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Delivery Hero

Delivery Hero Buys Brazil’s Subdelivery As It Beefs Up In Asia And LatAm

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Delivery Hero, the startup that is now valued at over $1 billion and is raising a lot of cash to compete heavily against the likes of Just-Eat and FoodPanda in the food delivery market outside the U.S., is adding another acquisition to its list as it focuses on growth in Latin America and Asia. It has acquired Subdelivery, an online delivery service based in Brazil.

Subdelivery’s biggest claim to fame is that it holds the exclusive contract to deliver food for the sandwich chain Subway.

We are asking Delivery Hero for the terms of this deal and if it plans to use more of its $657 million warchest for further acquisitions, or to expand into further categories of delivery. (We’ll update as we learn more.) Rocket Internet, for example, has been looking to leverage its own delivery network for more than just restaurant food, with its most recent move being the launch of ShopWings, an Instacart-style service that offers a list of groceries from across different stores that can be purchased online and aggregated into a single delivery.

It’s clear that these regions will be the focus of investments in any case:

“Asia and Latin America will hold a central role in our long-term strategy. We will continue focusing on growth and market share over profitability for the next 7-10 years,” said Niklas Östberg, Delivery Hero’s CEO, in a statement. “We have the advantage over our local competitors that we can afford having loss making markets like Korea for a very long time because they are funded by the profits generated in our European markets.”

“Loss-making” may be the operative phrase here.

While Delivery Hero doesn’t spell out what its overall revenue is, it notes that one operation called YoGiYo, a brand it operates in Korea, contributes $2 million in monthly revenues on orders of 1 million each month. It’s not clear how, overall, the company’s margins are holding up. If you calculate out an average of $2 million/month in sales, this works out to $48 million annually for YoGiYo. Delivery Hero also notes that its marketing budget is $40 million — meaning that before any other operational costs are deducted, it’s down to annual revenues of $8 million.

Another might be competitive pressures. Last month, Just-Eat also invested in growing its business in Brazil through a merger with iFood (via Tech.eu).

Delivery Hero, based in Berlin, first opened for business in Europe in 2011, but it’s gradually shifting more activity to emerging markets — not unlike its other non-U.S. competitors. Collectively, Asia and Latin America now account for 35% of all the company’s orders, with the Asian business growing at a rate of 500% and Latin America 300%.

To date, Delivery Hero has made four acquisitions prior to Subdelivery. They include Pizza.de, ClickDelivery, PedidosYa and 9Cookies — all of which were acquired this year.