Foodora to exit Canada

Despite increased demand for food delivery, the company claims it was unable to reach a leadership position in a saturated market.
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Story has been updated below with comment from Foodora.

Food delivery app Foodora plans to end operations in Canada within two weeks, the company announced on Monday.

In a statement, Germany-based Foodora said it has filed a notice of intention to make a proposal and plans to cease operations effective the end of day on May 11th. It cited an inability to achieve a leadership position within a saturated market – which also includes SkipTheDishes, UberEats and DoorDash – as the motivating factor in the decision.

David Albert, managing director of Foodora Canada, added in a statement that food delivery “requires a high volume of transactions to turn a profit” and the company had “been unable to get to a position which would allow us to continue to operate without having to continually absorb losses.”

Foodora did not respond to questions from strategy about its market share or order volume. In 2018, $1 billion was spent on food orders through delivery apps in Canada, with research from Angus Reid last year suggesting 29% of all Canadians have used a food delivery app at least once. Most research has also suggested a surge in online food orders and more local establishments that didn’t previously offer delivery have turned to services like Foodora to provide it. On Tuesday, its parent company Delivery Hero announced it had seen a doubling in orders and revenue globally in its Q1 results.

Foodora launched in Canada when the company purchased delivery app Hurrier in late 2015. Last year, Foodora also launched its “Shops” function, allowing local businesses other than restaurants to offer delivery, such as craft breweries, coffee shops and local pharmacies. In the month since non-essential businesses have been ordered to close across Canada, many that were not able to set up their own delivery services have promoted their Foodora availability.

Major retailers had also tapped Foodora to test the delivery waters. The LCBO had partnered with Foodora to provide alcohol delivery, beginning with pilots in Toronto and Ottawa that had been continuing through the pandemic. A spokesperson for the LCBO said in an email to strategy that the alcohol retailer is currently “exploring additional services with the goal of offering as many safe and convenient shopping options as possible” for its customers.

Convenience store chain 7-Eleven began offering deliveries through Foodora in late 2018, beginning with 48 locations in Toronto, Vancouver, Calgary, and Edmonton, though the chain also began offering delivery from 300 locations in several major Canadian markets through Uber Eats last summer.

Foodora’s decision to end its Canadian operations also comes two months after the Ontario Labour Relations Board rejected an argument from the company that its couriers should not be allowed to unionize because they are “independent contractors” – the results of the union vote, which was held last summer, was set to be revealed in the near future. A statement from Foodsters United (which represents Foodora couriers within the Canadian Union of Postal Workers) described the decision to close as “poorly thought out” and “cruel,” given the even more precarious situation couriers find themselves in during the pandemic, and asked the company to reverse its decision, given the fact that its “giant multinational” parent company can afford to continue operations.

Update, 1:45 p.m.: Foodora did not initially respond to questions about whether the unionization effort impacted its decision to exit the Canadian market, but in an email sent after this story was published, a spokesperson for Foodora said it was not leaving the market due to the “ongoing legal dispute with CUPW.”

“Rather, we have tried different ways of making our business work in major markets across Canada, including trialling logistics as a service, focusing on specific segments and new verticals, and many other tactics. Unfortunately, these strategies have not generated the desired results over time. We operate in a competitive space; market conditions in Canada, and our current position in that market, are the reasons why we have made the decision to wind down our operation. Our business requires great scale to succeed, and unless you can get there, it’s unlikely to become profitable and attractive to users.”

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