PM — Is the shine fading from ultra-fast delivery startups? US startups seem to suggest so

It’s another busy news day on all fronts as we sprint to the weekly finish line, ladies and gentlemen, with stake sales and investments topping headlines locally, and ongoing global energy concerns leading headlines abroad.

THE BIG STORY TODAY

#1- BREAKING- Abu Dhabi wealth fund ADQ is reportedly acquiring unspecified state-held stakes in Abu Qir Fertilizers, Mopco, and Alexandria Container & Cargo Handling, Bloomberg reports, citing a source it says has knowledge of the matter. The reported sale would be part of a USD 2 bn investment from ADQ in snapping up state-held stakes in five EGX-listed companies, which Bloomberg reported earlier this week would include up to 18% of leading private sector bank CIB, an unspecified stake in fintech darling Fawry, and three other unnamed companies.

Speaking of Fawry and stake purchases: State-owned Banque Misr has purchased an 8.85% stake in the fintech company in a EGP 1.47 bn block transaction, according to a disclosure to the EGX (pdf). The bank purchased 151.10 mn shares at an average price of EGP 9.75 per share. The transaction brings Banque Misr’s total stake in Fawry to 15.78%.

#2- EFG Hermes-led Vortex Energy, RX Healthcare, and Education Fund eyeing fresh investments + acquisitions: EFG Hermes’ Egypt Education Fund, and its healthcare arm, RX Healthcare, are studying new investments and acquisitions over the coming period, head of Private Equity and Asset Management Karim Moussa told Enterprise. These plans include some USD 30-40 mn the education fund plans to invest over the next 18 months, while RX Healthcare Management is looking into two or three majority stake acquisitions of pharma companies in transactions valued at between USD 200-500 mn apiece. Vortex Energy is also planning to reach a USD 550 mn second close for its Vortex Energy IV fund within the next two years, Moussa told us.

^^We’ll have more on these stories and others in tomorrow’s edition of EnterpriseAM.

** CATCH UP QUICK on the top stories from today’s EnterpriseAM:

• GDP forecast downgraded as cabinet signs off on 2022-2023 budget: Egypt has revised downwards its GDP forecast for FY 2022-2023, according to figures in the draft budget that was approved by ministers yesterday.
• More chatter that we are, indeed, going to talk to the IMF about a new program: Analysts, including at Goldman Sachs, Moody’s and Capital Economics, are speculating that the fiscal stimulus package and monetary policy measures announced Monday will pave the way for a fresh IMF program as the ongoing commodity price shock puts strain on the economy.
• Suez Canal transit fees to rise in May: The Suez Canal Authority will raise fees for ships transiting the waterway from the beginning of May.

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THE BIG STORY ABROAD-

Russia could cut its oil supply by about 1 mn barrels per day, Russian Deputy Energy Minister Pavel Sorokin said in a statement shared by the Russian news agency TASS. This comes as the country is working to repair its storm-damaged oil loading facilities at the Caspian Pipeline Consortium terminal — which makes up 2.5% of global seaborne oil trade. Depending on the damage, the repairs could take up to two months, during which the pipeline could slash its oil supply by about 1 mn bbl/day, putting the already vulnerable oil prices in a risky position, where they could rise even more. Europe is already facing a “systemic” shortage of diesel due to sanctions on Russia that could force governments to ration fuel as energy traders fear that western sanctions on Moscow could remove as much as 3 mn bbl/day of oil and petroleum products from the market. European gas prices continued its upward trend today on the back of talks of new sanctions, with Dutch gas futures rising 4.1% and British futures jumped 4%, reports Bloomberg.

A glimmer of hope: European gas is “likely to remain highly volatile but with a downside bias,” according to a Citigroup note cited by Bloomberg. Germany refusing to enforce natural gas sanctions on Russia will help cap the price increases, while China’s likelihood to increase coal production will decrease the demand for LNG, the note added.

And the US could soon offer a solution: US President Joe Biden “will announce joint action on enhancing European energy security and reducing Europe’s dependence on Russian gas at long last,” White House national security adviser Jake Sullivan said in a presser, as Biden heads to Brussels for talks with European officials.

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MEANWHILE- Chinese authorities have found one black box from the deadly Boeing 737 plane crash after two days of searching, reports Reuters. The box was found “severely damaged” — so much so that authorities can’t determine if it is the flight data recorder or the cockpit voice recorder at this stage. The flight nosedived into a mountainside on Monday, and new reports suggest that the pilot failed to answer calls from Chinese air-traffic controllers during the incident, according to Mint. All 123 passengers and nine crew are presumed dead.

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HAPPENING TOMORROW-

EV-charging bid deadline is tomorrow: Tomorrow is the deadline for companies applying to manage the soon-to-be-established company for EV charging stations. The deadline was originally set for 17 March but was extended for one week. Three companies so far have expressed their interest in the project.

REMINDER- There’s no MPC meeting tomorrow: The Central Bank of Egypt has canceled (pdf) Thursday’s regularly scheduled Monetary Policy Committee meeting after enacting a surprise 100 bps rate hike at a special meeting early Monday morning.

???? CIRCLE YOUR CALENDAR-

The Egypt International Mining Show (EIMS 2022) kicks off next Monday. The virtual event will wrap on Tuesday.

Check out our full calendar on the web for a comprehensive listing of upcoming news events, national holidays and news triggers.

WEATHER-

???? PSA- We’re in for some chilly weather and rain tonight, according to the Egyptian Meteorological Authority. Greater Cairo could experience light rainfalls at night while coastal regions are in for a full blown thunderstorm. Tomorrow’s weather will likely be the same at 19°C during the day and 8°C at night, but there’s less of a chance of rain, our favorite weather app tells us. Temps in Cairo are on track to rise to the high 30s by the end of next week and to 41°C on Saturday, 2 April (probably the first day of Ramdan).

And the chip shortage lives on: Chipmakers’ expansion plans to meet the growing demand and fill the gap between supply and demand will reportedly be constrained thanks to a shortage of critical equipment. “Next year and the year after there will be shortages … We’re going to ship more machines this year than last year and . . . more machines next year than this year. But it will not be enough if we look at the demand curve. We really need to step up our capacity significantly more than 50%. That will take time,” Peter Wennink, chief executive of the semiconductor company ASML told the Financial Times. The global chip shortage has been wreaking havoc on the automotive industry worldwide. Major global automakers have been forced to lower production or announce additional factory downtime at their production facilities, including Toyota and Volkswagen, who cut their global output by 40%.

Crypto.com becomes the first cryptocurrency platform to sponsor a Fifa World Cup: Singapore-based cryptocurrency platform Crypto.com will be an official sponsor of the Fifa World Cup Qatar 2022, Fifa announced in a statement, joining giant sponsors like Adidas, Coca Cola and Visa. The sponsorship marks the platform’s latest marketing push to bring the industry into the mainstream, particularly through the world of sports, Bloomberg writes. The move follows its USD 700 mn naming rights agreement with the Los Angeles iconic arena formerly known as Staples Center — and now known as the Crypto.com Center. “Through our partnership with Fifa, we will continue to use our platform in innovative ways so that Crypto.com can power the future of world-class sports and fan experiences around the world,” Co-founder and CEO Kris Marszalek said in the statement. It is worth noting that Crypto.com is a major sponsor of the UFC.

???? ON THE TUBE TONIGHT-

(all times CLT)

Attention millennial video gamers — Your favorite fight game is getting a Netflix anime series: Tekken: Bloodline — based on Bandai Namco’s successful fighting game franchise — is coming to Netflix later this year. The premise is effectively the retelling of Tekken 3 in anime form. For those too young or too old to have owned a PS1: Jin Kazama wants revenge for his mother’s death at the hands of a demon so he seeks out his grandfather, Heihachi Mishima, to teach him to fight. Fans of the video game know that Heihachi is one of the game’s hardcore characters, being the leader of a private military contractor known as the Mishima Zaibatsu. His quest for revenge will eventually lead him to the King of Iron Fist Tournament, where he’ll meet a number of characters from the game including the jaguar-masked King, Paul Phoenix, DLC fighter and Jin’s father Kazuya Mishima.

We haven’t kept our disdain for Netflix’s cookie cutter adaptations a secret…except when it comes to their anime adaptations of video games, with Netflix having previously successfully brought to life League of Legends, Castlevania, and The Witcher. And as fans of the game, we cannot wait for this. You can check out the trailer here (watch, runtime: 01:39).

⚽ We’re still waiting on Friday, when Egypt is scheduled to play against Senegal in the first leg of the decisive final stage of the African qualifiers for the World Cup.

???? OUT AND ABOUT-

(all times CLT)

Egypt’s reportedly first ever standup comedy show that is organized, hosted, and performed 100% by women is set to take place at The Room New Cairo tonight at 8.30 pm. The lineup of comedians include: Noha Kato, Reem Nabil, Bernadette, Salma AlNajar, Ghada Salah, and Rahma Zein.

Sharmoofers are performing tonight at Cairo Jazz Club 610 at 9pm.

New Cairo’s Lake View Compound is hosting Shop for a Cause — a bazaar organized by AlAlaa Charity Organization, Meraki, and Ville Bleue where proceeds will go to charity. The event will take place between 11am and 6pm.

???? UNDER THE LAMPLIGHT-

Redesigning Work looks at what’s next for the office: London Business School Professor Lynda Gratton is considered a global thought-leader on the future of work, having introduced the idea of remote work years before the pandemic. In her new book, Redesigning Work, she argues that organizations usually “freeze” or keep their culture, structure and practices fairly fixed, writes the Financial Times. However, the pandemic led the world to “unfreeze” and look at new working techniques and create a corporate culture from afar. Before the world “refreezes” it’s important to capitalize on the lessons learned from a more fluid state to create a better working model going forward. However, that doesn’t always mean a hybrid or remote system, with Gratton posing in the book a process to set a new working model that suits your company.

EARNINGS WATCH-

Egyptian Resorts Company saw its losses decline to EGP 4.5 mn in FY2021 compared to losses of EGP 44.6 mn in 2020, according to ERC’s financial statements (pdf). Total operating revenues increased nearly 22% y-oy during 2021 to reach EGP 127.6 mn.

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MARKET ROUNDUP-

The EGX30 rose 0.7% at today’s close on turnover of EGP 1.04 bn (7.4% above the 90-day average). Foreign investors were net sellers. The index is down 1.7% YTD.

In the green: Heliopolis Housing (+7.2%), Ezz Steel (+5.8%) and Madinet Nasr Housing (+2.9%).

In the red: Ibnsina Pharma (-2.0%), TMG Holding (-1.8%) and MM Group (-1.5%).

As two ultra-fast delivery startups go bust in the US, we have to wonder if the shine is fading from this new global delivery trend: Ultra-fast delivery — generally understood as online delivery usually completed within 10-20 minutes — seemed poised to be the next big thing in grocery delivery, with capital flooding into the sector since early 2020. But recently, two prominent startups operating in the US closed their doors in the space of a week due to their inability to raise funds.

Which two startups have gone under? Fridge No More, which launched in October 2020, was unable to continue operating after its failure to secure a potential sale added to “the dramatic and unexpected lack of funding.” And Buyk, which launched a year later, was forced to lay off its 870 employees earlier this month after its Russian owners found themselves struggling to access much-needed bridge funding due to recent sanctions. Buyk’s total funding was USD 46 mn while Fridge No More had funding of USD 16.9 mn.

Fridge No More and Buyk were among a handful of well-funded ultra-fast delivery apps jostling for market share in New York: As of February 2022, the “New York City battleground” included DoorDash, Gorillas, Buyk, Gopuff, Fridge No More, Jokr, and Getir. Gorillas and Getir, which each have total funding of USD 1.2 bn, have also landed in London, along with Zapp, Weezy, Jiffy, GoPuff and Yango Deli.

Ultra-fast delivery had been seeing an ultra-fast boom: As of November 2021, investors had poured more than USD 14 bn into ultra-fast grocery delivery apps since the start of the pandemic. In the first three months of 2021, more VC investment went into ultra-fast grocery delivery services than in the whole of 2020. As of April last year, the market was valued at almost USD 1 tn in the US and more than EUR 2 tn in Europe.

In Egypt, the model took off immediately: Egypt’s ultra-fast grocery delivery startup Rabbit, which launched in mid-October 2021, raised USD 11 mn in a pre-seed VC funding round in November — reportedly the largest-ever pre-seed round in the Middle East and Africa. The company, which guarantees delivery in 20 minutes or less, is currently operating across Cairo, Sheikh Zayed and New Cairo, and is targeting six-figure order volumes each month.

Rabbit’s founders see a huge market for fast and reliable delivery in Egypt, and in time could branch out beyond groceries, they told TechCrunch late last year. “Whatever the consumer wants in under 20 minutes, we’re going to let the market dictate what we sell. We’re not limiting ourselves as a grocery player,” said co-founder Ahmad Yousry. The company was recruiting for over 100 roles to meet anticipated demand, as of November.

It’s not just Rabbit: Existing Egyptian providers have also started focusing on ultra-fast delivery. Breadfast, which secured USD 26 mn in funding in a series A round in early November, is also targeting bringing delivery windows down to 20 minutes. And Talabat launched its 20-minute Talabat Mart grocery delivery service in March 2021, which now operates in nine governorates — including Assiut, Zagazig, Ismailia and Port Said, as well as Cairo. As of January this year, Talabat had already seen a 63% increase in grocery shopping since it launched the service.

Online, on-demand and ultra-fast grocery delivery are all set to keep growing: Market research firm Sacra expects the total volume of online grocery sales (which includes scheduled services offered by HelloFresh and FreshDirect) in the US to hit USD 192 bn by 2025. On-demand grocery delivery (which Sacra defines as delivery services spanning 20 minutes to an hour) spending could comprise a 15% share of that. And spending on ultrafast delivery could represent as much as a third of spending on on-demand online groceries in the US.

Still, Fridge No More and Buyk raise questions about ultra-fast delivery’s profitability: “The sudden failure of the two startups due to inability to secure capital quickly underscores a more fundamental issue with their businesses,” CNN writes. Some of the startups have no obvious way to become profitable, and end up reliant on VC funding, according to food supply chain consultant Brittain Ladd, who is quoted in the piece. Gorillas isn’t close to becoming profitable either, despite spending hundreds of mns of GBP.

As well as a big question about its ultimate longevity: Is it a flash in the pan, or here to stay? Aside from the issue of how to make a model financially sustainable if drivers are frequently delivering orders as small as a single apple, often with no delivery fees, companies in the sector must grapple with issues that include customer retention, environmental impact, their limited geographical research, and the limited options afforded by dark stores. All of this makes it difficult to gauge whether these apps will be around years into the future.