The biggest food delivery apps are moving into Latin America

Which global food delivery players are moving into the Latin American market?

This is a contributed article by Geoffrey Michener, CEO and Founder of dataPlor. 

The global food delivery mobile app market is expected to hit $16.6 billion by 2023. India's Swiggy, Germany's Delivery Hero, the UK's Deliveroo, and San Francisco's Postmates and DoorDash are among the delivery companies expected to attain VC-backed valuations of $1 billion or more in the past two years, according to Pitchbook. So how are all of these food delivery apps continuing their growth? In many instances, the answer is international expansion, and more recently, expansion to Latin America.

The technology industry in Latin America is booming. Millions of consumers are coming online via mobile devices, and entrepreneurs are seizing the opportunities that increased connectivity offers. In the first half of 2019 alone, VC investment in Latin American startups totaled $2.6 billion, a significant uptick from the less than $2 billion raised in all of 2018. Technology is disrupting everything in Latin America, from banking and education to travel and food delivery. 

The food delivery market in Latin America is now one of the most competitive in the world. In the early 2010s, Germany's DeliveryHero expanded aggressively across the region through a series of acquisitions. The food delivery giant arrived in Latin America almost overnight through its acquisition of Uruguayan PedidosYa, which at the time was the leading online food delivery service. In the same year, DeliveryHero also acquired Colombian startup ClickDelivery, helping to solidify its Latin American presence. 

These early players introduced Latin America to the concept of on-demand food delivery, but it was the next generation of food delivery services that created the current battle for market share and regional dominance.

Latin America's local delivery heroes

In 2015, three Colombian entrepreneurs founded Rappi, a super app that allows users to order "anything" and have it delivered within 30 minutes. It didn't take long for food delivery requests to overrun the app. Shortly after Rappi hit the streets in Colombia, the company expanded across Latin America and now operates in eight countries with more than 20,000 couriers. Rappi's success has caught the attention of many international investors, including SoftBank, who recently invested $1 billion in the business. 

Another local startup feeding Latin America's hunger for food delivery is Cornershop. Also founded in 2015, Cornershop focuses on grocery delivery in Chile, Mexico, and Peru. In Chile alone, Cornershop accounts for about 40-50% of all online sales in the supermarket segment. In 2018, Walmart struck a deal to acquire the app for $225 million in a bid to boost its e-commerce operations in Mexico as competition with Amazon increased. However, the deal was blocked by Mexican antitrust officials, and ultimately, Uber was able to seal a deal and buy a majority stake in the startup in October 2019. 

There are more than a dozen other local food delivery apps in Latin America, all vying for a slice of market share. But Softbank's billion-dollar bet on Rappi and Uber's interest in Cornershop are signs that the international community is excited about the region as well. Global delivery giants are increasingly turning to Latin America for growth; however, operating in Latin America is not without its challenges, and requires a different playbook to succeed.

The global players placing bets on Latin America

In 2015, the on-demand courier service, Glovo, launched in Spain. Food delivery quickly became its most popular service, and the startup set its sights on international expansion. Glovo began recruiting people to attend its ‘school of launchers' - a two-month training program that prepares managers to set up Glovo operations in a new market. Launchers are in charge of building local teams and setting up operations quickly, before moving on to the next city.

Using this expansion strategy, Glovo became one of the fastest-growing players in the food delivery space. With a fresh injection of venture capital investment and a joint venture with mobility company Cabify, Glovo entered Latin America by launching in Chile in 2017. Cabify supported Glovo's Latin American launch by providing access to its existing network of messengers, which helped the app to become a regional leader from the start. Glovo now serves more than four million monthly orders worldwide, with a large percentage of those orders coming from Latin America. Glovo recently reported that Peru will be among its top three markets by the end of 2019. And while Glovo has been wildly successful in Peru, it has struggled to find its footing in other Latin American countries. 

In 2019, Glovo abandoned its operations in Chile and Brazil following fierce competition with direct competitors Rappi, Cornershop, iFood, and UberEats. UberEats began it international expansion in 2016, which included Mexico. Over a two-year period, the company launched its food delivery service in more than 60 cities across 11 countries. Although UberEats now has a presence in 40 Mexican cities, the country is completely saturated with food delivery options. UberEats is fighting against Rappi, SinDelantal (owned by JUST EAT and iFood), Postmates, among others in a market that is estimated to reach $750 million in sales in Mexico alone by 2021. 

Postmates launched in Mexico City around the same time as UberEats, with more than one thousand local merchant partners and couriers. And while the company does not operate in any other international markets aside from Mexico City, local players are keeping an eye on its growth strategy, which also focuses primarily on food delivery. Meanwhile, Amazon, Walmart, and other grocery retailers are also experimenting heavily with on-demand delivery services in the region.

Challenges still facing food delivery in Latin America

Fierce competition remains the top challenge for both local and global food delivery apps in Latin America, but not the only one. Consumer preferences and digital behavior differ greatly across the region, making local teams and partnerships crucial for success. 

A lack of address standardisation and general business information (such as operating hours, owner contact information, etc.) in less-developed areas also make it more time-consuming and difficult to scale operations efficiently. One-way delivery apps are addressing this issue is by offering multiple address fields so users can enter as much information as possible and ensure delivery couriers can reach them. Crowdsourcing this information on the ground and compiling it in internal databases, rather than relying on incorrect or incomplete search results or business websites, is another approach.

According to UberEats data, nearly 20% of UberEats orders are paid in cash across Latin America, and in Colombia, this number rises to around 40%. Cash is still king in Latin America, so delivery companies must adapt to local payment preferences as well, which means still offering cash payments as an option. 

Another growing approach that food delivery companies are using to augment their operations and meet consumer demands are ‘ghost' or ‘dark' kitchens. These basic commercial cooking spaces provide restaurants all the resources they need to cook up more food and deliver it at lower costs. DoorDash has already opened a dark kitchen for multiple restaurants to share in California, and Glovo launched seven dark kitchens across Spain, Argentina, Peru, Italy, and Ukraine. 

Glovo is also testing ‘dark' supermarkets - or SuperGlovos - to deliver basic items such as bread, milk, cereal, and drinks to customers in just 20 minutes. These secondary spaces can help reduce congestion in kitchens, restaurants, and supermarkets, and may open the doors for many more in the food industry to operate their businesses through delivery platforms exclusively.

Solving the challenges above will be key to compete in Latin America's saturated food delivery market. Fortunately, many delivery services have already found unique ways to deal with these hurdles; however, continuous innovation in this space is crucial as more of Latin America's population comes online and will demand better and faster services. 

Geoffrey Michener, is the CEO and Founder of dataPlor, a company that helps global companies succeed in emerging markets by providing hand-collected and triple-verified micro business data. Michener is a 2x founder and international business executive with over 10 years of experience solving complex problems in the big data, small business, and enterprise space. His passion for helping small businesses stemmed from studying abroad in Nicaragua and working in restaurants throughout high school, college, and grad school. He is a Colorado Native, former East Coast dweller, and currently lives in the Greater Los Angeles area.