Gorillas to Acquire Frichti in Latest Instant Grocery Consolidation – TechCrunch
German start-up Gorillas at announcement that it plans to acquire Frichti, a French startup that delivers both ready meals and groceries. The acquisition is not yet finalized, but the two companies have entered into exclusive discussions.
“We don’t share the details of the deal itself, especially since it’s not fully signed,” Frichti co-founder and co-CEO Julia Bijaoui told me. “But it is fair to say that these are negotiations that should lead to the acquisition of Frichti by Gorillas.”
When asked when the deal is supposed to close, she told me it could take “a few weeks or a few months”, it’s still hard to say exactly. Over the years, Frichti had raised about €100 million in total ($114 million at today’s exchange rate).
Gorillas is part of a group of startups trying to reinvent grocery deliveries in Europe. The company raised nearly $1 billion in its last funding round and is already Operating in eight markets, including France.
It competes with Blink, zap, cajoo, Getir and gopuff (following the acquisitions of Dija and Fancy). With these apps, customers can buy anything they would find in a small grocery store. And they all promise near-instant deliveries so you don’t have to plan ahead when you need to order groceries.
In addition to this new generation of startups, other well-established companies are trying to position themselves as competitors to instant grocery startups. For example, Deliveroo and Uber Eats both emphasize grocery deliveries in their respective apps.
Frichti, meanwhile, has been around since 2015, but with a different positioning. In the article I wrote in 2015, I called the startup a full-stack food delivery startup. The startup designs its own recipes, cooks ready-to-eat meals in its own kitchens, stores food in its own micro-distribution centers and handles deliveries with its own delivery service.
The result is a complete end-to-end service with a strong brand and reasonable prices. In recent years, the business has expanded to include fruits, vegetables, groceries and private label products. It served 450,000 customers in total in eight different cities in France and Belgium.
The summer 2020 outsourcing incident
It’s a graceful exit for Frichti and the acquisition makes a lot of sense for Gorillas. Gorillas acquires a strong brand, a network of micro-distribution centers and a different segment in the delivery space.
Frichti and Gorillas will still operate as two different services in Frichti’s existing markets of France and Belgium. As for the other six markets for Gorillas, the company might choose a different path.
“Honestly, we haven’t decided yet, but it’s more likely that we’ll scale many of the building blocks of Frichti’s product, but under an umbrella brand which could be Gorillas,” said Frichti’s Julia Bijaoui. .
And because Frichti has been around for so long, the gorillas might learn a thing or two from Frichti. “We had six years to build this fast trading model,” Bijaoui said. “We are generating an operating profit, which is quite unusual in this industry.”
But the last 18 months have not been so easy for Frichti. In June 2020, Gurvan Kristanadjaja of Liberation reported that some of Frichti’s deliveries were made by undocumented workers. According to the founders of Frichti, the startup was not aware of this. Instead, Frichti, like all delivery companies, relied on outsourced companies to hire delivery people and handle some deliveries for the platform.
And one of these outsourcing companies lured in undocumented immigrants and told them they could make money from Frichti’s deliveries. There was no work contract, no minimum wage.
This was just one example that highlighted a much bigger problem. Frichti has checked the status of all of its delivery partners to ensure they have the correct work permit and are being paid correctly. The company underestimated the problem.
Instead of blaming Frichti, this crisis highlights a widespread problem with the outsourcing model and app-based on-demand work
Hundreds of couriers realized they would lose their source of income. So they decided to protest and they blocked access to Frichti’s micro-distribution centers. For several weeks, Frichti simply could not function normally.
According to Release, 200 of the 500 delivery people working with Frichti did not have a residence permit.
This incident became a serious crisis that could have led to the bankruptcy of Frichti. A few weeks later, about half of the undocumented migrants who handled Frichti’s deliveries has received a residence permit.
“We had this incident in the summer of 2020. Obviously, we had some flaws in our process for verifying the identity and permits of our delivery partners. This is something we completely fixed today. We ensure that our deliverers have a residence permit and work in optimal conditions,” said Bijaoui.
“It was an event that taught us a lot and I think we came out of it stronger because we partnered with them and helped them get residence permits,” she added.
Instead of blaming Frichti, this crisis highlights a widespread problem with the outsourcing model and app-based on-demand work. Account leasing and dishonest outsourcing companies have been a problem for years.
And yet, regulators and companies have been slow to implement changes for the better. I’m sure the Frichti team is happy to have turned this page in the company’s history, but I’m also sure that there are other companies that will face similar incidents.
After years of meteoric growth, there has been some consolidation in the food and grocery delivery industry, as today’s acquisition once again proves. Let’s hope these newly formed delivery giants don’t turn a blind eye to exploitation in the gig economy.