Jumia expands in online Africa food delivery in quest for profit

A package set for delivery is seen at the Jumia warehouse in Lagos, Nigeria. Expanding into food fits with Jumia’s strategy of bringing e-commerce to countries where global giants such as Amazon.com Inc and Alibaba have yet to make major inroads. — Reuters

Jumia Technologies AG is expanding in online food delivery as the pioneering Africa e-commerce business looks to grow beyond its main market of trading phones and electronics.

Food makes up 20% of overall transactions on the platform and is growing quickly, co-chief executive officer Sacha Poignonnec said in an interview. The company is expanding the service into Egypt, where there is a gap in the market following the exit of Uber Eats, he said.

Food delivery “is increasingly important to us”, Poignonnec said after reporting a narrowed fourth-quarter loss earlier this week. Despite restaurants in markets like Morocco closing early at times due to lockdowns, the New York-listed company still completed five million online food orders in 2020.

His comments come after a year where demand for delivered meals and groceries has exploded worldwide as restrictions to contain the coronavirus kept people indoors. Morgan Stanley estimates the online food delivery market hit US$45bil (RM182.38bil) in 2020, and UK firm Just Eat Plc was the subject of a grueling US$8bil (RM32.42bil) takeover battle even before the pandemic began in earnest.

The trend has been slower to take off in Africa, where Internet connections remain sluggish and unaffordable for large parts of the population. Yet expanding into food fits with Jumia’s strategy of bringing e-commerce to countries where global giants such as Amazon.com Inc and Alibaba have yet to make major inroads.

Stock surge

Jumia was started in Lagos, Nigeria, by Frenchmen Poignonnec and Jeremy Hodara in 2012, and is now in 11 countries. After a difficult start as a listed company in 2019, the share price has surged almost 1000% over the last 12 months, valuing the still unprofitable group at US$3.9bil (RM15.80bil).

The Berlin-based company has been criticised in the past for an over reliance on selling phones and electronics, and Poignonnec said trading in general products and fashion is improving. Jumia also generates revenue from its payments and logistics units, helping to offset a slowdown in new user growth to 700,000 in 2020 from two million the previous year.

The move into Egypt means Jumia is offering some form of food delivery in all 11 of its markets except South Africa, where Naspers Ltd-owned Mr D Food and Uber Eats dominate.

“Egypt is a promising market,” Poignonnec said. The company has added chain restaurants such as McDonalds and Burger King so far, with more to come, the CEO said. – Bloomberg

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