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By Toby Sterling and Nadine Schimroszik
AMSTERDAM, June 8 (Reuters) - The grocery delivery industry that erupted in the depths of lockdown is facing a painful period of adjustment that investors say is likely to see only a handful of firms survive in each market - and then, in very different shape.
As the COVID-19 pandemic kept consumers behind closed doors, investors poured billions into "quick commerce" grocery firms that pledged to deliver products from pasta to soap powder within 15 minutes from bespoke hubs known as dark stores.
But with lockdowns easing, consumers struggling with soaring costs of living, and profitability still elusive, that flood of capital has slowed to a trickle, and firms have shifted from expansion to retrenchment.
Getir of Turkey - the biggest and oldest of the fast grocery deliverers - Germany's Gorillas and UK-based Zapp have all said in recent weeks they are cutting staff, while Berlin-based Flink has also slowed hiring.
London's Jiffy said last month it was ceasing delivery operations, with Zapp, which raised $200 million in January, assuming its customers.
"The current macroeconomic climate has become incredibly challenging, with very little visibility of when things will improve," Zapp told Reuters in an email.
Citi analyst Monique Pollard estimates that seven or eight smaller companies have been forced to seek buyers or shut operations so far this year. "It's happening quicker than we could have imagined," she said.
Despite that, investors and executives say there is still a solid business case for grocery on demand, given the convenience it offers consumers.
Larry Illg, chief executive of online food businesses at technology investor Prosus NV, which has a 9.8% stake in Flink, said the current shakeout would ultimately benefit survivors.
"We are seeing slower rollouts of new dark stores, lower levels of marketing investment, and diminished discounting from competition," he said. "So aggregate growth is slowing down, but economics for the space are healthier."
BLURRED LINES
Illg, in a presentation to investors earlier this year, said he sees the lines blurring between restaurant food delivery, grocery delivery, and quick commerce. "I think you're going to see different variants of this across the world, across the different inventory mixes and business models," he said.
A push by big, well-known meal delivery companies like Deliveroo, Just Eat Takeaway and Uber Eats into the grocery space is already happening, as those firms strike delivery deals with convenience stores and grocery chains. Some are joining forces with existing delivery firms. DoorDash of the United States last week closed its $3.5 billion acquisition of Finland's Wolt, a meal delivery and quick commerce company.