Norway’s Kolonial rebrands as Oda, bags $265m on a $900m valuation to grow its online grocery delivery business in Europe

It’s also been helped by the current climate.

Online grocery shopping has been growing and maturing for a while now, but the last year has been a veritable hothouse in that process: COVID-19, shelter in place orders and a general desire for people to keep their distance all compelled many more consumers to try out online grocery shopping for the first time, and many have stuck with it.

“We have seen a significant inflection point with grocery over the last year with the market transitioning online, accelerated by COVID,” said Larry Illg, CEO of Prosus Food, in a statement. “Oda’s leadership and impressive growth in Norway paired with its ground-breaking technology and ambition to scale across Europe and beyond makes them an ideal partner to tackle the grocery opportunity over the coming years.”

Oda has over the last eight years grown to become the sector leader in a category it arguably helped define in its home country. It was profitable in 2020 on revenues of €200 million, and it currently controls some 70% of Norway’s online grocery ordering and delivery market based on its own particular approach to the model.

That model involves Oda building and controlling its own supply chains, from producers to consumers (no partnerships with third-party physical retailers where Oda powers their services), producing several of the products itself (such as baked goods) to order, and using centralized fulfillment centers to manage orders for large geographies.

“Centralized warehouses means 50 supermarkets in one location,” Munthe-Kaas said, adding that this also makes the business significantly greener, too.

Those fulfillment centers, meanwhile, are operated at “extreme efficiency”, in his words.

Oda’s grocery item picking averages out at 212 units per hour — that is, the amount of items “picked” for orders in a week divided by the number of labor hours in a week. The next closest UPH number in the industry, Munthe-Kaas said, was Ocado in the U.K. at 170 UPH, and the norm, he added, was more like 100 UPH, with physical store picking (where customers select items from shelves themselves) averaging out at 70 UPH.

All of this translates to much more cost-effective operations, including more efficient ordering and stock rotation, which helps Oda make better margins on its sales overall.

Munthe-Kaas declined to go into the details of how Oda manages to get such high UPH numbers — that’s competitive knowledge, he said — noting only that a lot of automation and data analytics goes into the process.

That will nevertheless be music to the ears of SoftBank, which has had a complicated run in e-commerce in the last several years, backing a number of interesting juggernauts that have nonetheless found themselves unable to improve on challenging unit economics.

“Oda’s leading position in Norway is a testament to the merits of its bespoke and data-driven approach in offering a personalised, holistic and reliable online grocery experience,” said Munish Varma, managing partner for SoftBank Investment Advisers, in a statement. “We believe that Oda’s customer-centric focus, market-leading automation technology and fulfillment efficiency are a winning combination, and position Oda for success in scaling internationally for the benefit of customers and suppliers alike.”

The big challenge for Oda going forward will be whether it can transplant into further markets its business model as it has been developed for Norway.

Oda will not only be looking for customer traction for its own business, but it will be doing so potentially against heavy competition from others also looking to expand outside their borders.

There are other online supermarket plays like Rohlik out of the Czech Republic (which in March bagged $230 million in funding); Everli out of Italy (formerly called Supermercato24, it raised $100 million); Picnic out of the Netherlands (which has yet to announce any recent funding but it feels like it’s only a matter of time given it too has publicly laid out international ambitions); and Ocado in the U.K. (which has raised huge amounts of money to pursue its own international ambitions).

And there is also the wave of companies that are building more fleet-of-foot approaches around smaller inventories and much faster turnaround times, the idea being that this can cater both to individuals and a different way of shopping — smaller and more often — even if you are a family.

Among these so-called “q-commerce” (quick commerce) players, covering just some of the most recent funding rounds, Glovo just last week raised $528 million; Gorillas in Berlin raised $290 million; Turkey’s Getir — also rapidly expanding across Europe — picked up $300 million on a $2.6 billion valuation as Sequoia took its first bite into the European food market; and reportedly Zapp in London has also closed $100 million in funding.

Deliveroo, which went public last week, is also now delivering groceries (in partnership with Sainsbury’s) alongside its restaurant delivery service.

These, ironically, are more cornershop replacements than Oda itself, and Munthe-Kaas said he sees them as “complementary” to what Oda does.

Indeed, Munthe-Kaas remains very committed to the basic rulebook that Oda has lived by for years.

“You need to beat the physical stores on quality, selection and price and get it home delivered,” he said. “This is a margin business and the only way to optimize is to be completely relentless.”

But he also understands that this might ultimately need to be modified depending on the market.

For example, while the company has not worked with other retailers in Norway — even the investment by REMA is not for distribution but for better economies of scale in procuring products that REMA and Oda will sell independently from each other — this might be a route that Oda chooses to take in other markets.

“We’re in discussions with several other retailers, wholesalers and producers,” he said. “It’s important to get sourcing terms and have upstream logistics, but there are many ways of achieving that. We are super open to making partnerships on that front, but we still think the way to win is to run the value chain.”