After a challenging few months including closure of markets, instant grocery delivery company JOKR told businessroundups.org it raised $50 million in a Series C investment at a post-money valuation of $1.3 billion.
The financing that The information first reported which JOKR was seeking last September follows a $260 million raise announced in November 2021. However, with the valuation, the company gets a slight uptick, compared to Series B’s $1.2 billion pre-money valuation.
“It’s not a huge uptick in terms of valuation, and it’s clearly something that, despite the market correction, still shows that we’ve been able to build traction to grow and become more profitable,” said JOKR co-founder and CEO, Ralph Wenzel. businessroundups.org. “Otherwise those conditions would not have been justifiable. We are pleased to have closed the Series C round and that it is receiving higher valuations from new and existing investors.”
The new investment was supported by existing investors, with G Squared leading the round and GGV Capital, Tiger Global Management and HV Capital participating. In total, JOKR has raised $480 million since its inception in 2021.
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Difficult decisions
Wenzel went after the new funding “to make sure that we have a fully funded business plan and that we can become completely self-sufficient and not be more dependent on outside capital.”
It has indeed been quite a rollercoaster ride for the company over the past year. In his report, The information said that JOKR was losing $10 million per month. Wenzel confirmed that the company is “still losing money,” but that this figure includes countries and cities where it no longer operates, so losses are currently down to single-digit millions of dollars per month.
JOKR achieved gross profit status last April but was swept up in the challenging economic environment that hit the instant grocery industry, due in part to people returning to in-person shopping as the pandemic eased, a slowdown in venture capital investment and the war in Ukraine.
As such, at the start of the summer of 2022, the company cited “global economic uncertainty” as the reason for announcing that it would close deliveries in New York and Boston. Then this month, it officially left Colombia following earlier closures of sites in Medellin and Santiago, Chile in November. The company continues to operate in Brazil, Mexico and Peru.
JOKR’s instant grocery delivery app. Image Credits: JOKR
The decisions came from an ongoing review of the various business units and a determination of where JOKR has the best opportunity to balance growth and profitability, Wenzel said.
“It’s not a ‘winner takes the whole market,'” he said, but more of a “winner takes the most market,” he added.
When asked how he can be optimistic about the future of JOKR when the instant grocery delivery industry is currently more widely challenged, Wenzel said it comes down to a different balance between long-term growth and short-term profitability and also on the company’s focus on profitability over geographical diversification.
“We therefore made the decision to fully focus on regions that meet these expectations and are on a clear path to profitability, without compromising our vision and customer promise or sacrificing the huge long-term growth potential in one of the largest under-penetrated regions in the world,” he said.
In addition, JOKR focused on the customer experience, which is why, he said, the company consistently has a Net Promoter Score above 80.
“We sincerely believe that e-commerce should respond to increasing customer demand for relevance, reliability, sustainability and fun,” he added. “JOKR is focused on building a new generation of retail, through vertical integration and superior data science and technology. We achieved full operating leverage with positive gross margins in just one year and have continued to grow ever since.”
Unwrap instant grocery delivery
The instant grocery delivery industry peaked during the global pandemic, as fewer people left their homes. Start-up companies flocked online and raised serious venture capital.
However, as the virus became something we all had to learn to live with, people returned to their normal in-person shopping behavior. This left much of the quick-commerce industry figuring out whether their business models could survive in a crowded space just as capital was becoming scarce.
“Some [delivery startups] are most definitely safe — especially those with positive unit economics,” Matt Birnbaum, the former head of talent acquisition at Instacart and now a talent partner at Pear VC, told my colleague Kyle Wiggers in June. “The good supply companies can slow their spending in growth areas like recruiting and marketing and become profitable almost immediately. The companies most at risk are those that do not have a clear path to short- or medium-term profitability. As access to capital has become more limited, so has the hunger for growth at all costs.”
Unfortunately, what resulted was announcements of companies resisting the tension over the past year and being taken over or going bankrupt. For example, Buyk, refrigerator no more And Zero grocery ceased operations – and Zero did so just weeks after announcing another round of funding. We also saw some giants, such as Gopuff, announce staff cuts, as did Zapp.
Meanwhile, my colleague Ingrid Lunden reported on Turkey-based Getir acquiring German competitor Gorillas, which had been “exploring strategic options” since May and had laid off staff. This was after Getir itself announced plans to cut its global workforce by 14% and delay expansion plans.
Deliver for Brazil
After facing layoffs and market closures, Wenzel said continued investor confidence is proof that where JOKR is headed today and tomorrow is on the right track. The Serie C round concluded in December.
Meanwhile, Wenzel said business in Brazil is “thriving, growing consistently and becoming more profitable.” Brazil accounts for 50% of JOKR’s business and the new financing will allow the company to double in this region while strategically looking at other geographies. He adds that the company has a positive gross margin in Brazil and expects JOKR to be fully profitable in the first quarter of 2024.
Brazil is one large market for on-demand grocery delivery. It has been growing at an average annual rate of 32% since 2019, and together the market generated an estimated $3.1 billion in revenue by 2022. The market is expected to grow at approximately 10% each year until 2027, which would effectively double the market, according to Ken Research.
The market is also fiercely competitive. Some of the major players serving the country include iFood, Rappi, and Mercado Libre. Uber Eats was on that list until early 2022, when it announced it was closure of his business Over there.
Brazil is also big enough to allow players from other parts of Latin America to come in and grab a significant share of the market share. Mexico-based online grocer Jüsto entered the market in October 2021 and told businessroundups.org in 2022 that it saw monthly growth of between 30% and 40% and that the market already accounted for 25% of Jüsto’s sales. In addition, Diferente, a new Brazilian online grocery delivery company, saw the average order volume for its fruit and vegetable boxes increase from 13.8% to 17.2% in the past 10 months.
Next steps
Instant grocery delivery is here to stay, but the way the companies operate in the future may look different in how they generate revenue. For example, DoorDash now returns packages for customers.
However, Wenzel claims that JOKR’s plans to increase sales will not be “realized at the customer’s expense”. Instead, the company’s vertically integrated infrastructure allows it to go to local producers to buy food and charge customers the same prices as in the supermarket.
“Brazil’s domestic food production is not dependent on imports,” he added. “You can integrate vertically because 90% of the food consumed in Brazil is produced in Brazil. This is not as feasible in the United States or Europe and that is why we have been able to unlock a very high operating margin.”
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