What’s With Jumia’s Sudden Craving For Egypt’s Slippery Food Court?

In the entirety of the initial release featuring Jumia’s fourth-quarter (Q4) and full-year 2020 results, “Food” was mentioned just twice, and one of those wasn’t much of a happy shout-out.

“The effects of the COVID-19 pandemic played out throughout 2020, including in the fourth quarter where the reinstatement of movement restrictions and curfews in selected geographies affected logistics flows for the e-commerce business and dinner deliveries for Jumia Food,” reads the company’s take.

The other mention of “Food” is buried in the following sentence: “We drove growth of GMV after CFDR (Cancellations, Failed Deliveries, and Returns) in 2020 vs 2019 across digital services (offered on the JumiaPay app), food delivery and physical goods other than phones and electronics by 41 percent, 32 percent, and 10 percent respectively.”

However, in the accompanying Results Presentation laden with infographics serving as diagrammatic representations of the data in the earlier release, the company revealed that its food delivery business had a good showing as food delivery orders grew 39 percent in 2020.

That seems to be in tune with the words of Jumia’s co-CEO, Sacha Poignonnec, who was quoted today by Bloomberg as saying that the food business “makes up 20 percent of overall transactions on the platform and is growing quickly.”

This same news report quotes the co-CEO as saying that Jumia Food is set to begin the business of getting meals to people in Egypt.

“Food delivery is increasingly important to us,” Poignonnec said while claiming that Jumia managed up to complete up to 5 million food orders in 2020 despite the lockdown and closure of restaurants that punctuated much of the year.

“The company is expanding the service into Egypt, where there is a gap in the market following the exit of Uber Eats. Egypt is a promising market. The company has added chain restaurants such as McDonald’s and Burger King so far, with more to come,” said Poignonnec, as reported.

With this move, Jumia will now be offering some form of food delivery in all but one of the 11 markets where it currently operates. The exception being South Africa where Uber Eats and Naspers-owned Mr. D Food represent formidable food delivery market forces that may just be too strong for Jumia to reasonably compete with at this time.

And much of the same can be said for the food delivery scene in Egypt which has even seen well-known global players like Uber Eats and Glovo pack up and leave in the past two years.

After a short-lived foray into the Egyptian market, Spain-based Glovo and Kuwait-based Carriage both suspended their operations. Glovo launched in Egypt’s capital, Cairo, in May 2018 and announced its exit exactly a year later, while Carriage had only five months of operation in Egypt before it shut down its business in August 2019.

A Glovo spokesperson told TechCrunch at the time that the Egyptian market was too “complex” and that “there is not a clear path to profitability” for the company.

However, In a press statement, Oscar Pierre, co-founder and chief executive officer (CEO) at Glovo said that the company decided to exit the Egyptian market along with others so it could focus solely on its top-performing markets.

In any case, there are reports that the Glovo and Carriage exodus was triggered by run-ins with the Egyptian Competition Authority (ECA). For a long time, the ECA tackled Delivery Hero (an investor in both Glovo and Carriage, as well as market leader, Otlob) for “engaging in anti-competitive practices.”

The ECA appeared to have been concerned about Delivery Hero’s influence in Egypt’s food delivery market and eventually, business soon became untenable for both Glovo and Carriage, and they both closed shop.

On a separate yet similar note, Uber Eats, the food delivery arm of global e-hailing player, Uber, which had launched in Egypt in 2018 ended its operations in the country in May 2020.

Alongside Egypt, Uber also exited Saudi Arabia and five other markets in the Middle East in that single development though it transferred its business operations in the United Arab Emirates to Careem which operates its own food delivery service Careem Now in the country.

At the time, Uber’s filings suggested that they made the decision to exit these markets as part of an ongoing strategy to be in “first or second position in all Eats markets by leaning into investment in some countries while exiting others.”

If there’s a recurring theme here, it’s that Egypt’s food delivery scene has proved a tough nut to crack to foreign-owned newcomers in the last few years, which has forced quite a number of those companies to throw in the towel.

With longer working and commuting hours among a career-chasing class, coupled with increased smartphone adoption,  ordering food online has become quite popular the world over and food delivery platforms have been at the heart of it all.

The “get-food-online” trend seems to have caught on in Egypt too. As per Statista, Egypt’s online food delivery sector is worth USD 74 Mn, and is expected to grow to USD 131 Mn by 2024.

Apart from that, the overall value of Egypt’s food delivery market is thought to be higher, since many restaurants in the country have shunned the online platforms and deliver meals directly to their customers, who call in rather than use an app to order.

As reported by Wamda, according to data from Elmenus, an online guide for restaurants and their menus, the penetration of orders placed online falls below 5 percent of total delivery orders, which means 95 percent of all orders for takeaway or delivery are still placed on the phone, between the restaurants and the customers directly.

If even a small portion of that business can be moved onto food delivery platforms, there’s a lot of value to be had for the platforms operating in Egypt’s food delivery scene; an area where Jumia is set to enter.

But with the likes of Otlob dominating the market with a network of 4,500 restaurants, 650,000 monthly users, and 90-95 percent market share, as well as Breadfast, Yumamia, Surv, and Mumm carving a niche for themselves, Jumia certainly has its work cut out for it.

For the African e-tailer which seemed to have steadied itself after the post-IPO nightmare of 2019, expanding the food business is in line with its new approach of weaning itself off of the online sales of big-ticket electronic items and chasing growth in its general products and fashion marketplace, logistics, and payments business instead.

Featured Image Courtesy: Proper Spots Africa