2021 June-July Analysis

Georgia delivers: the food-delivery startup boom

Five new food-tech services have appeared on Georgia’s delivery scene in the past year. While they face fierce competition from multinationals, their niche strategies and innovative offerings mean they might not only hold out under pressure, but may possibly even have the chance to expand abroad themselves.

There were just three food delivery platforms operating in Georgia at the beginning of 2020: Wolt, Glovo, and Menu.ge. By the end of the year, the only Georgian company on that list—Menu.ge—had gone under, but had been replaced by a flood of local startups and a third multinational competitor, Bolt Food.

Due to COVID-19-induced bans on in-person dining, already-growing delivery markets across the world have seen revenues doubling and tripling, inducing new suppliers to enter.

Georgia was no exception: by early 2021, there were at least five new Georgian delivery-focused foodtech services on the scene, as well as a flood of individual restaurants working to set up their own online systems.

While Wolt and Glovo are still currently the biggest players by far, the Georgian companies believe that their local market focus, more restaurant-friendly terms, and innovative features can give them an edge—at least domestically. The international food delivery market is largely going through consolidation, so expansion beyond Georgia may be a difficult proposition. Many other countries with similar market characteristics have managed to successfully field at least one or two local competitors, though, so it wouldn’t be surprising to see at least one success story emerge.

Elvis: like lightning

Elvis (ელვის) alludes to the word “lightning” in Georgian, a hint as to how it hopes to differentiate itself from other services with speedy point-to-point delivery. Its couriers only handle one order at a time, making their trips more direct and, theoretically, faster.

It also seems to offer significantly larger delivery areas than the big players, allowing diners to choose from a wider range of restaurants. And, crucially for restaurants, delivery fees are lower than competing multinationals like Wolt, Glovo, and Bolt Food.

Currently, Elvis operates solely via a smartphone app (developed by Tbilisi-based software company Lemondo), while most of its competitors maintain both web and app interfaces. That said, the app functions fairly well and, as of May 2021, is the most downloaded local delivery app.

Elvis responded to requests for comment, but hasn’t released any information on their growth plans. However, it’s probably the best-executed Glovo/Wolt/Bolt competitor on the Georgian market at the moment, so if it can gain a sufficient foothold by offering better terms to restaurants and users, differentiate itself, and implement a plan for the post-COVID-19 slowdown, it stands a good chance of surviving.

Kovzy: turnkey restaurant digitalization

While a lot of the other apps on this list are competing with existing multinationals, Kovzy is targeting a space that’s only just begun to take off around the world: managed digital infrastructure for restaurants. Its service focuses on three main things: deploying an e-commerce website for the restaurant, connecting the business to local low-cost delivery services, and providing a QR-code menu builder for in-person dining.

The goal is for restaurants to have more control over their online business, build stronger customer relationships, and, of course, retain a higher percentage of profits compared to using third-party platforms. Basically, as Kovzy’s CEO Sandro Darsavelidze says, “We are giving them the opportunity to get direct sales.”

Kovzy’s delivery system is another point of differentiation: rather than operate a network of couriers, it provides only the digital ordering and tracking infrastructure that enables restaurants and couriers to work together.

These courier services then compute delivery fees based on distance rather than order percentage—a significant potential draw for restaurants tired of paying 30 percent or more to delivery platforms.

So, what does a Kovzy restaurant look like? At its core, it has a website with a menu, an ordering system, and online checkout. Customers can visit the site, order, and receive tracking information for their order. Restaurants receive the payment immediately and can coordinate with a courier to make the delivery. And after a successful order, as Darsavelidze says, “they have the opportunity to build relationships and get recurring sales.”

Though it is, to some extent, competing with Wolt, Glovo, and other platforms, Darsavelidze believes that there’s room for both sales channels in a restaurant’s business, citing a Deloitte study’s findings that customers prefer to order directly from restaurants. Indeed, he says, “we should thank Glovo and Wolt for changing customer behavior.”

Another Deloitte study shows that there are similar efforts on the restaurants’ side, as “many brands are working to bring delivery back to a store-led basis and away from third parties so they can wrestle back control of the ordering experience, marketing to the customer, and ownership of customer data they need to inform digital and loyalty experiences.”

Kovzy is still getting off the ground and is relatively untested as of yet, but it has support from TBC and Visa, and the team is hopeful that they can make their mark not only locally, but internationally, as one of the first movers in this market. Says Darsavelidze of the turnkey restaurant digitalization industry: “We do not have any global leaders, some kind of Shopify like in E-commerce. We can say that here in Georgia our company is in the same stage as other global startups and we are building them together.”

OFOODO: Georgia’s restaurant marketplace

Want an app that does everything? You might be looking for OFOODO. As its CEO, Beka Khatiashvili, says, OFOODO is a “platform and solution for restaurants and the food industry, which combines all digital service in one application.” So, what’s in this package?

  • Food delivery/takeaway via both web and smartphone app
  • QR code menus
  • A fully digital menu, ordering, and in-restaurant service platform
  • Table reservations
  • Restaurant directory

As far as delivery goes, the OFOODO system uses the currently prevalent third-party app model: restaurants and couriers both receive their tasks via the intermediating platform, and OFOODO takes a percentage of the sale as a commission.

Where it seeks to set itself apart, though, like Elvis, is on speed: “Each order is served by one specific courier,” says Khatiashvili, “which means that the delivery time is optimal and the quality of the dish is preserved.”

That’s not all it’s trying to add to the experience, though: OFOODO’s other features are fairly unique in the Georgian market at the moment. “OFOODO is not only a food delivery service,” says Khatiashvili.

“It helps restaurants in digitalization through our different services and platform, so they can get more guests at a place as well.” That not only includes QR menu systems, table reservations, and event booking, but even an informational resource on restaurants, so that, ultimately, Khatiashvili says, “OFOODO will be the guide and planner for food-lovers and travelers.”

While OFOODO is directly competing with other food delivery services that run courier networks and charge restaurants a commission on orders (by far the most popular approach), it sets itself apart by integrating in-person dining, restaurant discovery, and self-service pick-up options.

Given that delivery will likely take a dip as people begin to physically visit restaurants again, this is a smart move on the company’s part and may give it an edge.

Khatiashvili says they saw a 30-40 percent drop in delivery volume in the summer of 2020, but, “we have another solution—business diversification … because then [after COVID] people will start table reservations.”

Already working in Tbilisi, Kutaisi, and Batumi, with over 200 restaurants, OFOODO has international aspirations—its QRMenu website already lists phone numbers for seven countries, and the team plans to expand into Georgia’s neighboring markets in 2022.

Mally: serving Tbilisi’s suburbs

What sets Mally apart is that most of its activity is currently centered in Tbilisi’s northern suburbs, especially Gldani and Dighomi. Investor.ge reached out for comment but weren’t able to obtain any information from the company, apart from the information that their tech is being developed by local software company Softgen.

Mally’s terms of service seem to describe a third-party app system similar to Wolt and Glovo, though what sets them apart from these services, apart from being local (and claiming to be the cheapest and fastest on their social media pages), isn’t completely clear.

Mally started as a phone service, with customers calling in orders to Mally, which would then dispatch couriers. In February 2021, though, Mally released a functioning version of its website and smartphone app, signaling its plan to join the broader app market. It has been adding restaurants and maintaining a social media presence since then, though its software still definitely has a beta-testing feel to it.

Mally has demonstrated an intent to move down into the more active Vake-Saburtalo area of Tbilisi, which will put its viability to the test. Hopefully, as it continues to improve, the app will be able to clarify its value proposition to consumers and restaurants.

Telivery: food delivery in Telavi

The name pretty much tells you everything you need to know about Telivery: it’s a food delivery service located in, wait for it… Telavi! Most delivery services thus far have only shown up in Tbilisi, though some have expanded to Kutaisi and Batumi and a few are targeting even smaller cities. Telivery is one city’s answer to being overlooked—and, depending on how it goes, it could end up either expanding as a small-city solution or becoming a model for startups in other areas.

Telivery started up in response to the COVID-19 pandemic as a phone service, taking orders from customers via phone and dispatching couriers. Since then, it has released a smartphone app, though it’s still very much under construction. Nonetheless, it seems intent on expanding with what the team describes as “ambitious plans.” “Our goal,” they say on their site, “is to introduce a high standard of delivery service in the [Telavi] region.”

The platform is unlikely to face a lot of competition in its hyper-local market, though whether it will be sustainable after the likely post-pandemic drop-off in orders remains to be seen. There isn’t any mention of expanding to other small cities, but if Telavi turns out to be a profitable market, it may either branch out or inspire other cities to follow its lead. Investor.ge reached out for further information on Telivery’s business model and plans, but was unable to establish contact.

Competition strategies

There aren’t that many different ways for delivery drivers to drop off food at doors, but everything that makes that completed order possible is a potential point of competition. Georgian startups are, currently, catering to a single market, enabling them to react and innovate more quickly, and, thanks to their home-field advantage, operate at a lower minimum efficient scale. However, as OFOODO CEO Beka Khatiashvili says, one of the major challenges is that “on the Georgian market we have world-leading companies who have more money, and they are spending a lot on marketing.”

Mally and Telivery are avoiding the competition to some extent by getting first-mover advantage in Georgia’s underserved areas. According to a University of Oxford study, delivery services tend to enter larger markets first, so local startups could potentially gain and retain small market dominance.

Improving the experience of restaurants is another way local apps are competing. Kovzy and OFOODO for example, offer opportunities to recapture customer relationships by increasing the points of direct contact between the restaurant and the customer.

As Wolt and Glovo take at least 30-35% of every order, fees are another big pain point for restaurants. Elvis, Mally, and OFOODO are competing here by offering lower fees, while Kovzy calculates fees based on distance.

According to 2021 data from SecondMeasure, the majority of U.S customers use multiple food delivery apps. Switching costs in Georgia are currently even lower, thanks to the crowded ecosystem, so providing a smooth customer experience is basically table stakes at this point. That makes competing on price, features, and user experience vital—until the markets consolidate, at least.

Despite the multinational competition, local food delivery startups have managed to survive all around Europe, from Armenia to Portugal. This bodes fairly well for Georgia’s prospects to have at least one local app in the running, though international expansion will be much more of a challenge.

Startups that are working to set themselves apart from the crowd, like Kovzy and OFOODO, could be the most likely to make it in the long run. Ultimately, though, this is a quickly shifting market that may be set to shrink in the next one to two years as the Covid-19 pandemic fades, so where it will end up is anyone’s guess. The one thing these apps almost certainly indicate, however, is a thriving startup ecosystem in Georgia—going from almost zero local solutions to five in under a year—is fairly impressive!

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