Why Food Delivery Apps Are Hot in Latin America

January 20, 2020

In the LATAM region, food delivery isn’t a trend that resulted from the rise of mobile usage. It is part of the Latin American lifestyle, especially in large cities like Mexico City, São Paulo, Buenos Aires, or Bogota (more on this later). This lifestyle combined with the affordability of delivery and the expanding mobile market created the perfect conditions for delivery startups to flourish and spark fierce competition to conquer consumers. 

 

The rise of food delivery apps

Back in the early 2010s, a food delivery revolution began when German company Delivery Hero expanded its operations across the globe. Delivery Hero bought food delivery companies in Europe, China, and South Korea to aid in its growth. 

In LATAM, Delivery Hero acquired PedidosYa, an Uruguayan company operating with more than 1,000 restaurants in Mexico, and ClickDelivery, a Colombian startup that had one million visits to its website per month. 

These deals inspired a number of entrepreneurs. By 2013, seven food delivery startups were operating in three LATAM countries. A fierce competition began. The battle between startups and the acquisition rush led to a lack of business sustainability and soon investors gave up on the industry. 

But then in 2015, Rappi arrived, and a second revolution started. The Colombian startup gained the attention of the American seed accelerator Y Combinator by presenting a business model where a delivery — no matter the product or the distance — would only cost $1. In 2018, Rappi became Colombia’s second unicorn.

Parallel to Rappi, PedidosYa started to grow too. New startups entered the market, including Glovo, from Spain, and UberEats, from the U.S. Today, food delivery mobile apps compete in a very active market in the LATAM region, with the biggest players are Rappi, iFood, Mercadoni, Glovo, Kiwii, PedidosYa, and UberEats.

 

Addressing the needs of busy city dwellers

Mobile usage has grown exponentially in the past five years, giving people from all over the region access to the internet. In fact, it has grown so rapidly in the past decade that the number of LATAM mobile subscribers is gaining on the world’s most developed countries, and is expected to reach 422 million mobile subscribers, or 64% of the population, by 2025 (80% in countries like the U.S.). 

The immense growth of mobile usage combined with overcrowded cities allowed food delivery startups to rise to prominence. Rappi promises, for example, to deliver anything in less than 30 minutes at a very affordable price. In places where big-city dwellers commute for more than an hour each way and don’t have time to cook a proper meal or buy their weekly groceries, Rappi arguably improves and simplifies people’s lives. 

 

Confronting challenges and expanding business

As food delivery startups become more prominent they face a regulatory challenge. At present, delivery people who work with these new apps are not formally employed. The business model of food tech startups relies on delivery people who are independent and choose when and how many deliveries to take on. This causes uncertainty around labor regulations in most LATAM countries, with some of the companies having even been suspended. Food delivery companies need to ensure that their work policy is legal while continuing to contribute to the creation of new jobs and boosting local economies. 

The last decade has been a time of growth, failure, and learning from mistakes for food delivery apps in LATAM, but today, these companies are rolling in the dough (Rappi reached $3.5 billion in May 2019). The food tech experience in LATAM demonstrates perfectly how important it is to really get to know Latin American people, with their unique lifestyles and market behavior, in order to be successful. All successful businesses find a need and address it, and it’s no different in the mobile sphere. 

 

Excited about the opportunities the LATAM mobile market presents? Join us at MGS LATAM in Mexico City to take a deep dive into the specific opportunities and challenges this market presents. 



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