iFood merges with Delivery Hero’s Domicilios.com to challenge Rappi in Colombia

Latin America's leading legacy food delivery company iFood and Delivery Hero-owned Domicilios.com are merging in a bid to take on the food startup Rappi on its home turf.

The price of the transaction was undisclosed, but will result in iFood holding a 51% equity stake in the partnership, while Delivery Hero will hold the remaining 49%.

Domicilios, the Colombian online food ordering startup, raised $47.7 million before it exited to Berlin-headquartered Delivery Hero for an undisclosed price in 2014. And while iFood's has operations in Colombia and Mexico in addition to Brazil, it hasn't achieved the same kind of market penetration outside of its home country - where it serves +147,000 restaurants registered in over 1,000 cities.

iFood says the combined companies will have the largest geographic presence in Colombia with more than 12,000 restaurants in more than 30 cities across the country. With the merger, iFood inches closer to overtaking the top-spot in the Colombian market, behind the Bogota-based billion-dollar-valued hometown hero, Rappi.

Rappi has raised a total of $1.4B in funding over 8 rounds, including a $1 billion injection from SoftBank in 2019 that marked the largest single investment into a Latin American startup. Despite that capital, Rappi was hit with a wave of layoffs in January 2020, cutting 6% of staff amounting to roughly 300 employees.

We're not certain whether the layoffs had any effect on the company's valuation, which has been estimated at $3.5 billion.

Since its launch, Rappi has expanded its delivery portfolio to pharmaceuticals, banking services, and furniture in addition to groceries and restaurant delivery. Investors in the Latin American market speculate that Rappi is burning money as it battles UberEats and Didi (also both heavily backed by SoftBank)

iFood hopes the acquisition will boost business growth for restaurant and delivery partners in the region, while generating more competitive delivery products and services for Colombians.

iFood prides itself on business intelligence and management solutions, and is backed by Movile Group and Just Eat, a leading global hybrid marketplace for online food delivery.

The coronavirus pandemic is expected to hit Brazilian retailers and restaurants hard, as zero-tech restaurants are forced to enable digital delivery to stay in business. In response, iFood announced a $9.8 million fund to help sustain restaurants within its network.