Food apps

Is the boom in Latin America's food delivery market sustainable?

Food delivery apps experienced explosive revenue growth during the COVID-19 pandemic, nearly two years later, the companies behind these apps are concerned that consumer habits may revert to normal as lockdowns come to an end in Latin America.

In Colombia, 63% of the population bought food and groceries for the first time during the pandemic. This tendency was stronger in millennials, 44% of which said that they regularly buy food products on-line, revealed a Bain & Co. report.

Brazil saw an 80% increase in food delivery services in 2020, compared to 2019, revealed the National Confederation of Store Managers. A sector analyst for a local investment bank provided further colour, “Food delivery apps in Brazil have experienced a massive boom, unheard of in other countries. It is literally impossible to walk around any city across the country without spotting the delivery riders driving around in their colourful vests. The sector leader in Brazil is iFood, it controls something like 75% of the Brazilian food delivery market.”

“Food delivery apps in Brazil have experienced a massive boom, unheard of in other countries. It is literally impossible to walk around any city across the country without spotting the delivery riders.”

Consumer analyst, investment bank, Brazil

According to the Brazilian Association of E-Commerce, food delivery apps significantly improved their offering during the pandemic and sector leaders such as iFood, Uber Eats and Rappi consolidated their market share with this technology. The analysts continued, “The continued success of these businesses will depend on their ability to expand into other regions of Brazil but most importantly on post-pandemic consumer habits. If you look below the surface, much of the growth has come from supermarket deliveries, which are double that of restaurant deliveries.”

Mexico has seen growth across the entire delivery value chain from the apps and retailers to delivery companies and even bicycle and motorcycle retailers. An executive at a delivery company in Mexico gave us his view of the market, “There was much discussion about the longevity of food deliveries post-pandemic but even the most pessimistic market observers have been surprised. There will obviously be a contraction in sales over time but most now believe home delivery will remain a strong business line, the customer enjoys the convenience of delivery to your doorstep.”

“There was much discussion about the longevity of food deliveries post-pandemic but even the most pessimistic market observers have been surprised.”

Executive, food delivery company, Mexico

Despite this, the sector faces a number of other challenges including the issue of setting commissions and how they are shared with the rider, the bad road culture that is putting riders at risk and the fact that most food delivery companies continue to lose money and may need to scale down operations if demand reduces. An unstable customer base and food price oscillations in Latin America are also major challenges for players in the industry.

The pandemic has undoubtedly catalysed home delivery as a valid route to market for retailers but the medium term outlook remains uncertain.

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