Investors eye fast delivery business

Investors eye fast delivery business
Investors eye fast delivery business

Pandemic-fueled demand for delivery services is attracting investors for quick profits and low risk

The growing demand for fast and convenient home delivery amid the Covid-19 pandemic has had a lasting impact on the consumer market. E-commerce has quickly become essential amid social lockdowns across the globe, with consumers turning to online options for daily essentials like groceries. Last-mile logistics companies have also experienced rapid expansion as they compete to provide an efficient service.

With growth slowing in the current climate, many investors are looking to M&A as a quick route to profit in the fast delivery sector.

Asia’s on-demand grocery market is hot

The global online grocery market size is expected to reach US$2 trillion by 2030, growing at a CAGR of 25.3% from 2022 to 2030.

Investors are taking note. In January, SoftBank-backed food-delivery platform Swiggy raised US$700 million in a new funding round led by Invesco and including new investors Barron Capital Group, Sumeru Ventures, IIFL and Kotak. The latest funding doubled the valuation of the Indian delivery start-up to US$10.7 billion—elevating it to “decacorn” status.

After the funding, Swiggy aims to further accelerate growth on its core platform as well as invest in its express grocery delivery service, Instamart.

One of Swiggy’s main industry competitors, Indian food delivery startup Zomato, recently acquired 10-minute grocery delivery startup Blinkit, formerly known as Grofers. The all stock deal is valued at US$569 million.

Singapore-based super-app Grab, a Southeast Asian provider of services ranging from ride hailing to digital financial services and food and grocery delivery, recently expanded its presence in the Malaysian market with the US$450 million purchase of Jaya Grocer. Local supermarket chain that operates 40 stores across the country.

The agreement is intended to help accelerate the growth of GrabMart, Grab’s on-demand grocery and specialty retail marketplace, to broaden the consumer base in Malaysia.

Last-mile logistics M&A gathers momentum

Last-mile logistics providers are a major area of ​​growth due to increased demand for logistics and freight-forwarding services amid the Covid-19 pandemic.

In January this year, French shipping and logistics major CMA CGM Group acquired a majority stake in local logistics player Colis Privé Group for US$314 million. The purchase aims to expand the presence of CEVA Logistics, CMA CGM’s logistics subsidiary, in the fast-growing last-mile delivery sector.

The sector is increasingly becoming the hub of VC activity. Pac, a Spanish provider of last mile scheduled delivery services, raised US$225 million in funding led by Softback in January to scale its e-commerce platform.

The delivery firm has developed an innovative platform that integrates directly with e-commerce retailers, thereby giving customers the option to customize their delivery options. After success in Spain, the last-mile logistics firm is now looking to consolidate its presence in the UK, France and Portugal.

In addition to raising VC funding, last-mile logistics firms are using M&A to access new markets and remain competitive in their rapidly evolving industries. In June, UAE-based delivery firm Aramex announced a deal to acquire US-based e-commerce platform myUS.com in a deal worth US$265 million.

The purchase of Aramex, currently the Middle East’s largest courier company, is part of a strategy to expand into new markets and capitalize on opportunities in the fast-growing US$4 trillion global e-commerce sector.

Start-ups want to disrupt the logistics industry

Due to the high growth potential of last mile delivery, the logistics industry is ripe for disruption. New players seeking to innovate and disrupt traditional market dynamics are rising and increasingly attracting the attention of dealmakers.

One such example is Swedish technology company Instabox, which offers a tailor-made pickup service to customers by deploying smart automated parcel lockers at convenient locations. The startup, which was recently named Europe’s third fastest growing technology company by the Financial Times, recently closed a US$190 million growth equity investment led by Norwegian investment firm Vardan.

Outlook

With such obvious growth potential on the horizon for the global delivery market, it’s no wonder investors and dealmakers are flocking to the sector. Asian markets in particular have quickly become hotbeds of delivery start-ups, with consumers increasingly demanding convenience from their food providers and many companies now promising 10-minute delivery times.

Then again… ongoing inflation and economic uncertainty are squeezing consumer disposable incomes. In the coming months, more consumers may choose to economize on the luxury of home delivery, which could dampen investor appetite for the sector.

Still, delivery and courier services were clear winners in the pandemic, with last-mile companies using M&A as a tool to expand their geographic footprint and strengthen their capabilities in an increasingly competitive landscape. Meanwhile new startups, driven by VC investment, will continue to make their presence felt as they seek to disrupt the industry.

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The article is in Bengali

Tags: Investors eye fast delivery business

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