Buenos Aires — Founded in 2009 by Uruguayans Ariel Burschtin, Álvaro García and Ruben Sosenke and acquired by Germany’s Delivery Hero in 2014, delivery app PedidosYa now operates in 15 Latin American countries: Argentina, Uruguay, Paraguay, Chile, Peru, Bolivia, Dominican Republic, Ecuador, Costa Rica, Panama, El Salvador, Guatemala, Honduras, Venezuela and Nicaragua.
Depending on the country, the delivery giant competes head-to-head with either Rappi or UberEats, although, in the words of its CEO, Esteban Gutiérrez, PedidosYa has aimed from the outset to achieve a larger scale than its competitors.
“In Argentina our main competitor is perhaps in 10 cities, we are in 60″, Gutiérrez told Bloomberg Línea in an interview.
Gutiérrez is an Argentine economist trained at the UCA and began his career at Fitch Ratings, later moving on to Landmark Capital and Groupon, and is the second CEO in the company’s history, following the retirement from leadership of its co-founder, Ariel Burschtin.
Since January 2021, Gutiérrez heads up operations and oversees more than 5,000 employees, 110,000 business partners including restaurants and marketplaces, and 60,000 delivery drivers.
In the year he took over as CEO, the company posted year-on-year growth of 57% in total orders (184 million), 82% in gross merchandise volume (€2 billion), and 98% in revenues (€510 million), according to information provided to Bloomberg Línea by the company.
Gutiérrez avoids revealing numbers that are not public, and gives the impression that PedidosYa keeps them under lock and key. But the question remains as to how many users were added during the pandemic, and how many of them continue to place orders since they first downloaded the application.
The retention of users is one of the main challenges for the tech companies that saw their volumes grow vertiginously during lockdowns, and that uncertainty has been one of the main drivers in Delivery Hero’s share price drop from nearly €140 at the beginning of 2021 to €41.60 on March 21.
For the time being, both the company and its holding company remain focused on investment to penetrate more markets, and are not yet focused on profitability.
The following conversation was edited for length and clarity.
A year ago you mentioned that one of the company’s goals for 2024 was to reach one order per citizen per month in the 15 countries in which you operate, which would be a $100 billion business. How are you progressing towards that goal?
We’re on schedule with the deadlines we have planned. The main pillars that support this idea are that most people who order a delivery in Latin America still do so by calling a restaurant, and there are still many people who do not use a delivery service. It is quite an ambitious task to believe that by 2024 we will be able to reach all those people. That is our goal, that is our vision, and that is where we are heading.
What are the main challenges on that road?
On the one hand, there are people who consume delivery, but not through an app. Often they order from a certain restaurant, the pasty house around the corner from your house, for example. And we still have a lot of restaurants and associated businesses to bring to the platform. That’s where we see a big barrier to remove. Then we have another big group of people who don’t do delivery. That’s where we’re mainly talking about how we can remove price barriers. I mean, that probably happens because this universe of people doesn’t have enough disposable income. As we build volume, we continue to learn about our business and we combine all this with the technology we are building.
Which was the country in the region where you saw the highest growth rate in active users in the last year?
It is difficult to answer because we are present in 15 countries throughout Latin America and each country is at a different stage. The country that grew the most in relative terms is Nicaragua, where we launched six months ago, and today we have a very large volume. Argentina’s business in absolute terms grew much more. What we see is always the same pattern and it brings us back to the question at the beginning. There are still a lot of people who do not use the service and the opportunity is repeated in all markets.
Have you measured how many people first used the app in the pandemic and how many of those people are still using it?
Yes, we measure everything. In fact we have more information to measure than we have the ability to digest. In the pandemic we didn’t see different behavior from what was happening before. If out of every 100 people who bought for the first time, a certain percentage were still buying 12 or six months later, those ratios remain relatively similar for people who bought for the first time during the pandemic. The change is that the volume of new people we had in the pandemic was much higher than it was pre- or post-pandemic.
Where on the roadmap is profitability? Is it a priority issue?
When we are close to one order per citizen. If we are not close to that number, it means that we will have to invest more money in acquiring users, related businesses, or in building technology that will allow us to combine all that. That means that in the middle and along the way we will have to go through a process in which we stop losing money for each order we place, and eventually start earning money for each order.
One order per citizen in 2024?
The ambition is 2024. But we could easily reach 2026 and not be there yet. We are convinced that we are going to reach that goal of one order per capita. We are not yet clear about all the paths that will lead us to that destination, but we are convinced that we are going to get there. Today I am telling you that we are aiming for 2024. Quietly along the way we are finding problems that will take us more time to solve. Sooner or later the solution will be there.
How is the relationship with Delivery Hero in Germany? Are you very demanding with these goals?
If one chooses the ideal conditions one would like to have in a shareholder, it is not very far from that. We share a very important long-term vision and where we are not willing to make short-term decisions that could lead us astray. Our goal of one order per citizen is a vision shared with our shareholder. The rationale for us being convinced that we are going to get there is based on the fact that Delivery Hero in other parts of the world is already doing that or more. Delivery Hero is a company whose investment portfolio is concentrated in all emerging economies. One thinks that Latin America has its particularities and that it is difficult to operate here, but I talk to my peer in Southeast Asia and you realize that in the end in almost all emerging regions of the world there are issues that make it more or less difficult.
The Argentine context is perhaps more volatile than the Latin American average. What are the macro variables that you follow the most?
Honestly, none. We do not follow short term variables for any of the economies in the region. We follow this a little, let’s say, if you want more macro variables from the point of view of per capita consumption, per capita per country. We understand that all countries may have moments of increase, moments of decline, but we also understand that everything must converge towards this dynamic. So any solution, any measure that may affect the short term is not an impediment to follow our long-term vision. That is how we invest a lot of money in Argentina, we invest a lot of money in Venezuela, we invest a lot of money in Nicaragua, if you like, which are economies that, from the outside, one can say that they may be among the most difficult to operate in Latin America, and the reality is that we do it by applying the same logics as in the case of Chile or Peru.
Regarding the competition, and Rappi in particular, do you differentiate between the objectives of each one?
In each market our main competitor is different. In some markets it is Rappi, in others perhaps it is UberEats. Now, in both cases we tend to look at the business a little differently than our main competitors. To be able to have an order per capita means that we have to have a presence in every part of a country, in every city, block by block. Our competitors tend to operate in much smaller areas, generally focused on areas of upper-middle socioeconomic levels, and it’s a little bit the same in most of Latin America. We tend to operate wherever we can and the level of investment we have allocated for each year allows us to do so. In Argentina our main competitor is perhaps in 10 cities, while we are in 60. But beyond that the competition is the telephone, it is the people who keep calling a restaurant.
How do you work with that? There is also a generational issue.
One of the explanations could easily be the generational issue. But if there is someone who is still afraid to put a card in PedidosYa, there is also something that we must not be doing very well. So we try not to approach the problems from an age point of view, nor from a socioeconomic point of view. We try to understand why people don’t use it, and then we try to attack them. Our industry has one big peculiarity, which is that it is more or less at the same stage in almost every part of the world. A developer sitting in our office in Buenos Aires is probably at the same time solving the same problem as an American kid in Silicon Valley.
How much will you invest this year and in what?
The total amount is not public, but it will be quite similar to last year. The main areas of investment are acquiring users and businesses, developing technology, and also developing some new business units, which at the beginning are very expensive to incubate. We are venturing into fintech businesses, leveraging our logistics structure with our technology, and also being a sort of wholesaler for restaurants, so that they can buy the products they use for their business at better prices and with greater confidence when it comes to supplying the goods.
Does the withdrawal of Uber Eats, and Glovo, whose operations you absorbed, speak more of the maturity of the market or how difficult it is to operate in Latin America?
I don’t think it has been associated to the specific complexity of a country or the region, but rather that this is a business in which you have to invest a lot of money. It is a business that, until the day we reach that stage in which we believe there is no need to invest more, has a lot of volume and very, very low margins. In the long term, we do not believe that it will be an industry with many players per country, because the levels of investment required to reach that stage are so high that the return on that investment will not be for everyone. For me, the exits that occur in this industry respond more to that logic than to the country’s situation.
What is the average salary of a delivery driver in Argentina, for example?
In Argentina today, delivery drivers are earning more or less on average between 60,000 and 70,000 pesos ($545-$635) per month. That is two and a half times the minimum wage. This formula of what they earn working on the platform compared to the minimum wage is replicated in almost all of Latin America. Economically it is a good deal and offers a lot of flexibility and freedom.
And how do you view the debate about occupational safety, occupational risk for your employees, not only in Latin America but also in the rest of the world? In Europe it was also a very controversial issue.
At some point the legislation has to adapt to the new reality. It is a reality in which delivery drivers value the source of work very much, due to the level of income it generates, and the flexibility it gives them in their day-to-day work. So we believe that all legislation, particularly in Latin America, will start to tend towards that path, and we are trying to be an active voice that allows us to reach some new regulations that are more in line with the economic reality that exists today.
Do you think that the rate hikes by the Fed and the different central banks around the world will result in a cash flow contraction and a challenging environment for startups this year?
The context you are describing has already occurred during most of 2021. Clearly in the second half of the year it became quite a bit more evident. But as of today I haven’t seen it happening at the level of money going to startups. I’ve seen it as more pressures on publicly traded companies. I’ve still seen a lot of rounds of fundraising for startups, at valuations that seem high relative to where publicly traded companies are today. Now, it’s likely that at some point that will probably have to happen. But there are always times when there is a lot of investment and times when there is little investment. That is why in scenarios of very good economies, the more money a startup has in the bank, the more likely it is to succeed than those with less money. For all founders, raising money is going to be much more expensive.