U.S. Markets closed

Amazon-Backed Deliveroo Pulls Out of Germany in Abrupt Retreat

Stefan Nicola and Nate Lanxon

(Bloomberg) -- Amazon.com Inc.-backed food-delivery service Deliveroo announced an abrupt retreat from Germany after more than four years, a casualty of increasingly cut-throat competition tearing through the industry.

The service will cease operations in Europe’s largest economy on Aug. 16, telling customers in an email Monday that it can no longer offer the desired “brilliant” service standard. Instead, Deliveroo will focus on “growing our operations in other markets around the world.”

Deliveroo’s German business is the latest victim in the European food-delivery industry, which has long suffered from expensive competition that has forced established players to consolidate or close shop. Takeaway.com NV agreed to buy the German businesses of Delivery Hero SE last year to end an expensive rivalry in the country where both were competing for market share at the cost of profitability. Britain’s Just Eat Plc and Takeaway are now pursuing an all-share 5 billion-pound ($6 billion) combination.

The firm employs riders that cycle restaurant meals to customers’ doors in boxy backpack containers emblazoned with Deliveroo’s logo. It’s a business model that’s logistically more challenging than simply offering a platform to connect restaurant and foodie. The service is available in cities including Berlin, Frankfurt and Cologne, though Deliveroo already began retreating from some German cities last year, including Leipzig or Stuttgart.

It’s especially tough to make money in Germany, where consumers don’t order as often as their counterparts in the U.K. or the Middle East, and where riders can go on strike and form unions. Takeaway already buried the Deliveroo clone Foodora, which operated alongside Deliveroo in Berlin, and Uber Eats never started in the country.

Deliveroo hasn’t ruled out returning to the German market in the future, according to a person familiar with the matter. It will refocus its resources first to grow its business in other parts of Europe and the Asia-Pacific region. Job losses for employees, riders and restaurants will be compensated, the person said.

In May, Deliveroo said it had secured $575 million in funding from Amazon.com Inc. and other investors. The company at the time said it would continue to expand in markets including the U.K., France, Italy, Spain and Dubai.

--With assistance from Sarah Syed.

To contact the reporters on this story: Stefan Nicola in Berlin at snicola2@bloomberg.net;Nate Lanxon in London at nlanxon@bloomberg.net

To contact the editors responsible for this story: Giles Turner at gturner35@bloomberg.net, Benedikt Kammel

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.