Grocery Guru Episode #37: Ultra Fast Groceries
Join Andrew Grant and Darren A. Smith in the thirty-seventh episode of the Grocery Guru. They discuss the rise of rapid groceries, also known as ultra fast groceries. These start-ups are being discussed by JP Morgan and Credit Suisse as having the ability to take serious market share in the UK.
You Can Read the Full Ultra Fast Groceries Transcript Below:
Darren A. Smith:
Hello, and welcome to the Grocery Guru. We are episode 37 and we are here with that Grocery Guru, Andrew Grant. How are you?
Andrew Grant:
Very, very warm, Darren.
Darren A. Smith:
Yes. It's 31 here in town. It's hot.
Andrew Grant:
Well yeah, the official temperature is 31, but I think in this office, it feels like 40. So yes.
Darren A. Smith:
Now, if I was very smart, I'd make the link between hot weather and ultra-fast groceries, but I'm not that smart. So would you tell us about an ultra-fast grocery?
This week Darren and Andrew discuss ultra-fast grocery deliveries
Andrew Grant:
Well, I think you could say that their share prices are on fire.
Darren A. Smith:
They're going like hotcakes?
Andrew Grant:
Something like that, yeah. So no, we spoke about it a few weeks ago, didn't we? This rapid grocer I think is going to be the term that is used. So people like Getir and what have you, where they promise to deliver in 10 minutes. And I think both you and I are a little bit cynical, where to say okay, it's a nice thing to have and the odd person in a city center might run out of crisps or something, but the reason I've brought this back today is J.P. Morgan, the investment house, I read an article last week where they reckon, and the headline of the article was Rapid Grocery Will Create an Existential Threat to Mainstream Grocery. They're predicting, wait for this, that the rapid delivery grocers could capture 50% of the UK grocery market worth 200 billion a year.
Darren A. Smith:
And for someone like J.P. Morgan to make that forecast, we're putting a lot of stead by that, and so we should.
Andrew Grant:
Well, I don't know. It depends how cynical you are. I know both you and I have healthy doses of cynicism running through our veins, but I've always thought don't brokers come up with stories in order to pump up a share price and then come up with another story to deflate the share price that they make money on the up and the down? Isn't that what they do?
Darren A. Smith:
Well, a bit like Elon Musk with Bitcoin or Dogecoin.
Andrew Grant:
Yeah. So whether it's one of these things, let's just pump the hype so that we can make even more money out of the shares that we've hedged, or leveraged, or whatever they do. But they were reckoning, and this is the bit that got me is whether you believe they'll get 50% of the market or not, but they're [inaudible 00:02:39] these startups, this says why so much money is going into them and why the share prices have gone crazy is they're making net returns of 10 to 15%. Now, we've spoken on here many times about UK grocers being the most profitable in the world, but they still only make about two and a half P net profit in the pound, which is a lot of hard time, effort, and energy for two and a half P for every pound you sell. They reckon these guys, because they're operating out of dark warehouses on industrialist estates and under railway arches, they're using transient labor, are getting 10 to 15% returns. Now, just do the maths, Tesco worth what? 80 billion, 100 billion, making 4%. If these guys suddenly carve out 200 billion making 12%, whoa.
Darren A. Smith:
That is staggering. Now, on top of what you said, so one of these guys is Gorilla.
Andrew Grant:
Yeah.
Darren A. Smith:
Gorillas, excuse me. Gorillas. And I had a look, and these guys are already in ... Don't know if you're able to see that, but this many countries. So we're not just talking about a UK phenomenon here, we're talking about eight European countries that they're alr...