In what would be a dramatic upheaval for one of Europe's most-hyped startup sectors, Turkish speedy grocery company Getir is closing in on a deal to buy its German rival Gorillas.
After months of trying to raise funding, while burning tens of millions of euros a month, Gorillas is now reportedly being sold for $590m in cash and equity to Getir. The startup was valued at $3bn at its last funding round in September 2021.
The deal has raised eyebrows for many in the tech community, who question why Getir would want to buy such a heavily loss-making company. Getir, which was valued at $12bn at its last funding round earlier this year, is already operational in all of Gorillas’ European markets — the UK, France, the Netherlands and Germany — and is also present in Portugal, Spain and Italy.
I don't understand why an investor would put money into this, because it just doesn't make any sense and it's only going to cause more problems
One European investor familiar with the quick commerce industry, who asked to remain anonymous, tells Sifted: “I don't understand why an investor would put money into this, because it just doesn't make any sense and it's only going to cause more problems.”
Gobbling up its competitor could allow Getir to acquire more customers, increase its market share in Gorillas’ European markets — and take a well-known competitor out of the equation, even at a potentially huge cost. It would also gain access to Gorillas’ 180 “dark stores” spread across 44 European cities.
These sites, which act as mini-warehouses in residential areas to make 30-minute delivery times possible, are increasingly hard to get hold of as regulators crack down across Europe.
Two sources familiar with the transaction tell Sifted that Getir’s primary motivation to buy Gorillas is to get its hands on this real estate.
Gorillas responded to these claims, saying that “as a general rule, Gorillas never comments on market rumours".
Sifted also reached out to Getir for comment, but had not received a response at the time of publication.
The dark store debate
In the Netherlands, three cities — Amsterdam, Rotterdam and Utrecht — have put a one-year ban on opening new dark stores. Meanwhile, France is currently attempting to make them harder to establish in city centres.
Dark stores are in local authorities’ bad books because they’re often situated in places that warehouses aren't normally allowed — like city centres and busy residential areas. Local communities have complained about the noise and disruption caused by unloading trucks in previously quiet neighbourhoods, putting pressure on local politicians to act.
With authorities now putting a freeze on new dark stores, buying out rivals and their existing warehouse networks may be the most straightforward way for Getir to expand its footprint.
Getir has tried to get around the regulations in other ways, too. In July, it attempted to open a dark store in Amsterdam that doubled up as an in-person supermarket. A judge upheld an order from the local council and said the site had to shut down in two weeks.
Stephan Soroka, a foodtech researcher and operational adviser to quick commerce companies, says that “the situation with the dark store bans in the Netherlands and in Paris is one of the biggest motivations there could be for Getir in this specific deal”.
More wiggle room for Getir?
An executive working for a rival quick commerce firm agrees that real estate is “one of the most important reasons” for Getir buying Gorillas, which had bolstered its dark store network when it acquired French rival Frichti in January.
“Gorillas was just a bit quicker than Getir in securing those [warehouse] locations — the acquisition of Frichti probably helped a lot as well,” they say. “[The acquisition] gives [Getir] so much more room to wiggle to build up a network of good locations which they haven’t done so far… Gorillas’ network in Paris is much better than the Getir one.”
One investor who’s backed a European quick commerce startup tells Sifted that, if Getir does acquire Gorillas, it will inherit some of the wisdom of navigating the French system that came with the Frichti buyout.
“Frichti executed at the local level much better than any competitors… The business was still the leader in France when they got acquired, with much less capital raised,” they explain. “I’m pretty sure there’s a lot of know-how to leverage out of this.”
The rival executive says they also understand that in the event of a sale, the permits for Gorillas’ existing warehouse locations in France — those that don’t already have problems with the neighbours, at least — can be transferred to the buyer.
They added that in the Netherlands, Gorillas has already secured permits for new locations in the cities where it's present, which can, in theory, be transferred to Getir.
The problem is, if you buy more unprofitable hubs, you have more unprofitable business.
But not everyone sees the wisdom in acquiring these sites.
“The problem is, if you buy more unprofitable hubs, you have more unprofitable business. So in the end, I think that's very short-sighted [of Getir] because you just accumulate more burn” — which was €60m a month for Gorillas in May — says the first investor.
Gorillas’ track record as a business partner might be another good reason to steer clear of an acquisition, says the first investor.
“Their [Gorillas’] credit score is absolutely terrible because they're just not paying their suppliers,” they say.
Documents from Creditscore, a European credit rating agency, seen by Sifted also state that Gorillas’ credit score is low and the company is prone to delays in payments. Its probability of default was put as 21.22% in June; far higher than the average probability of default in Germany, which is 1.06%.
Gorillas, responding to these claims, says that it's a “fully solvent organisation”.
“Thanks to the investments in our company and our strong focus on profitability, as part of our new corporate strategy, we are in a good financial position and can therefore meet all financial demands related to our daily business activities. Our business partners appreciate us as a reliable partner."
Another possible issue with the acquisition, speculates the first investor, is that the costs of integrating Getir with Gorillas would be considerable.
“You would have to close down many hubs with overlaps and then have the costs for the rental contracts that are still running for another few years… and you can’t simply let go of people that become redundant,” as employment laws in countries like France and Germany make it harder to fire employees, they explain.
And, even if gobbling up more dark stores is the aim of the game in European tech’s most-watched deal of the year, the investor cautioned that the real estate play might be a short-sighted one, with the regulatory landscape around dark stores still unpredictable.
Getir might be able to reap the benefits early on of more real estate in the heavily regulated markets of Paris and Amsterdam, but with further crackdowns on dark stores ahead — new regulation is set to be established in 2024 in Paris — it may not be for long.
Tim Smith is Sifted’s Iberia correspondent. He tweets from @timmpsmith