous investors like Rakuten, Seaya and Cathay Innovation along with new investors, who are strange bedfellows having evident connections to Glovo’s competition.
The new investors include Idinvest Partners; GR Capital which had previously backed Deliveroo; former VP of Uber (EMEA/APAC) and partner in Atomic Niall Wass; and most controversially, AmRest and Delivery Hero which, together, injected a total of €76 million.
The restaurant group AmRest currently controls brands like La Tagliatella, PizzaHut, KFC, Starbucks and Burger King with a total of 1,600 restaurants in 16 different countries. The group participated in the round with a €25 million investment that corresponds to 10% of Glovo’s shares while Delivery Hero, Glovo's German competitor, contributed a total of €51 million, securing the largest number of shares in Glovo.
In labor groups’ crosshairs
What truly complicates things is not the odd mix of investors nor closing 2018 with a turnover 20% below its estimated target – albeit one of €80 million. Glovo’s biggest concerns are the Spanish labor groups and their relationship with deliverymen.
Since last summer, Glovo, Deliveroo and Uber Eats have been the targets of Spanish jurisprudence after the companies' drivers started to denounce their employment status as "fake freelance." Deliveroo had to pay €1.3 million in arrears to the Spanish Social Security system following an inspection that found that the company had failed to pay its drivers' quotas.
In September, a court of first instance in Madrid issued a verdict that recognizes the independence of Glovo’s delivery staff. The verdict detailed that it is part of the deliverymen’s right to decide when to work and for how long, stating "(delivery staff) can desist from a service previously accepted without incurring any penalty."
Most on-demand delivery companies in Spain are affected by multiple labor inspections; this puts one-third of Glovo’s business – that which relies on the Spanish market – at risk. Facing an uproar, the company opened a "Department of Public Affairs" to encourage dialogue and manage relations with economic, social and public institutions.
Glovo is also seeking to give its delivery staff more work opportunities outside its off-peak lunch and dinner hours by exploring the introduction of a courier service.
High stakes expansion
Given the current situation, it is not surprising that the company is moving toward strengthening its position in Latin American countries as well as expanding to East Europe and Africa.
“We tend to expand in cities where we see poor food-delivery services,” summed up Pierre.
Glovo’s second biggest markets are Italy and France. This explains why the company has been so attractive to its German competitor, Delivery Hero, which has recently lost significant market share across European markets and is therefore looking to regain its presence in key European ecosystems.
The year 2019 will be critical for the company: its challenge will be to prove its model under close investigation and, ultimately, to assess its international success. Just as importantly, July’s funding round brought in investors that are Glovo’s biggest threats, hinting at the company’s potential buyout or partial acquisition.