Why did the digital supermarket Jokr leave Mexico?

The departure of the home delivery startup Jokr from Mexico is a symptom of the situation that markets are going through on a global scale. The increase in interest rates and the requirement of profitability have made some companies prioritize some markets over others.

The festival of the venture capital markets in 2021 caused the valuations of startups like Poplar, Joker o Name will reach levels never seen in Latin America. A year later, startups began to see how financing was becoming more difficult to obtain.

The increase in interest rates, as a consequence of the high inflation, came to close the circle. Decisions by central banks and the consequent difficulty in accessing capital have made companies seek to justify their valuations with a lower level of financing, according to Francisco García, investment associate at seed capital fund Melek Capital.

Startup accelerator Endeavor calculated that, through the end of 2021, Latin American unicorn startups were worth an average of 18 times their annual revenues, which were $150 million. Startups in that condition would have to post 18 years of earnings of $150 million to justify their valuation.

Does this explain Jokr’s departure from Mexico and other markets?

What is Chokr?

Jokr is a home grocery delivery startup. Its business model is based on the installation of small distribution centers that allow the delivery of an order in less than 15 minutes. The company has received $480 million in financing through its most recent Series C round.

Founded in 2021 by Harvard Business School graduate Aspa Lekka, Jokr rapidly expanded its operations to cover multiple US, Mexican, Chilean, Colombian, Peruvian, Brazilian and European cities. In this 2023, Jokr has backed down, keeping only the Brazilian operation.

For Fran García, the Jokr business model most likely could not achieve a positive relationship between its costs and its profits per unit (unit economics). The company decided to focus on Brazil.

“I believe that Brazil is a market where they can have a profitable business model in the long term. Brazil is a much bigger market than Mexico and they must have a solid business there,” said García.

The Brazilian market represents half of the entire home delivery market in Latin America. They are followed by Mexico, with 30%; Colombia, with 6%; Chile, with 4.6%; Argentina, with 2.97%, and Peru, with 1.39%, according to data from Statista.

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Competence

Competition is another factor that could have triggered Jokr’s departure from Mexico. The leadership and experience of companies such as Cornershop, Jüsto and Rappi make it very difficult for smaller players to have a viable business model, according to Denis Yris, director of the venture capital fund Wortev Capital.

“There is a lot of highly innovative research in Latin American universities, but what is usually done is copying business models from other countries, such as delivery, but also from fintech,” Yris said in an interview.

For Francisco García, from Melek Capital, the diversity of products offered by some of these companies, which range from transportation services to financial services, make monetization of their platforms easier, with the aim of turning them into what is known as superapps. Something that has not been seen in Jokr’s plans.

There is no clarity on Jokr’s motives for leaving Mexico. The Economist sought out the company to find out his position, but had no immediate response to the request.

A similar situation occurred with the Colombian Merqueo, which left Mexico in June 2022 without further explanation.

The specialists consulted agree: this is a sign of what could happen in the Mexican and Latin American entrepreneurial ecosystem, in the next two years.

rodrigo.riquelme@eleconomista.mx