Avoiding the US German startup Delivery Hero worries about Amazon and Uber encroaching

With sales up 60 percent last year, the Berlin-based company is expanding rapidly.
A Delivery Hero man speeds through Berlin.

In the future, your favorite restaurant may have a menu but no tables and chairs. It may be just a kitchen with a good phone line.

The CEO of Germany’s largest meal delivery service, Delivery Hero, says it is urging restaurants to open in out of the way locations to serve the growing demand for home-delivered meals.

“Restaurants with delivery service do not have to be in the best locations or need elaborate furniture,” Niklas Östberg told Handelsblatt. “Actually, they do not even have to be a restaurant – just a kitchen. We help to implement such concepts, where expansion takes place in the kitchen, not in the restaurant.”

He added that the company has even helped some restaurants get financing to ensure an adequate supply of takeout food for his army of bicycle messengers.

The only thing that matters is that we do a good job. Niklas Östberg, CEO, Delivery Hero

“We also identify geographical gaps,” he said. “If there is no Thai restaurant in a place, we want to make sure one opens here.”

Delivery Hero has been on a tear recently, with revenues in the fourth quarter increasing by 51 percent and by 60 percent for the whole year. The company had an initial public offering last June, and its stock price is now at €37.80, an increase of 34 percent despite a capital raise of €362 million in December.

“The only thing that matters is that we do a good job and the stock price will follow,” Mr. Östberg said. “I am more interested in what shareholders will think five years from now rather than the current price.”

He said that the company is open to further acquisitions – it bought rival Foodora from Rocket in 2015 – but that the company has now grown sufficiently that it doesn't need further deals to bolster its business.

Delivery Hero is available in Canada and most of Latin America, but hasn’t yet taken on the US market, where delivery firms Grubhub and Seamless seem to have the market sewed up.

Mr. Östberg said that potential rivals may soon be Amazon and Uber, which have both started food delivery services. Amazon, which bought the Whole Foods grocery chain in the US, now offers restaurant delivery to members of its Prime shopping network while UberEats is available in many parts of the world.

Asked if Amazon was a potential threat, Mr. Östberg said: “Quite possible.”

The company’s biggest outside shareholders are Rocket Internet, a Berlin-based venture capital firm, and Naspers, the South African internet investor. Naspers now owns 26 percent of the firm, while Rocket’s share has declined to 8 percent.

He said his ambition is to make Delivery Hero profitable after adjusting for earnings before interest, taxes depreciation and amortization in 2018 and profitable without adjustment next year.

Mr. Östberg acknowledged that most of his workers are part-time students, but denied that businesses such as his are creating a low-paid employment sector.

“We help people to earn something and feel valued,” he said.

Christof Kapalschinki covers consumer goods, textiles and food for Handelsblatt. To contact the author: [email protected].