Oda, the online supermarket delivery startup based in Norway, has recently announced layoffs of 150 jobs as it scales back its expansion plans and focuses solely on its home market and Sweden. The company, which was once valued at $900 million after raising significant investment from SoftBank’s Vision Fund, aims to achieve profitability in these two markets by next year.
Oda’s decision to retract its expansion mirrors what we have observed in the instant grocery delivery industry, where several startups have faced challenges in achieving sustainable growth and have either been acquired or sold for significantly less than their initial investment amounts. This trend became particularly apparent in April when Getir, a Turkish startup that raised $2.3 billion, announced layoffs and a retreat to its home market to alleviate financial difficulties.
Online grocery delivery presents unique challenges due to the complexity of managing perishable items and a multi-temperature supply chain in a price-sensitive category. Even the most capable organizations have struggled to develop a viable online model for grocery retail. Oda’s CEO, Chris Poad, acknowledged these challenges in a recent LinkedIn post, emphasizing the difficulties associated with the sector.
Oda’s decision to bring in Poad as CEO is part of their efforts to overcome these challenges. With his previous experience at Amazon, Tesco, and Google, Poad joined the company in April of this year, taking over from co-founder Karl Munthe-Kaas, who reportedly left the company following pressure from the board related to Oda’s unsuccessful international expansion.
Initially, Oda had ambitious plans to expand across the Nordics and northern Europe, capitalizing on the surge in online grocery delivery during the pandemic. However, the company soon faced setbacks, with plans to end its operations in Finland after just one year and Germany shortly thereafter. Despite the retrenchment of its own-brand expansions, Oda pursued consolidation with existing grocery retailers and merged with Sweden’s Mathem in 2023. This merger was expected to position Oda as the largest online grocery retailer in the Nordics, generating over NOK 5 billion ($471 million) in revenue.
Nevertheless, Oda has now confirmed the postponement of its international expansion strategy. The company’s current situation serves as a reminder of the optimism displayed by investors prior to 2022 and the challenges faced by startups that failed to meet their growth projections.
Before the pandemic, Oda had established itself as one of the prominent regional players in online grocery delivery in Europe since its founding in 2013. Other notable players in this industry include Ocado from the U.K., Rohlik in the Czech Republic, Picnic in the Netherlands, and Everli in Italy. The COVID-19 pandemic led to a significant increase in online shopping, and in 2021, SoftBank’s Vision Fund led a $265 million funding round for Oda, valuing the company at $900 million. However, by late 2022, Oda faced a decreased valuation of $353 million, raising $151 million.
The announcement of layoffs is often an indication of a company’s effort to reduce costs and strengthen its balance sheet in preparation for future fundraising activities. This seems to be the case for Oda, as reports suggest that its major shareholders, including Kinnevik, Summa Equity, and Verdane, are expected to provide the majority of the NOK600 million ($57 million) that Oda plans to raise. The impact of these recent developments on Oda’s valuation remains uncertain.
In conclusion, Oda’s decision to focus on its home market and Sweden while scaling back its international expansion plans reflects the challenges faced by online grocery delivery startups in sustaining growth and achieving profitability. The company’s journey, along with the struggles encountered by other players in the industry, serves as a reminder of the complexities associated with online grocery retail and the need for innovative solutions to overcome these obstacles.
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