Uber Eats exit intensifies fight between iFood and Rappi and worries restaurants

Uber Eats exit intensifies fight between iFood and Rappi and worries restaurants

The announcement of Uber Eats’ departure from the restaurant delivery service intensified the market dispute in the sector, heated during the pandemic.

Uber Eats, which announced that it will end its operation in the segment on March 7, was second in the market, behind iFood and ahead of Rappi.

Amid the fight between the companies, the fear of consumers and restaurant owners is now that the exit of Uber Eats from the modality will increase the dominance of the other two and result in an increase in the fees charged.

In Minas Gerais, restaurant owners say they were surprised by a notification from Rappi via email informing an increase of up to 35% in the fee charged by the app, about ten days after the announcement of Uber’s departure.

The readjustment, optional and negotiable, was credited by the company to the high inflation in the country. When contacted, Rappi did not respond until the report was published.

Abrasel (Brazilian Association of Bars and Restaurants) stated that it has received complaints from customers about the increase in application fees. Rates are negotiated in direct agreement with restaurants and companies, and therefore may vary depending on the region, company and partnership established.

The ANR (National Association of Restaurants) also stated that it “has registered an increase in complaints from its members regarding the rates charged by delivery apps.”

The entity says that it is against the increase in charges, especially at the current moment, when establishments are still recovering from the drop in revenue caused by the pandemic and have started to use delivery as one of the main sales channels.

A survey carried out for the association by the consultancy Galunion and the IFB (Instituto Food Service Brasil) in November showed that 22% of the restaurants already work exclusively with delivery as a sales channel, an increase of 11% compared to that observed in August of the same year. . These entrepreneurs would be particularly susceptible to growth in fees charged.

According to iFood, there was no adjustment made by the company in delivery and service fees to restaurants after Uber’s announcement. In a note, the company emphasizes that the partner restaurant “may choose to use its own fleet, thus defining the value of delivery to the customer”.

Rappi goes to Cade against iFood

In an attempt to gain space, Rappi filed a new demonstration this Monday (14th) with CADE (Administrative Council for Economic Defense) against iFood’s exclusive contracts with restaurants.

In this week’s demonstration, Rappi asks Cade to prevent iFood from charging a termination penalty to restaurants that wish to break the exclusivity and hire the service of other competitors. In the request, Rappi alleges that iFood “uses exorbitant contractual fines as a way to prevent the restaurant from terminating the exclusivity contract”.

The request is in addition to the preventive measure already issued by Cade, which prohibited iFood from establishing new exclusivity contracts with restaurants and bars and established a one-year limit for renewing existing contracts, until the body renders the final decision on the case. .

Rappi’s main argument for expanding the scope of the preventive measure was the departure of Uber Eats, which would demonstrate “a drastic drop in competitiveness in the food delivery market”.

The company claims that the lack of competitive conditions stems from the “practically monopolistic” performance of iFood, and becomes “increasingly unequivocal and worrying”.

Although iFood has disclosed that less than 10% of its portfolio of establishments have exclusive contracts, Rappi and Abrasel argue that the percentage represents the most relevant restaurants in the locations where the application operates.

The association also filed a lawsuit with Cade against an alleged iFood monopoly in 2020.

“The customer enters the competing platform and does not find the most famous restaurants, the city’s symbols. This distorts competition not only between applications, but also between the restaurants themselves”, says Paulo Solmucci, president of Abrasel.

Rappi stressed that the adverse conditions for competitors caused Uber Eats to exit the food delivery market, even amid the intense growth of the sector experienced during the pandemic.

“Even in a moment of vertiginous expansion of the market, highly competitive players with a consolidated name were unable to establish themselves in the sector. It is reiterated: Uber Eats is not a small regional application that has financial difficulties. global operations with a market value of more than US$ 70 billion that, even so, could not face the market power of iFood.”

Uber Eats is not a small regional application that has financial difficulties. It is a global company with a market value of more than US$ 70 billion that, even so, has not been able to face the market power of iFood.

Uber even filed for representation in February 2021 to join as a third party in the lawsuit filed by Rappi against iFood at Cade. At the time, he claimed that the competitor would have exclusivity clauses in force with more than half (55%) of the Top 100 restaurants in the country and with 6 of the 10 largest pizzerias in São Paulo.

Sought, iFood said it does not comment on ongoing cases. In a statement, the company stated that the online delivery market “continues to evolve, with the frequent entry of new competitors and the emergence of new business models”.

The company also said that its commercial policies “are in strict compliance with competition legislation” and that it will continue to cooperate with the authorities on the subject.

Smaller delivery apps seek to differentiate themselves to survive

Among the more than a dozen smaller and newer apps that compete for food deliveries and grocery shopping with giants iFood and Rappi, the consensus is that the departure of Uber Eats will intensify market concentration.

For this group, the only way to survive in this new scenario is to look for differentials.

Ceopag, for example, has a system of local franchises and monthly subscriptions focused on cities in the interior and, with that, it claims to overcome iFood where it cannot reach. Currently, the app has more than 1 million users in 22 states and 210 municipalities.

“Competing with the market leader without the same conditions would not make sense. But, with a differentiated business model like ours, a world of opportunities arises. There is room for everyone”, says Kawel Lotti, founder of the Ceopag group.

The penetration in the interior markets is also the focus of Quero Delivery, which appeared four years ago in the interior of Sergipe and serves 180 cities in 14 states, mainly in the Northeast. According to Miguel Neto, founder of the app, 1.1 million deliveries are made a month through the tool.

“We want to develop small and medium-sized businesses in the interior. This is a totally different market from the capitals, where the big apps operate. Many customers in the interior prefer to pay with cash, for example. And we deliver everything, even gas cylinders.”

In the interior of São Paulo, in Ribeirão Preto, Alfred Delivery emerged in 2017 also with the proposal to be a “delivery-everything”, like Rappi, but with a focus on inland municipalities. Today, the app has more than 13 thousand establishments registered in 23 states.

Those who remain focused on the fierce market in large capitals, such as Daki, seek to win over the customer with agility in deliveries. The company has 80 “dark stores”, a kind of supermarkets in the form of warehouses or distribution centers that, spread across the city, allow the delivery of around 1,500 items ordered online in approximately 15 minutes, according to the founder, Rafael Vasto.

“It’s a very different model from the one offered by marketplace applications, in which the buyer will go around the hypermarket, not find items, and miss the motoboy. We have trained personnel and a model dedicated to online.”

Large retail chains are also eyeing this market. During the pandemic, Magazine Luiza acquired the AiQFome, ToNoLucro, GrandChef and Plus Delivery apps. B2W, owner of Americanas, also bought the delivery platform Shipp.

For Abrasel, applications purchased by large retail chains may soon move the market, as they already have a high number of individual customers and large-scale logistics solutions.

market future

Cristina Souza, executive director of Gouvêa Foodservice, points out that the need for investment in technology so that new entrants can face the quality of service and market power of iFood and the Colombian Rappi, after the departure of Uber, is gigantic.

Therefore, competitors have opted for specific niches — in addition to focusing on the interior and delivery time, new axes that are being explored are meals that meet specific diets, such as vegan.

“You have to play a strong game and bring great advantages. It’s like launching a competitor to Whatsapp today. The customer is used to the service, with that quality, waiting time. It has to be incredible to win this customer”, he says. Souza.

“iFood, in turn, was an undeniably successful benchmark, including in the pandemic. But it is reaching a point of business maturation where it is necessary to democratize its solutions. No company wants to be the market leader and not be the most beloved , well liked by the public and the market”.

The consultant points out that restaurant owners have been complaining about the drop in sharing customer data by iFood. “The company doesn’t share the data so that restaurant owners can actually run their business, as they did in the past. In a way, that doesn’t sit well with business owners.”

Specialists bet that the maturing of the delivery market in the country involves the internalization of services and the reduction of bureaucracy in the offer of options to restaurants. An often cited solution is the implementation of open delivery, which will unify all delivery options in one software.

“Today, the restaurant usually works with the leading application, one of the deputy leaders and its own delivery system. It will not adopt another one, because it would be another channel to manage. With open delivery, a single screen will receive everyone’s orders applications. This encourages competition and service improvement. We are against any exclusivity, from anyone”, says Solmucci, from Abrasel.

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