A look at Egypt's online food delivery sector
Ordering food online, has over the past few years become a daily practice for people all around the world. Longer working and commuting hours, coupled with a rise in smartphone penetration paved the way for food ordering and delivery platforms to emerge.
In Egypt, the same patterns are evident, with more and more Egyptians ordering their meals instead of cooking. According to Statista, the country’s online food delivery sector is worth $74 million, and is expected to grow to $131 million by 2024. The overall value of the 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. According to data from elmenus, the penetration of orders placed online falls below 5 per cent of total delivery orders, which means 95 per cent of all orders for takeaway or delivery are still placed on the phone.
But while this presents an attractive opportunity for growth, the market can be difficult to navigate, especially now during the uncertainty brought about by the Coronavirus Disease (Covid-19).
After a short-lived foray into the Egyptian market, Spain-based Glovo and Kuwait-based Carriage both suspended their operations.
Glovo launched in 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.
“Glovo’s decision to exit the Egyptian market was sudden and unexpected,” says Mahmood Al-Ameen, former head of country growth and marketing manager at Glovo. “Within a span of a year, Glovo had assembled a team of top-notch professionals that quickly got its own operations up to speed and managed to cap a 20 per cent market share, at a time when Otlob's market share was estimated ot be 90-95 per cent."
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.
But the company’s presence in Egypt was fraught with difficulties.
Saving the Incumbent
The Egyptian Competition Authority (ECA) accused Glovo and its investor Delivery Hero of engaging in anti-competition practices. The ECA said in a statement that the two companies were involved in a market allocation agreement that led to Glovo’s exit.
In 2018, Delivery Hero acquired 16 per cent of Glovo. Consequently, it had the ability to access “Glovo’s commercially sensitive information and influence their strategic business decisions,” the ECA statement said.
The strategic business decisions that the ECA alluded to was Delivery Hero’s influence in Egypt’s food delivery market. The German online food ordering and delivery marketplace also owns Egypt-based Otlob and Kuwait-based Carriage, the latter exited the Egyptian market in August 2019, just five months after launching its operations.
The ECA ordered Glovo to resume its operations in late May 2019, however, the company suspended its business completely in January 2020, saying that it lacked the necessary financing that would enable the company to sustain its operations in Egypt alongside other markets.
“When Glovo re-entered the Eyptian market as per the ECA’s order, Delivery Hero had to shut down Carriage so its investment could be put towards enhancing its long-standing business -which is Otlob,” says Al-Ameen.
Otlob, founded in 1999 in Cairo, has a network of 4500 restaurants and has almost 650,000 users every month, dominating the market.
"When we were first striking partnerships with restaurants, they were excited at the fact that there are other players are coming to the market, which would turn to be in favor of the customers by enhancing the competition, ” says Al-Ameen
But Otlob's dominance has not dissuaded others from entering the market. Uber launched its Uber Eats platform in 2018, while elmenus, which began in 2011 as an online guide for restaurants and their menus, now offers a delivery service on its app. Elmenus recently raised $8 million in its Series B round, which included investment from Delivery Hero's vice president Julian Dames. The company claims to have more than 1.2 million monthly active users.
More niche platforms have also emerged like Y Combinator graduate Breadfast which produces and delivers freshly baked bread directly to customers alongside home-cooked meals platforms Yumamia and Mumm. Meanwhile, last mile delivery startup Survv has also started delivering food in select areas in Cairo.
Room for Growth
Given the density of the populations of Cairo and Egypt’s second city Alexandria, the existing online delivery service providers limit their operations to these areas.
“When it comes to food delivery services, the rural and remote areas are still widely underserved. However, the purchasing power is very high in such areas,” says ElSaeyd Qassem, CEO and founder of Akelni, adding that going beyond the outskirts of the big cities should be an area of growth for existing players or new entrants.
“Innovation is key to make it into the market and catch the attention of both investors and customers alike,” he says. “The market is now headed to improving the customer experience leveraging data-driven tools such as artificial intelligence (AI) machine learning and facial recognition.”
Sicne its founding in 2017, Aklni has onboarded 2000 restaurants and attracted more than 200 thousand users.
Otlob remains positive about the future of online food delivery in Egypt.
"In this hard situation and unbearable phase, people believe more in the power of technology as they do not have the opportunity to leave their homes and get out to grab their daily needs... after this ends, we believe that they would continue using the online ordering as they [realise] how effective, easy and fast [it is]," says Sofiène Marzouki, managing director at Otlob.
According to Marzouki, the company plans to introduce on-demand grocery and medicine shopping on their platform.
The Impact of Covid-19
With the advent of Covid-19 pandemic, digital food delivery platforms are poised to have their share of challenges. While sales initially went up, they have begun to taper off as more people work from home and cook for themselves.
“The Covid-19 outbreak is set to influence customers' spending behaviour,” says Qassem. “A change in consumer behavior in the ﬁrst quarter of this year due to the Coronavirus can impact the future quarters for 2020."
On the business side, Qassem suggests that wise cash management is vital during these times, asserting that businesses operators must respond quickly to these changes and remain adherent to the quality of the service offered to the customers in order to keep the businesses rolling and maintain custom.
"Operations have taken a hit over the past week. We are seeing slow movement upward again as poeple start adapting to the new reality," says Amir Allam, founder of elmenus. " [We] started putting a label on restaurants that are taking good safety precautions on our apps to encourge more safety measures on the restuarants' end and ensure safety to all customers."
Every operator has taken to emailing their customers to reassure them of hygiene and safety procedures for all their deliveries.
“In times of the rise of epidemics like the novel Covid-19, people are becoming increasingly dubious of getting the best cut of meat through an online order, which can have its toll on the operations of these platforms,” says Ibrahim Al Sahouly, assistant professor at the American University in Cairo (AUC) School of Business.
A lack of trust in online food delivery hygiene and safety practices could end up having a detrimental impact on the sector overall and push consumers away from ordering their meals online. Like every other sector, it remains to be seen what the true impact of the pandemic will have on Egypt's online food delivery sector.