Ladies and gentlemen, thank you for standing by. Welcome, and thank you for joining Delivery Hero's Conference Call. Throughout today's recorded pre-presentation, all participants will be in a listen-only mode. After a short introduction by the management, there will be a question-and-answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Please press the star key followed by zero for operator assistance. I would now like to turn the conference over to Christoph Bast, Head of Investor Relations. Please go ahead.
Hello, everyone, and thank you much for joining today's conference call. We trust you have all received the flash update presentation on the Glovo transaction, which we published yesterday evening on our IR website. I would like to remind everyone that this call is being recorded, and the webcast, as well as a replay of this call, will be available later today. Niklas will now give you an overview of the contemplated acquisition and share his excitement with you, and then he will discuss our path to profitability. After that, we will turn it over to the operator for questions. Now let me hand over to you, Niklas.
Thank you, Christoph. Today I'm here with Óscar Pierre to discuss the recent signed agreement to acquire the controlling stake in Glovo. This is, as you know, a milestone transaction between two leading technology companies joining forces in the delivery space. Therefore, I want to share with you some further background why we are so excited about this and the strategic rationale behind this transaction. Before diving into this, let me introduce Óscar. Óscar is Co-Founder and CEO of Glovo, and he will also share some of his perspective on why this is such a beneficial partnership for both our companies. Welcome, Óscar.
Thanks, Niklas. Hi, everyone, and happy to join.
Yeah, I've worked with Óscar and the team for many, many years. I'm a huge fan, and I've been incredibly impressed with their achievements. As you know, Glovo is the leading, fastest-growing on-demand delivery platform across its core regions in Europe, Central Asia, and Africa. What makes Glovo very special and different from many of other companies we have looked into is that Glovo started as a multi-category player from day one.
By being a native multi-vertical product with exceptional customer experience, they managed to build leadership position and scale quickly despite having launched later than its competitors. They also had to be ultra-efficient as they had far less capital. Glovo has developed good unit economics on a group level and is on track to be EBITDA positive in Spain and a few other markets. Last but not least, Glovo is a founder-led company built by Óscar with possibly, in my view, the coolest product globally. Óscar, please share your story with us here in a minute.
Thanks, Niklas. Hi, everyone. Again, I'm really excited to be here. I started Glovo seven years ago in 2015, when I was right out of college, and together with my co-founder, Sacha Michaud. I'm very proud and I'm very impressed of how fast we have generated such an impact by, you know, through technology in all the cities where we operate. I feel we have changed how millions of users get their local products and manage their busy urban life. On top of that, and for most of our, you know, more than 100,000 merchants, we have created a new online channel that didn't exist before, and we're providing a flexible earnings opportunity to all the couriers that work with us.
I'm a huge believer that we're in very early days in this journey. In all of our markets, both user penetration and user frequency have so much room to grow. I think our markets are still very young in terms of, you know, delivery industry development. On top of that, as Niklas said, we are probably the only global delivery brand that started from day one being a multi-vertical app, and this gives us a lot of advantages in all this massive opportunity in quick commerce and all the verticals outside of restaurants.
I'm very happy to have partnered with Niklas and with DH. I have worked with him and his team for a while, and I believe it's a super match in terms of ambition, culture, and a speed of execution, you know, to keep working on this and continue this adventure.
Thanks, Óscar. The fit and alignment of Delivery Hero and Glovo can be seen by the common visions. We have both been early believers in delivering whatever you want fast, easy, and to your door. The passion for multi-category delivery and quick commerce is at the heart of our journey and has turned our companies into innovation leaders in the industry. Óscar, anything to add there?
Well, no, I agree. As said, we grew up from day one being a multi-vertical app. I think you guys, you know, Delivery Hero has shown an incredible execution over the last years to also become a leader in multi-vertical offering. Delivery Hero is clearly ahead in multi-vertical offering versus their competitors or our competitors. I would add, Niklas, a few more things that we share. First is an obsession with customer experience. We both believe it is the best tool to become leaders in each market. Second, that we both always invest in innovation to increase the value proposition to users and great things have come out of it as we'll see later. Third, the culture. I think we have a culture that feels very like in line. Yeah, overall, I think it's a very good fit.
Cool. Thanks, Óscar. If we move on to some numbers, I think on slide three, you find some high levels. GTV or Global Transaction Value grew 80% organically in 2021, with circa EUR 2 billion of run rate GTV in October. After that December turned out really well and reached EUR 3.2 billion and including three small M&A deals signed but not yet closed. The pro forma GTV was about EUR 3.8 billion, so significantly above the EUR 3 billion we announced earlier. In many of the global markets, it's the most loved app, with more than 130,000 monthly active partners ensuring excellent content and offering to its more than 15 million yearly active users. If you turn to the next slide. Let me then further highlight the compelling rationale for this transaction to Delivery Hero.
First of all, Glovo is the leading multi-category delivery platform with a geographical footprint that is 100% complementary to Delivery Hero's. This expands our TAM in attractive, fast-growing, profitable countries. Glovo's current footprint translate into an incremental total addressable population of more than 700 million. Our combined footprint serves now more than 2.2 billion people. Secondly, Glovo has developed very strong leadership position by having superior product and service. Like us, Glovo is obsessed with offering great user experience, and their smart approach to it has allowed them to surpass many larger competitors with deeper pockets. Today, more than 70% of Glovo's GTV is generated from countries where Glovo has a number one position. On a combined basis, Delivery Hero number one position countries will generate over 90% of our group GMV. I'm switching here between GMV and GTV.
I'm sorry for that. We are still setting the exact right number for a translation for GTV, GMV here for Glovo. I'll come back to that later, but it's a couple of % difference. 90% of our GMV is from leadership markets. No other Glovo player is even close to this kind of leadership that we're holding. We think that is the fundamental driver for also high profitability long term. Thirdly, I've been working with the founder team since 2018, and Delivery Hero is a great place for founders. We already know each other exceptionally well and know what we can leverage together. Glovo's growth profile is great, and we believe it can sustain high growth for many, many years to come. However, this does not come at the expense of margins.
Glovo proved that it can be profitable during the early days of COVID but decided after that to invest more into growth again. Despite that, they are now on path to profitability in several countries such as Spain. We expect further margin improvement as we work on clear synergies from shared technology, but also other central functions and significant opportunities to drive costs down in things like cloud cost, data warehouse, payments, just to mention a few things there. We do believe that jointly, we will be able to activate Glovo's path to profitability, and any in-market consolidation we make will accelerate the path to profitability even further. We believe there are clear possibilities for this.
We see Glovo reaching similar EBITDA margin as Delivery Hero, and therefore we feel comfortable to reconfirm our long-term adjusted EBITDA margin of 5%-8% of GMV for Delivery Hero. I'll come back to the short-term impact from this transaction in terms of path to profitability in a second. Now, let's have a deeper look at the competitor position on the next slide here. I have seen in this industry where so many or very few examples of someone coming from behind and overtaking so many players as Glovo has done. It is really remarkable that they have managed to grow leadership position and outperform better-funded competitor that launched earlier than Glovo. They were able to build number one position in 16 out of 25 markets, and if, I know three markets are very early stage and has barely started.
It will soon be 19 out of 25 markets if you include those markets already. As I said, no other company has such a track record, in my view, to get there. In this slide, we have used App Annie as the primary source, and in some cases, validated with credit card data where sample size is large enough, which often is not the case. Where it is, we have used that as a secondary source.
In cases we've actually had access to actual data, we have, of course, also validated with that. What we do not look at is their traffic, as the new generation delivery companies such as Glovo and others will have 90%-100% app traffic. Looking at web is obviously very distorted, especially since there are differences. Old generation have more web traffic than the new generation apps.
We also don't look at Google Trends as app users will never search Google when they order food, so therefore, will very rarely show up in Google Trends to the same extent as web platforms do. Anyway, overall, we are very confident in the 16 leading positions, which as I said, with three additional markets where we just launched. So, we'll be 19 shortly. We're also confident about Glovo gaining position in almost every market. Óscar, anything you'd like to share on this. You're on mute or you have nothing to share.
Sorry. I was on mute. Thanks, Niklas. Look, we grew up with very limited funding in most of our markets. As you said, in most of them, we started as a distant number two or number three player, even number four in some. You know, being based in Barcelona, access to capital was never very easy during the first three-four years. I believe that made us super frugal and super-efficient in how we operate. Actually, you know, internally, we always talk about doing more with less. I think this is one of our big mantras in our culture. After those, you know, difficult three-four years, we managed to raise some funds. We got Delivery Hero on board as a shareholder.
Finally, you know, we had some chance to scale our budgets but still keeping that same mentality now of doing more with less. Basically, I think in Glovo, every euro we spend, you know, needs to make our service better. Now, if we move to the next slide, I can also comment on that one. You have here example of Spain. Spain, you know, in 2015, it was historically dominated by Just Eat, and then both Deliveroo and later on, Uber Eats launched with a very aggressive investing, while we were in those early days of Glovo with very limited capital. Nowhere nearly as deeply funded as these other players. Therefore, we had to build a culture of only investing in very smart ways.
For example, we always rejected the idea of only growing through promotions as we saw most of our competitors doing. We have proven, I think, that great execution beats bigger budgets. Also, having a strong multi-category offering has helped a lot. I believe it is a business of thousands of small details, and you need top-notch talent that executes better than competitors. This is what I personally focused on a lot. Back to this slide, we can say today we're the clear leader in Spain. Also to comment on the graph, based on our actual data and trusted data, we believe the distance is much larger than what you see in this slide. We're seeing similar things in many other markets like Romania, Morocco, Ukraine, Kenya, etc.
You see very similar trends, and also in big markets like Italy and Poland. It feels like the story is very similar, maybe at an earlier stage. Finally, I'd also highlight that the key part of our success has been to be always very pragmatic and brave in making tough decisions like selling or shutting down in markets where we didn't believe we were getting the traction and the leadership that we aim to. We did that during 2018, 2019, 2020. I feel today, as Niklas shared, we have a very healthy portfolio in terms of leadership.
Thanks, Óscar. Turn to the next slide. Here you can see that Glovo has consistently shown a remarkable growth trajectory. All segments have continued to perform strongly in 2021. Western Europe grew 81%. This is another data point for that they have been growing market share. Southern and Eastern Europe grew at 149%, mostly organic, but partly also driven by acquisitions. CIS and Africa delivered 83% growth with ample opportunities left in the regions. Glovo has developed a proven expansion playbook, a little bit what Óscar mentioned before, and is particularly into underpenetrated market and has consistently achieved strong order and GTV growth in new countries from shortly after launch.
Across all regions, strong growth in food delivery was complemented by even more rapid growth in Glovo's other verticals, in particular ultra-fast deliveries and partnerships in quick commerce. On the next page, here you can see the four pillars behind this tremendous growth. This is the playbook that Óscar has allowed Glovo to outcompete much larger competitors on. I think Óscar is best to speak on this topic. Óscar?
As said, our business is one where we need to be in many small details. The complexity of our service and the economics is high, and the business has thousands of levers to keep improving. What you see in this slide is what I would highlight from our strategy in winning in food, mostly in restaurants. The first pillar is providing the best selection and coverage to consumers. If you believe like we do that selection matters in a marketplace business, Glovo has the largest selection pretty much everywhere, in pretty much all our markets. We operate today with more than 130k active partners on the platform.
Everything from fast food chains, high-end restaurants, discounters, premium wine shops, gift shops, beauty stores, pharmacies, et cetera. I would also like to mention our growth rate and our capacity to scale fast. We're now growing our partner base at a rate of doubling the current size in 12 months or in a year from now. This has also allowed us to expand our coverage across secondary cities and suburbs. In a country like Spain, for example, we operate in more than 300 cities with our own logistics. The second is, you know, offering a superior user experience. No need to go deeper into this. Based on our data, it's obvious that our service and our logistics is faster and better than our users' alternatives.
The same with subscriptions, what we call Glovo Prime. We're still in very early days of Glovo Prime. We still have many features to develop, but we're seeing amazing results in terms of, you know, frequency incrementality while keeping very healthy margins. We still haven't rolled out in most markets, and it already represents 15% of orders and I believe it will represent the majority of our orders pretty soon.
Finally, innovation. As we said at the beginning, we have, you know, even with low budget, we have always kept a percentage of our budget to invest in new ideas, and some of them are showing great return on investment. Two examples are Glovo Concepts, which is our own food brands that we franchise to our partners. The second is Cook Room, where we operate today more than 150 dark kitchens. Both businesses are today a bit profitable as standalone businesses.
Thanks, Óscar. The next slide, we cover quick commerce. It has been at the forefront, or Glovo has been at the forefront of introducing quick commerce in their markets. The team has already reached quick commerce GTV of EUR 300 million in 2021, and the growth continues to outstrip the company's overall growth profile by multiples. On the next page, we have their offering here. This multi-category offering has produced powerful synergies for Glovo. The majority of the new grocery customers are of course existing Glovo customers, which comes at zero CAC. Existing courier network can be utilized more efficiently, and the multi-category offering significantly enhances the lifetime value. Not only does it make the product more attractive to consumers, it also confers or helps the financial benefits for Glovo. Nothing new, I think, for most of you here.
If you go to the next slide, then we cover the transaction background and structure. As I have mentioned, the partnership between Glovo and Delivery Hero goes back quite a long time. We first participated in their Series C funding round in May 2018, and since then supported the company. Glovo is an excellent example of how we continuously invest in and develop our partnerships over time. This transaction just evolved naturally out of the trusted collaboration we have built over a number of years, and we believe it is a great foundation for our joint endeavors in the future, and one of the reasons why we're so bullish about this transaction.
Focusing on the Glovo transaction value, we value Glovo at EUR 2.3 billion, I believe, before certain adjustments based on the Delivery Hero share price at announcement and net of debt and cash. Obviously, our blended acquisition price for the full 83% majority stake is much lower, given our current 44% stake was acquired at lower valuation at earlier points in time. Needless to say, the GMV multiple is in line with Delivery Hero for Q1 and accretive looking at Q2 and beyond. In absolute terms, it's a multiple lower than recent acquisitions, if you look at Woowa as an example, despite Glovo having significantly more leadership than other acquisitions that have been done. It shows that we remain a very disciplined buyer.
It also shows the trust of Glovo's shareholders in the Delivery Hero share price upside. The transaction will be share financed at a fixed ratio. The remaining minority shareholders will have the possibility to adhere to the SPA until January 31. The transaction is subject to customary antitrust clearance, and we currently expect closing in Q2 2022, so this year. Last but not least, we would like to highlight that Glovo has approximately EUR 140 or so cash at hand and is in the final stage of concluding an external financing at very attractive conditions. This will then be sufficient to fund the business until cash flow break even. Going to the next slide, on the guidance and what this means for our overall group profitability in 2022.
We have been focusing, as you know, on driving unit economics since, in particular, since Q3. We have been operating on a plan where we are not reliant on equity financing, and this is still true. On a combined basis, including Glovo, we expect the food delivery business to reach breakeven this year during H2 and produce between EUR 0 and EUR 100 million positive adjusted EBITDA in Q4 2022. On the quick commerce front, investments are predicted to peak in the Q1 of 2022 and gradually decline thereafter. On a long-term basis, as mentioned before, we are reconfirming our long-term adjusted EBITDA margin target of 5%-8%. This is it from our side, and we are looking forward to your questions. Operator.
Thank you. Ladies and gentlemen, at this time, we will begin the question-and-answer session. Anyone who wishes to ask a question may press star followed by one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star followed by two. If you are using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. The first question is from the line of Joseph Barnet-Lamb from Credit Suisse. Please go ahead.
Excellent. Thank you for taking my questions today, team. Three questions from me if I may. Firstly, when you say you expect quick commerce investment to peak in 1Q 2022, is there anything you can say to help us how to think about how high that peak could be? If you can't be explicit, perhaps you could talk about dark store openings and expectations there, but any color would be great. Secondly, when we consider your guidance for food to deliver EUR 0-EUR 100 million of profits in 4Q, you say that includes Glovo and central cost allocation. Does that include all of Glovo or just Glovo's food business?
And when we consider Glovo, how does that break down both for GTV and losses between food and integrated verticals? Thirdly, we've seen an evolution of political thinking with regards to gig economy. Those evolutions have varied by country. Can you talk a bit about Glovo's employment policies by country and specifically what the impact of gig evolution has been on the business in Spain? Thank you.
Thank you. I'll cover the first two, and maybe you, Óscar, can add on the third one. Yes. The losses are still moving up. I would say Q4 and Q1 are on similar levels, but we start seeing that it. The economics that we are able to produce are improving, not yet breakeven on unit economics basis. And since we're growing, of course, we have to improve our gross profit in order to be on a stable basis, and that's what we're seeing right now. And going forward, we are not yet as mentioned, gross profit, but we are growing, so that is generally bad for profitability, but we are improving that gross profitability fairly fast. As you will see a slight decline.
The big jump in profitability is of course at the point when you reach profitable contribution margin and you keep on growing, then you have the double effect of course. That is a little bit what you see in food and other businesses where the growth is significantly helping us to profitability. That is not yet the case for quick commerce. Therefore, you will expect that the H2 will be H2 of 2021 was significantly higher than the H1 of 2021. You see Q1 being, let's say H1 being order of magnitude, let's say similar then. And then you will see a gradual decline. It's still significant investments there.
Hope that can help without giving you any exact numbers there. On the profitability part, this was actually not taking Glovo's quick commerce part or integrated verticals into account. However, given the size of that quick commerce as a relation to Delivery Hero Group, it is fairly minimal. So, it will also not make a big difference if I would include that into that guidance. When we set the guidance, that was not included. This is fairly minimal, I would say, in the big scheme of things. Óscar, regulation on riders' employment status.
Yeah, I'll take that one. Regulation in Europe and also in all the regions where we operate. First clarify that Glovo, you know, we have always been willing to comply with existing regulation in all the markets where we operate, and we invest significant time in having conversations and being in touch with the relevant ministries and stakeholders in every country. We also strongly believe in establishing independent relationships with our couriers and provide flexibility, because we know they care, and they value that a lot. For example, that they can accept and reject orders, they can choose when to work, etc.
Going into the situation in Spain, there was a new Rider Law that came out in mid-2021. We did a massive investment to adapt to it, and today we're operating, you know, according to this new law, with a massive investment in products and also adapting our operations to it. Of course, we could afford this investment because we care a lot about Spain. It's our home market. Taking into account just to go a bit more in detail into this, you know, situation in Spain, taking into account that we run different activities, we have separated our operations, and today we combine a model with freelancers, with a model with employees, depending on the activity that they perform.
In the case of freelancers, we have also adapted a lot how we work with freelancers in Spain. Basically increasing a lot the flexibility and autonomy and independence that they have. Again, in line with the criteria that has been defined by the courts. On the other hand, Glovo has you know we have hired in-house couriers in some of our business units where we don't offer the same you know level of autonomy. These are you know our MFCs, which basically are the equivalent of DMarts and also our B2B service, where we basically offer courier services for different you know to different companies.
There's maybe also to touch on Italy. In Italy, we are currently operating with a valid model after the new collective bargaining agreement that we agreed in mid-2020. We have adapted to this new framework and where we introduced several new benefits like minimum earnings per hour, health insurance, seniority bonuses, et cetera.
Wonderful.
Thank you.
Thank you very much, team. Thank you.
Thank you.
The next question is from the line of Andrew Ross from Barclays. Please go ahead.
Great, many thanks, and good afternoon, everyone. I've got three as well. First one is, could you give a consensus to what the Glovo EBITDA actually is for 2021 and ideally an expectation for 2022, at least directionally? A second question is on the group growth for 2022. Appreciate that you're not guiding today, but I think consensus is kind of in the low 30s% GMV growth ex Glovo for 2022. As it stands today, are you okay with that? And then the third question is just to follow up about the terminology between quick commerce and food. In the past, you've spoken about integrated verticals and platform.
So, can I just confirm that integrated verticals and quick commerce are kind of the same thing as you're talking about? I think at the Q3 you said platform business would be profitable in 2022 ex investments. That investment has gone now with Japan and Germany or largely gone. I mean, there's some reinvestment coming in. How are you thinking about the platform business EBITDA for all of 2022? Thank you.
Thank you, Andrew. So, on the Glovo EBITDA, we are not disclosing, and we still have to work together a little bit more here. I think what you should assume is that in the H1 , there's not much that we can do in terms of synergies. There's a lot we can do on what I mentioned before, both on technology as well as on the cloud costs and payment costs, et cetera. But none of that will happen during the H1 year. We also think that at the stage where Glovo is right now, it's also a good moment to keep doubling down.
Therefore, you would probably assume that the H1 year will be significantly higher than the H2 of the year, both because we are able to operate together and the size will also be at a different magnitude. That's the only thing I could say. In terms of group growth excluding Glovo, I can't really comment. I don't know. I think it's. I'm sure the analysts have done a good job when they made their assessment and growth projections. We are coming from a tremendous year. I guess if you would extrapolate absolute order growth into 2022, you're probably getting in that order of magnitude.
Normally, we usually grow absolute terms more every year than the previous year, but we are coming from a COVID year, especially, in Asia was in the middle of the year, in Taiwan and so on, lockdowns there. Now we're coming end of the year, a little bit lockdown, although the impact is a little bit less now. We had then Q1 being very much lockdown in Europe, so it was a very strong Q1, beginning of the year. Therefore, the absolute growth normally would be higher every year. Now again, keep in mind that you have a little bit of acceleration or a little bit extra absolute growth in 2021 for that will then not be the case in 2022. Quick commerce versus integrated, yes, it's correct.
When we say quick commerce, that is the whole integrated verticals. Quick commerce is by far the largest item right now. But correct. Yes, in terms of profitability excluding investments, now we took a couple of investments out in Germany, Japan. We still have a couple of country investments such as in a couple of Latin American countries, will also enter quick commerce in the middle of the year. There are five or so markets in addition to those. Nothing has worsened, so therefore, in general, the business is more profitable and not less over time. Now we took some investments off and added some investments in. Yeah. That was the last question, right?
It was.
Yeah.
I asked about six, so I was only asking three. It was really just for what do you expect from the platform business EBITDA for all of 2022, and maybe you don't want to give a number, but directionally.
Yes. I think directionally, I think overall like most markets, as they grow and improve profitability over time, we'll get more leverage there. What I would like to point out, though, is that we have the old pricing scheme in Korea, and Korea is 50% of our GMV, so it's very substantial. We have the promotional pricing that is ending now partially in Q1, partially in Q2, and we will be implementing CPC, another jokr, another product that we have. But that will also take until Q2 that starts playing out. That means as we have increased OD quite significantly, actually in Q4 a little bit more than we expected, that we actually have worsened our unit economics in Korea.
That will still, I don't know, be at lower levels or worse levels until we actually implement the final pricing and also until we start pushing on CPC and jokr. That means we have a little bit of a headwind with us that 50% of our business is rather on the opposite side, with more OD with economics which are negative on the promotional pricing. That is gonna weigh a lot on us in H1. That's why H2 is gonna be significantly better than H1. Same also with Glovo. We double it down a little bit more in H1 and especially in Q1. And so therefore, that's how you should see a little bit the dynamic on the profitability side during this year. Hope that helps.
Thank you. It does. Thank you.
Before we continue with the next question, I will shortly hand over to Christoph Bast.
Yeah. I guess, Christoph speaking here. Just one comment from my side. I think we have still a lot of questions and analysts in the queue. Sorry. Therefore, we would kindly ask you to limit your questions to two, so to give everyone a chance to ask a question. That's it. Thank you.
The next question is from the line of Miriam Josiah from Morgan Stanley. Please go ahead.
Great. Thanks for taking my questions. Firstly, just on the profitability in the Glovo business, again, understand that you won't want to share numbers, but you spoke about the efficiency of the business and the relative lack of access to capital. Could you just share some more detail about the unit economics, particularly around the dark stores and potentially how that compares to what you've seen in the Dmarts business? Perhaps anything on what you see in terms of best-in-class cities, in terms of the margin profile or perhaps the contribution margin? That's the first question.
Secondly, how do you think about the path to getting to the number one position in markets like Italy, Portugal, and Poland in terms of timing and in terms of the cost of that? Are you happy to stay as number two in those markets? I think you mentioned some clear possibilities for consolidation. Should we think about you as a, being a buyer in that situation, or are there also some markets that you're willing to divest? Thank you.
Sure. I'll cover the first one, and then maybe Óscar will cover the second part. On the contribution margin on the quick commerce, and we see similar things, I would say. I know we might have been, you know, a little bit more aggressive in terms of scaling it up. I know we have more than 1,000 stores globally. But yeah, therefore I would say similar still. In terms of contribution margin in our own D business, I know Glovo is slightly ahead in Europe, I would say. Our OD business in Europe is slightly less, and I know it's less profitable than Glovo's. Overall, and of course we still have a little bit marketplace and so on. I don't know what the net effect is there. It's
I would still believe that Glovo is probably a tad higher on the contribution margin. I do think that Delivery Hero has certain tools and systems that could potentially also help Glovo improving their margins even further. The reason why they still have a slightly better economics is a little bit the mix of markets. They have higher AOV markets than Delivery Hero. So, you have Spain, you have Italy, high AOV, and that is also a big driver to that, and also more willing to pay for delivery fees, et cetera, et cetera. I think on the logistics efficiency, I still think Delivery Hero is slightly possibly ahead in some areas, at least. We pass to number one. Óscar, do you wanna comment?
Yeah. Look, I think that we basically in south of Europe in these big markets with, you know, high basket sizes. We have a playbook that is working. It's the same playbook that we executed in Spain, where our service and our value proposition was stronger, combined with, I think, a very smart growth, you know, budget execution. We have some markets where we think there is enough momentum to now start optimizing for profitability. In those where we're still not leaders, we have the ambition to become leaders everywhere because it doesn't 100% depend on us. Things as they are today, we are now growing much faster than competitors, and we think the playbook, the story will repeat in these other markets. Yeah, we have the ambition to keep investing and getting and replicating the Spanish story.
In terms of consolidation. I think in general; we believe that we have a superior product and a very strong position. We feel fairly confident here. If that's the case, then generally would be more of a buyer than a seller. That's maybe the guidance I can give there.
Great. That's helpful. Thank you.
Thanks.
The next question is from the line of Rob Joyce from Goldman Sachs. Please go ahead.
Hey, thanks for taking my questions. The first one, just on the EBITDA trajectory you've got, you're forecasting to exit 2022 at in the food delivery business. Does that mean, you know, we should extrapolate that as a sort of think about that as a minimum into 2023 for the food delivery business? With the integrated verticals, does that mean potentially there's room for break even in 2023 at the EBITDA line, on a group basis? The second one is, I guess in the last couple of weeks, we've seen a sort of acquisition of Glovo and a sell down of some of your stake in Rappi. Can you just contrast the two, well, opportunities there, why you are acquiring one and looking to sell down the other? Thanks very much.
Thank you. I think it's fair to extrapolate on the 2022 ending into 2023, that as we grow and we have positive unit economics, and the unit economics will improve a little bit every year, that means that the profitability should also increase. We have done our market expansions and all of that. This is not a company that started with one country and then started expanding to other countries and therefore profitability will kind of decline over the years. For us, it's that all the markets we have been around for a long time, we are leading those markets. Every year all of them is getting a little bit more profitable. That's why I think it's fair to assume that you can extrapolate.
Of course, quarter-on-quarter, Q4 is generally a good quarter, so is Q1, but you have Ramadan in Q2. Yes, generally, profitability should move up. We have also seen that in several segments, if not all. Yeah, all segments, I believe, on a percentage basis at least. Integrated Verticals. Here, when we look at the quick commerce, yes. That is what you would expect, that as we have from peak losses and now it will go down as we improve economics and will turn a good traction also to profitability. We are still early stage in this business. We operate for a couple of years.
It's too early to drive profitability and already now we believe. It will definitely be faster to profitability than our food business, partially because we don't have to acquire the customer again, what we mentioned before. However, we don't want to give a guidance on 2023. We feel it's a little bit premature, and it might restrict us in one or another way. We don't know what the future holds. Take a good example of this, that's a couple of years ago, quick commerce didn't even exist. Now we have 1,000 Dmarts or even more than 1,000 Dmarts is enormous strategic value or a business that is gonna produce substantial cash flow to the group and as well as the user experience and so on.
We let ourselves have that flexibility, and that's why we are the leader in quick commerce globally, including the pure-play players. At this point in time, I don't know what 2023 will hold. Therefore it's probably a little bit too early for us to give this statement, but we'll keep you updated.
Just on the contrast.
Then sell and Rappi, yeah.
Thanks.
We built a lot of love for Glovo. We think it's a fantastic product with great leadership. We also think that Rappi is a fantastic company, very multi-vertical as well. It's gonna have tremendous success. It's just that the country overlap is a little bit more country overlap. I would say Glovo is still more of a leader in their countries, and that is also aligned with our strategy. I don't say that Rappi has a chance to become leader in Mexico and Colombia and Brazil, which are all huge markets.
At the time, they are not yet with their product and the way they're building a product. I said they have a good chance, but it's a slightly different story than what Delivery offers. I think in general; we held a smaller stake in Rappi. We therefore feel more as a shareholder than a strategic partner, and we don't hold financial holdings without strategic rationale. We felt it's better to double down on Glovo and therefore cash out a little bit on Rappi, as well as other potential non-strategic assets.
Thank you.
Thanks.
The next question is from the line of Adrien de Saint- Hilaire from Bank of America. Please go ahead.
Yeah. Good afternoon, guys. Well, done on the deal and getting this done over the holidays. A couple of questions, if I may please. I'm trying to reconcile your comments saying that quick commerce has been at the core of Glovo since day one, and still, it's only about roughly, let's say, 10% of the group, GTV. And then secondly, I think, sorry for the difficult question, Óscar, but I think you mentioned last year that you wanted to stay independent. What has changed over the past 12 months to make you perhaps change your mind? Thank you.
Yes. I'll add the first question. You can maybe add to that question, Óscar, and then of course yours, the second one. I think still quick commerce is in the early stages. Delivery had to push really hard to get to where we are right now, getting such a large portion of our business. I think Glovo came a little bit easier to that, let's say 10%, because they already kind of operated that. I think even today, I would argue that even if you look vertical by vertical, we are equally much multi vertical. We're equally much of Dmarts relative to size, et cetera, et cetera. But if you look at applications, you can see that they are native in this. You can see that it's a multi-category offering.
You can hear it from the brand perception of people. When you ask people on the street, they speak about Glovo as a multi vertical. Unfortunately, they still speak about our brand as food delivery company who also deliver other things. I think that's something that we have to work on. Glovo already nailed it, and I think it's not as easy as it sounds to change that perception. I think they are therefore in a strong position to continue to grow these verticals very fast, even going forward. Óscar, do you wanna add something or just comment on the independence?
Yeah, I agree. I think first of all, this percentage depends a lot on every market. We see, for example, adoption of non-restaurant categories being much higher in Eastern European countries or African countries. Overall, we feel that, you know, we sign partnerships a lot faster. We grow. When we ask these partners, you know, how well we're doing versus their other competitors, we always do much better. I do think there's a brand effect that, you know, since day one, we launch every market with an app that says that Glovo brings you everything and this is helping a lot. The percentage today is higher than 10%.
I think we can't comment on the exact number, but it's significantly higher. The other thing is that food keeps growing super-fast . Now we see this as a journey, as a user journey now, where there's still a massive percentage of relatively new customers in Glovo. We have almost doubled our new customers in 2021 versus last year. This means that we have a big percentage of our business that is or our users that are still in the early stages of the journey, and still many are to be converted into groceries and multi-category. Then on the difficult second question you said, it's true. It's true that I said this.
I guess I don't regret it because based on the information that I had, that's what I felt at that moment, around a year ago. Maybe I had idealized a bit the you know doing an IPO or and staying independent. I think what has changed is that we during this last year we have gotten to you know know and work together much better Delivery Hero.
I truly feel they have a very unique model to accommodate founders, to keep giving them a lot of you know autonomy, while still unlocking a lot of synergies, you know opening you know now being part of this community of very smart people developing similar things in you know in over 50 countries. I think it's gonna make us fly a lot faster. Now, yeah, it just, I feel it was the right timing, and the pros are very big to join Delivery Hero. Overall, my team and I were very happy.
Understood. Thank you very much, both.
Thank you.
Question is from the line of Monique Pollard from Citi. Please go ahead.
Hi. Good afternoon, Niklas and Óscar.
Hello.
Thanks for keeping taking my calls. I've just got two questions, if I can. In the presentation you mentioned Glovo currently has EUR 140 million in cash. You'd also said in your ad hoc release on the day of the announcement that you were committed with Delivery Hero to providing EUR 250 million backstop financing during 2022. Is it sort of rational for us to then sort of add those two things together and assume that Glovo's losses would be about EUR 400 million in 2022? The second question was just on the process of getting antitrust approvals, you know, for the clearance of this deal. I just wanted to understand why it is that you're required to get antitrust approval in Spain, Poland, Romania, and Portugal, given that Delivery Hero doesn't operate there.
Yeah. Thanks, Monique. On the first question, yes, there is cash there, and we have a backstop financing, but all of that money will not be used in 2022, but that is to take the company to break even with buffer included. Of course, there might be CapEx and other things there as well. That's the backstop financing. We are currently in late stage for Glovo, I should say, of doing that financing. We'll see if they participate or if they don't. Yes, most likely we will not. It will be EUR 250 million that comes in from other parties. On the antitrust. Yeah.
Well, I didn't write the antitrust laws and regulations. It simply is the requirements of these countries that, based on the size of Glovo in those markets, we will have to file regardless of if we operate there or not. On the positive analysis, we don't have overlap. We also see this as an antitrust process that should be fairly straightforward. Therefore, we also expect it to close in the next couple of months.
Understood. Thank you.
Thank you.
The next question is from the line of Silvia Cuneo from Deutsche Bank. Please go ahead.
Thank you very much for taking my questions. My first one is if you could please talk a little bit more about the different delivery categories available in the Glovo app and how important is the core restaurant food delivery within the marketplace mix. Related to this, I would like to get your view about the future for the sector and whether you see multi-category as a winning proposition in contrast to single verticals, meaning that down the line, grocery delivery apps could start perhaps expanding into restaurant delivery as well. The second question is if you could shed some more light about the drivers of the food delivery business break-even target in the H2 of 2022 by region. Thank you.
Can you do the second question again? I missed it a little bit. The drivers of?
Sorry, Nick. The drivers of the food delivery business break-even target in the H2 of 2022 by each region.
Mm-hmm. Got it. Okay. On the first question, maybe Óscar, you can fill in, but in general, I can speak about the future for the sector, to speak specifically. I think we have taken the path that we wanna have a multi-vertical offering, and we put a lot of effort and money into doing that. I don't want to say that is the only way to succeed. I think there are players who will have a smaller scope, and that can also be a viable strategy, or having a niche segment and so on. It's just not our strategy. I'm not sure if something in between makes a lot of sense.
I think either you are focused on having a very good multi-vertical offering or maybe just focused on having very good food offering and that might also work. Again, that's not our strategy. I think there was some question on the marketplace delivery and so on on Glovo. It's a small portion, but Óscar, maybe you wanna cover that and maybe have something more to add to the first question.
Yeah. Not much to add. You know, we combine. We basically build marketplaces of local stores, local retailers, and local restaurants in every city. We're also combining this with our own, you know, quick commerce, what we call MFCs. Delivery Hero calls it Dmarts, which basically unlock a new level of speed for our users, you know, where we deliver super-fast , convenience products. As I said before, I mean, there's no. Yeah, everything that can be transported inside the city, we try to include it in the marketplace.
I think you have a little bit, aspect of it being those pure play delivery companies expanding into food. Yeah, that can well happen. I think that would not be a very strategically sound decision in general. Because it probably will mean that they are a little bit worse in the core, and they will never or it will be very hard for them to be equally good in the food delivery space. So basically, you dilute the value that you're having of being a pure specialist to being, yeah, to hopefully being a worse version of a multi-category app that we have right now. I think it's too late to start offering food in a good way. It's been done for 10, 15 years.
I think it'll be very hard for someone to catch up on that vertical, then break even by region. We don't give that guidance, but as you know, Middle East is already profitable, and I think it's fair to assume that it probably will increase its profitability. Europe, we said was kind of break even before we started Germany. Now Germany is no longer there. You would assume that that has increased its profitability in food and will continue to do so. Now of course, with Glovo and other things coming in that might change, but if you exclude Glovo for a second, there will be increased profitability in that European segment. That's what you would expect.
You would expect that the loss in Latin America will decline, but not at the level where it will be breakeven. For Asia, you will expect to see a big shift into profitability. That is of course a large segment. You will see in the APAC segment already and as we're moving now in the H1 , already improvements, of course improvements in the H2 . If you look at Asia overall with Korea as the largest part of the segment, as I mentioned before, we are operating on a promotional pricing in OD, and OD has grown quite substantially over the last quarter.
That means that there is a clear headwind for Korea in both in Q4 as well as in Q1 and Q2 until we start having the tailwind of actually changes in pricing, set up, as well as start producing an NCR or non-commission revenue through CPC and Joker and so on. That would be a big tailwind as we get into Q2 sometime. Hopefully that color helped you a little bit.
Yes. Thank you very much.
Thank you.
The next question is in the line of Giles Thorne from Jefferies. Please go ahead.
Thank you. My first question is for Óscar on the Glovo Couriers Pledge. It was only fairly recently launched, but with a pretty aggressive rollout. To my reading is probably the most substantial platform-driven initiative and commitment to the conditions that riders work in. I'm just curious to hear what regulators and politicians are saying as you are rolling this out across your operations. Secondly, back on the EMEA consolidation, it seems that M&A is becoming more cross-border, more transformational in nature. Niklas, I'd be interested to hear your thoughts on the end game of sector consolidation and where you want to fit into that overall picture. Then maybe a comment as to whether you think your cost of capital is in the right place to give you the type of self-determination that you want. Thanks.
Cool. Óscar, the first one for you.
Yeah. Glovo's pledge is something we kicked off last quarter, Q4. It basically aims to you know raise the bar in the conditions and benefits for all our couriers, independent of the country and the regulation. We wanna make sure that 100% of our couriers meet or are offered certain conditions. Sorry. We started rolling that out in Q4 with a couple of countries. Yes, we do have the commitment to keep rolling it out. It's still very early. Of course, you know all our conversations with the EU have been very positive. I would also like to take the opportunity to comment on the Platform Work Directive.
The current first draft was released a couple of months ago, and we're very positive. We're fairly positive that the EU will regulate this in two-three years' time all the gig economy, in a way that keeps offering flexibility to workers and also is good for companies. The first draft feels maybe a bit too restricted to riders, and it goes against what they want, but it's very early days. I think we have probably two years ahead of us, and we expect many changes until this becomes you know possibly a law in some of our markets. On the Glovo pledge, finally, we you know after announcing it, we're working with many other players in the industry, of course, Delivery Hero, to also work together in the same lines.
Yeah. I think on that, I think it's super cool to work with a company who really cares for riders and done such a great job in care for them and help them. You see the happiness and satisfaction scores are really good. You also see that in Delivery Hero. I've also seen numbers from Deliveroo. Generally, it's a very good complement and it's a to the gig economy what we're offering. Drivers are generally very happy, in particular, if they can work with full flexibility because it makes them make more money and have the flexibility that we all want. The more the flexibility, the better it is, and the model that we're offering and advocate for is to have as much as possible.
We see such a positive effect to both the community, to us, to local economies. I hope that has been taken into account. On the M&A cross-border end game, I don't know. I think for us, we kinda wanna be heads down right now. There might wanna be some more in-market consolidation possibilities. Generally, we are not actively looking for any larger M&A transactions at this point in time. It's too diluted. We bleed too much in our own business. We think that any business that we acquire would be diluted for our shareholders. Yeah. We also don't care. We have the size, we have the scale. We are in 70 markets. We have leadership in almost all of them.
We really don't need the M&A. It really needs to be priced to the point that it makes sense or some other strategic value to it. If someone else, does it, that's fine. They're happy to do so. Let's see. Cost of capital. That is true. With the current cost of capital, it is very hard to do, especially any public market transactions, because people will look at the share price and set them a value and so on. I think in the case of smaller transaction, I think we still have a possibility to play. I know this example of Glovo now is a good one.
Of course, Glovo would also argue that they should have seven, eight, nine, 10 billion values given the recent transaction of another company and the market leadership that they own. They feel like, well, in terms of actual value, which is the shares that you're getting, was very valuable, very substantial. They want to have Delivery Hero stock, so that's not a surprise. It was not a valuation thinking, should this be how many billion should this be worth? It was just like, what is the relative value between the companies? Does it make sense? If Delivery Hero would have been worth three times as much as it is today, it would have been the same ratio.
It wouldn't have been a different ratio because we would have been worth, I don't know, EUR 60 billion versus what we're worth today. Therefore, it was all about relative value and for them to participate in the upside of Delivery Hero over the next few years, that made them go for this alternative and save most of them than the team. I think we have proven that people want to be part of Delivery Hero, people want to see the upside, to see the value of our business, and therefore we can be part of consolidation of smaller players. Of course, public market is a little bit different.
Thank you very much.
Thanks.
Perfect. Thank you.
I think last question maybe.
Yeah, exactly. As we're running out of time, I'm afraid we will not be able to answer all analyst questions in this call. We would now come to the last analyst for today, please.
The last question is from a line of Marcus Diebel from JPMorgan. Please go ahead.
Yeah. Hi, everyone. I keep it short, given that we have the numbers broadly for this year. Now, just a question for you, Emmanuel, and we talked about it in the past. Do you expect to move also Glovo on one platform? Yeah. At the end of the day, given that we have obviously been very acquisitive in recent years. Is that the plan? Or I assume short term you will leave it separate. But is the expectation that the one platform model is still in case including Glovo?
Yeah. Emmanuel is actually not part of the call.
Oh, sorry.
We're able to make the call today. Otherwise, he would have answered some of the questions I had to answer here. Probably better than I could.
It's fine.
You have to be satisfied with me and Óscar here.
Okay.
In terms of the platform, yeah, we still believe in one platform, but the question is what is one platform? The way we built our platform is that the platform consists of something like 100 different big microservices and 1,000 microservices. Let's say 50 big services, everything from transmission to search to logistics. Even within the logistics, there are six to seven, eight different services, everything from rider hiring to onboarding to tracking to incentives. All of it are different components and grouped into one, which is logistics in this case, or transmission 'cause this is also multiple services. We believe in that, and I think Glovo do so, too.
Therefore, they will look at the, let's say, 50 or so big services, and they will say, "Well, those 20 is world-leading, best-in-class. We don't have to build it ourselves. Let's just use the engineers that would have to work on those things on something else because there's so much to build." We will operate on one platform. If you look at today, almost all platforms that we have are using probably something like 70%-80% of our services or of the components that we're building in as one global tech team . Then still meaning that every platform has their own technology, and they scale that technology, they increased number of resources of that technology, but they only build things that they cannot easily, I don't know, take from one service.
That means talabat, foodpanda, and so on. They are scaling technology even faster because 50% of what they do is already covered through one platform, and 50% they can double down with every resource there. There is a lot of cost synergies, but even more so, there's a lot of growth synergies, and speed of execution that we build through one platform in that way. I hope that helped, Marcus.
Yeah. Super. Yeah. Thanks a lot.
That's it. I'd like to thank everyone for listening in and for being supportive of Delivery Hero. As I said, I'm super excited working with Glovo and the team. I think it's one of the best companies I've ever looked at. Cohort's amazing, footprint amazing. It's really a fantastic company, and I'm extremely excited working with Óscar and the team. I think that together with Delivery Hero, they will only fly faster. I'm super excited. Thank you everyone for your support.
Ladies and gentlemen.
I think that's it. Sorry.
Ladies and gentlemen, the conference is now concluded. You may disconnect your telephone. Thank you for joining, and have a pleasant day. Goodbye.