Indonesian grocery delivery startup HappyFresh is in the midst of a restructuring exercise that involves staff layoffs, a financial review and streamlining of its operations amid mounting debt.
A direct source aware of the development told DealStreetAsia that HappyFresh is in need of raising capital as debt owed to supermarkets, logistics partners, and other clients is piling up.
Bloomberg first reported on Tuesday that HappyFresh has hired turnaround firm Alvarez & Marsal Holdings and is conducting a review of the company’s financial situation after it struggled to raise additional capital to fund its operations.
The company told Bloomberg that it has “recently come to be aware of new information on the company’s finances” and is “making certain hard but necessary decisions.”
“Certain members of senior management have stepped aside from active duty pending further clarity,” HappyFresh said, without giving further details.
In a separate statement to DealStreetAsia, HappyFresh confirmed the layoffs but declined to provide a number.
“We made the extremely difficult decision to downsize certain teams. We had considered all other options and unfortunately, given the current climate, streamlining operations was the best option at the present time,” HappyFresh said.
HappyFresh said it uses strategies such as physical dark warehouse operations and setting up HappyFresh Supermarket—which offers up to 15,000 SKUs of fresh, dry, or frozen products through its own dark stores—across Indonesia, Malaysia, and Thailand.
Despite the layoffs, HappyFresh has been advertising tens of job openings over the past couple of months for various positions in Indonesia which include analysts, engineers, and other backend posts.
HappyFresh, which began operations in 2014, has been at the forefront of changing consumer habits in Southeast Asia due to the pandemic. It raised $65 million last year in a funding round led by Naver Financial. The company’s total fundraising to date stands at over $97 million in both equity and debt funding.
The online grocery delivery was targeting to close ‘triple-digit’ funding before the end of 2022 to increase the number of supermarket stores and ramp up its technology, product, and supply chain teams, CEO Guillem Segarra said in a previous interaction.
HappyFresh is facing intensified competition in the online grocery space. The company is facing competition from initiatives such as GoMart, Tokopedia NOW, and AlloFresh which are backed by giant ecosystems. There are also newcomer quick commerce players such as ASTRO, Bananas, Dropezy, and others.
Within a year, most quick commerce players managed to raise funding with ASTRO amassing more than $91 million in total.
BRI Danareksa Sekuritas Research analyst Niko Margaronis said HappyFresh is not as aggressive as its new competitors but it must spend an extraordinary amount to stay in the ring.
“They have been in the market for quite some time, they should have developed a good supply chain. They know the market but distribution and their last-mile [delivery] might be lacking,” Margaronis said, noting that quick commerce players managed to offer costly but tempting propositions for customers such as 24/7 operations and delivery within 10 minutes.
A player in the online grocery space, who asked not to be named, criticised HappyFresh’s stock management in its apps that may draw customers to its competitors. Unlike its younger counterparts, HappyFresh stocks are not as frequently updated.
“We see HappyFresh’s business model as contrasting from the quick commerce industry, with its exclusive focus on freshly handpicked groceries and medium-large sized basket orders to satisfy weekly/monthly grocery needs. We see this as a strong distinguishing factor that stands (and will continue to stand) HappyFresh apart from its competitors,” the company said, commenting on competition from quick commerce.
Kristie Neo and Aastha Saboo contributed to the story.