Online supermarket Picnic suffered the biggest loss in its existence last year. Below the line, the Dutch grocery delivery service was more than 114 million euros short in 2021, according to the annual report filed on Wednesday. In previous years, the net loss was usually between 35 and 45 million euros. Nevertheless, the company top is not worried, according to a telephone explanation from co-founder Michiel Muller.
After all, the losses are largely the result of investments in growth that the internet super made last year, Muller explains. For example, the construction of an innovative, fully automated distribution center near Utrecht was “a very expensive one”. In addition, the company expanded to dozens of new cities in the Netherlands, Belgium and France.
Every new city requires a substantial investment, says Muller. “The cost far outweighs the benefit for us. You furnish a hall, pay full rent, hire staff, before even a banana is delivered.” And that will remain the case for the time being, says Muller. “Because you can wait five years, but we prefer to open somewhere ourselves before someone else does.”
In that respect, there are no surprises for investors, says Muller. The average payback time per new hub is two years, according to Picnic – the loss is still in the cities where the company has just settled. The sales of the online supermarket did increase in 2021. Turnover amounted to 719 million euros, more than 250 million euros more than in 2020.
What is new is that Picnic had to set aside tens of millions for so-called stock appreciation rights (SARs). This is a kind of share plan for employees, especially developers, who can benefit from the growth. It keeps employees engaged, but will also have to be paid one day. “So you have to include all that on the balance sheet,” says Muller, “and that increases as more people participate.”
Read also:How Picnic wants to conquer France and Germany with Bill Gates’ millions
Grow regardless of loss
For Picnic, growth is above all else. The company has been driving small electric cars through Dutch streets since September 2015 and is constantly expanding to other cities. Picnic is now active in 260 locations in the Netherlands, 80 in Germany and 10 in France. It wants to grow especially in the last two countries.
Picnic’s strategy is known from large growth companies in Silicon Valley: fully committed to maximum growth of the market share, regardless of the size of the losses. As soon as the company is the market leader, the black numbers will come naturally – that’s the idea. With this strategy, Uber became the market leader, Amazon was finally able to make a profit after more than six years, and the Dutch meal delivery company Just Eat Takeaway – the parent company of Thuisbezorgd – succeeded in conquering large parts of the European market.
It’s a costly strategy that exists by the grace of investors with deep pockets and a lot of patience. But now that interest rates are rising, that is no longer a given. Investors demand a view of profits in the shorter term and are no longer satisfied with promises about future profits. It forced Uber to change its financing strategy this summer. From now on, the company will finance its own growth, which is possible now that more money is coming in than going out for the first time. Profit is also becoming more important for the Dutch Just Eat Takeaway, CEO Jitse Groen promised this spring.
Picnic isn’t that far yet, but that doesn’t worry Muller much. According to him, the losses suffered by the web super are very different from flash delivery companies such as Getir and Flink. “Such companies spend half of their budget on discounts to keep customers coming back. For us, it involves opening new warehouses and recruiting new staff. That is a completely different kind of loss.”