It took Efood delivery less than three years to become one of the most successful Internet startups in Greece — but less than one day to turn into the ultimate disaster story.
When a text message to 115 of their employees urging them to become freelancers, possibly accepting no benefits and less stable employment or lose their jobs, broke on social media, its reviews dropped from 5 to 1 star in just a few hours.
The future looks rather bleak, if not disastrous, for Efood’s business after its strategic blunder, but after it was first formed back in 2012 as the first online food delivery distributor, its growth had been meteoric. It took only three years for its creators, the Kyrkinis brothers, to sell it to German mogul Delivery Hero for 22 million Euros — while retaining their position as CEOs.
From 2012 to 2015, Efood delivery managed to successfully overcome the effects of the financial crisis (when Greek businesses started dropping like flies) and create an unparalleled brand name, soon selling it to the German company. In the past two years alone, on account of the lockdowns due to the pandemic, its profits stood at 64.488 million Euros – over 21 million more than in 2019.
Efood’s income from commissions alone rose by 13,400,000 euros to 46,143,000 euros in 2021.
From instant success — to delivering financial disaster
The company’s profits before taxes came up to 28,700,000 million Euros, up from 22,500,000 in 2019, while its profits after taxes rose to 21,390,000 million. Meanwhile, Efood’s cash reserves skyrocketed to 40,840,000 Euros, up from 28,900,000 in 2019, and parent company Delivery Hero’s profits this year were close to 20 million.
Efood employed 378 people in late 2020, up from 268 in 2019, while the rest of its employees were so-called “rental workers” hired via an international employment agency, with 3-month long contracts.
Also, in 2020 the company took advantage of the financial support laws established by the government due to the pandemic, by alleviating certain taxation on companies affected by it. That was the financial state of the company which, last Thursday, sent what appeared to be an ultimatum to its drivers, that it would “only renew the workers’ contracts if they accepted a freelance position with the company.”
From despair to where?
The social media backlash was immediate and devastating, with thousands of Greek users deleting their Efood applications from their phones, publishing extremely angry messages on Facebook and Twitter — resulting in the company appearing to take back its “ultimatum,” stating that the labor changes proposed were intended only for its new contracts starting next month.
However, it was too little, too late — the damage was already done.
Efood’s reviews dropped to 1 star overnight and the Athens streets saw less traffic after 7 pm on Friday. The company had turned from a wonder start-up and successful business model to a complete self-inflicted disaster in less than 24 hours.
A lesson many competitors and other big companies would do well to learn in these days of social media riots and cancel culture.