Flink, one of Europe’s last remaining independent grocery delivery start-ups after a wave of consolidation this year, expects its core German business to be profitable by the end of 2023, after hitting €400mn in sales in 2022.
With more than $700mn from backers including US delivery company DoorDash and Prosus, a top investor in food apps, Flink has so far defied the sector’s funding crunch that has forced rapid-delivery peers including Europe’s Gorillas, Weezy and Cajoo, and US-based Buyk and Fridge No More, to sell or shut down.
In a corner of the ecommerce market that has become notorious for burning cash, Flink hopes to position itself as a more sober player. German rival Gorillas consumed almost all of the $1.3bn it had raised before being acquired by Turkey’s Getir in early December.
“One investor asked me what we have done differently to Gorillas,” said Oliver Merkel, Flink’s co-founder and chief executive. “We are a very boring company.”
Founded in Berlin in 2020, Flink expects net revenues to grow fivefold to €400mn in 2022, up from €80mn in 2021 (net revenues exclude rider tips and VAT). The company expects growth to be slower next year as it reduces investment in expansion in order to conserve its funds and focus on the profitability of its existing business.
Flink is one of more than a dozen companies in the US and Europe that together raised more than $5.5bn since 2020 to deliver groceries and other convenience store items in as little as 15 minutes from a network of small urban warehouses or “dark stores”.
Merkel said that the company was making “very good progress” towards profitability, with about 20 per cent of its delivery hubs now profitable, excluding central corporate costs. KPMG audited its accounts in Germany.
Flink expects its German business, which makes up about half of its total revenues, to be profitable in the fourth quarter of 2023, including a proportionate share of central corporate costs. The entire business, including subsidiaries in France and the Netherlands that launched last year, would be profitable by the fourth quarter of 2024, it added.
That timeline suggests that Flink will still need to raise further funds next year, at a time when capital-intensive businesses such as grocery delivery have fallen out of favour with investors given rising interest rates and looming recession.
Despite many consumers facing a squeeze from inflation, sales were “very resilient”, Flink said, with average order values above €30 excluding promotional vouchers — a key metric for ensuring profitability.
With the public markets in effect closed to lossmaking new listings, an initial public offering could be several years away. Merkel said the business would be ready in two to three years but Flink might not pursue an IPO that quickly.
“It requires a lot of money to build a business so fast,” said Merkel, adding that Flink was “well financed” until the end of next year. “We have strong commitments from our existing investors.”