Fast grocery group Gorillas eyes collaborations in profitability push

FILE PHOTO: Bikes of the fast grocery deliverer Gorillas are parked in Rotterdam, Netherlands February 8, 2022. REUTERS/Piroschka van de Wouw/File Photo/File Photo

DUBLIN (Reuters) -German grocery delivery app Gorillas, which began cutting jobs last month to conserve cash, is looking to collaborate with large retailers as it races to achieve group-level profitability within 12 months, its chairman said on Wednesday.

The Berlin-based startup, founded in 2020, is reviewing its operations in Belgium, Denmark, Italy and Spain and has changed focus from rapid expansion to turning a profit after the boost from COVID-19 lockdowns fizzled.

"We realised that, okay, we need to adapt, course correct and we have to do it fast, so there were really tough decisions and now the whole focus is actually going towards profitability," Ugur Samut, co-founder and chairman told the Consumer Goods Forum's Global Summit conference.

One option for Gorillas is deeper collaboration with large retailers, Samut said, the "Tescos and Alibabas ... of this world", to combine their buying power and higher margins with Gorillas' technology and logistics.

"When you do that, actually the business becomes more sustainable, financially more sustainable," he added.

Samut said 25% of the company's distribution centres, warehouses known as "dark stores", are now operating at a profit.

"We believe we will be operation profitable in three months and group profitable in 12 months," he said.

The grocery delivery industry is facing a painful period of adjustment after a surge in growth during COVID-19 lockdowns. Turkey's Getir and UK-based Zapp have also said they are cutting staff, while Berlin-based Flink has slowed hiring.

Gorillas raised $1 billion at a $2.1 billion valuation in October from investors including meals delivery company Delivery Hero, but Chief Executive Kagan Sumer has acknowledged the company has since struggled to raise more.

The company is working with JPMorgan on its fundraising plans and other strategic options which include the sale of some or all of its business, a source familiar with the company said. JPMorgan declined to comment.

Gorillas is a takeover target for meals companies eager to see the delivery industry consolidate, the source said.

"The problem for private equity investors is that the underlying business is not there to make it cash neutral," the source said.

Investor Christophe Maire of Atlantic Food Labs told Reuters he welcomed Gorillas' strategic shift, which he said was "a natural move toward a long-lasting business".

(Reporting by Conor Humphries and Padraic Halpin; additional reporting by Emma-Victoria Farr, Nadine Schimroszik, Toby Sterling; Editing by Barbara Lewis and Jan Harvey)

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