Bolt Food, the food delivery service of the ride-hailing company Bolt, announced its exit from Nigeria in December 2023, after only two years of operation. The company said that it made this decision after thoroughly evaluating its performance and aligning with its broader strategy of focusing on its more profitable segments. It also said the exit was a specific situation for the Nigerian market and that it does not affect its plans for other African countries where it operates. However, a few days later, Bolt Food confirmed it would shut down in South Africa on December 8, 2023.
What do both countries have in common?
Nigeria and South Africa are both among the largest and most populous economies in Africa, with a combined GDP of over $700 billion and a population of over 300 million. They also have a growing middle class that is expected to drive the demand for online food delivery services. According to Statista, the online food delivery market in South Africa is projected to reach a revenue of US$2.10 billion in 2023, while the online food delivery market in Nigeria is estimated to be worth $834.7 million in 2022.
Bolt Food entered the Nigerian and South African markets in October 2021 and March 2022, respectively, hoping to leverage its existing transportation network and customer base to offer a convenient and affordable food delivery service. However, both Nigeria and South Africa have experienced economic downturns in recent years.
In Nigeria, the food delivery market was estimated to be worth $834.7 million in 2022, but the country also had the highest inflation rate in Africa, reaching 18.17% in March 2023. This reduced the purchasing power of consumers and made food delivery less affordable and attractive. Families have struggled to stretch their incomes, negatively impacting the disposable income and consumer spending of the population, especially on non-essential services like food delivery. Similarly, South Africa’s food delivery market was projected to reach $2.1 billion in 2023, but the country also faced civil unrest, and had its worst power crisis ever, with frequent and severe power cuts this year. The central bank projected that the country would lose nearly $13 billion as a result.
Both countries have also experienced stringent policies and currency depreciation which have further affected many companies’ operating costs. South Africa’s rand has depreciated by about 10% against the dollar this year. The Nigerian naira has had an even worse year. Last month, the naira weakened 26% against the dollar on the official market, touching its lowest closing price on record. The devaluation has contributed to increased prices for goods and services, including fuel and energy, both of which are critical for the functioning of delivery services.
Moreover, the company entered the market when there were already established players like Jumia Food, Gokada, and O-Foods in Nigeria, Uber Eats, Mr D Food, and OrderIn in South Africa. These competitors had a larger market share, a wider network of restaurants and couriers, and a loyal customer base.
In an interview with Technext, Bolt’s communications manager in Nigeria, Femi Adeyemo said the company had managed to control only 5% of the Nigerian market, despite its heavy investments. The exit was necessary to streamline its resources and maximize its overall efficiency as a company. Henceforth they plan to focus on their other verticals in the region, such as ride-hailing, e-scooters, and e-bikes, which align with their long-term strategy.
Does the food delivery market in Africa have an inflated value?
The African food delivery market has received several investments in recent years, indicating its potential and attractiveness. Glovo raised $528 million in April 2021 to expand its presence in Africa, while Chowdeck secured $1.5 million in seed funding in October 2021 to grow its operations in Nigeria. Africa still offers immense opportunities for growth and innovation, as the continent has a large and young population, a growing middle class, a rising demand for convenience and variety, and a vibrant culinary culture. The food delivery market in Africa is expected to grow at a compound annual growth rate of 12.2% from 2023 to 2028, reaching $1.7 billion. Some of the food delivery providers in the region are witnessing impressive growth and performance. Recently, Chowdeck celebrated delivering food worth over N1 billion in a single month.
However, the food delivery market in Africa also faces several challenges and risks, such as managing customer expectations, ensuring food safety and quality, coping with fluctuating market prices, and overcoming logistical and infrastructural barriers. Moreover, food delivery businesses mainly target the middle-class market, which is the segment of the population that has the income and the inclination to order food online. However, the middle-class market in Africa has been shrinking due to economic downturns and the rising cost of living. This also means that people are beginning to have preferences, make cheaper choices, and reduce their spending on non-essential services.
Also, food delivery in Africa is not homogeneous. For example, food is the biggest personal expense for Nigerians. A recent Piggyvest report showed that over 86% of the respondents picked food as a top-six personal expense. However, spending more on food does not necessarily mean that there is a high demand for food delivery services. Inherently, food delivery providers will have to adopt a context-specific and customer-centric approach, rather than a one-size-fits-all model, to succeed in this market.