For the past year, analysts and experts in the entrepreneurial ecosystem have been predicting that Mexican online supermarket Jüsto would soon become a unicorn, a start-up with a value of more than $1 billion.
Forecasting which would be the next Mexican unicorns, Juan Laresgoiti, leading fintech partner at Deloitte for Latin America, said recently that “Ricardo Weder did very well in the pandemic, he was the star that received funding from Bimbo and Femsa”.
“Jüsto can surprise us [by becoming a unicorn], it is well funded and has very capable people,” according to Alejandro Estrada, a venture capital investor at Catorce Venture LLC and author of the book Entre Unicornios, Jaguares, Serpientes y Escaleras (’Among Unicorns, Jaguars, Snakes and Ladders’).
But with the recent change in market sentiment and a potential economic downturn on the horizon, fewer multiplications of startups’ valuations are likely at this time, according to Jüsto’s founder and CEO Ricardo Weder.
In an interview with Bloomberg Línea, Weder said that, in these uncertain times, valuations fluctuate.
“In fact, there have already been some down rounds that have not been made public,” he says.
The unbearable lightness of valuations
Contrary to many startups that blag about their valuation amid the slightest suspicion that they have exceeded $1 billion in value, Weder has preferred not to make the company’s valuation public.
However, he says the company is among those “that has raised the most in the history of Mexico and Latin America”, but adding that “we don’t want to focus our team on valuations, because they fluctuate”.
This startup, which promises fast deliveries of fresh produce and other groceries and merchandise, has raised more than $250 million in less than three years. Investors that have backed Jüsto include General Atlantic, Mountain Nazca, Foundation Capital, Tarsadia Capital, Citius, Arago Capital, Quiet Capital, Femsa Ventures and Bimbo Ventures.
Two months ago, Jüsto raised $152 million in a Series B led by U.S.-based fund General Atlantic, with which the company will seek to shore up its position in the markets in which it operates: Mexico, Peru and Brazil, with a view to expanding into Colombia and Chile.
So far the unicorn badge has not arrived for Jüsto. Either that or the company has not made it public.
“What matters is the number of users and our profitability,” Weder says of the startup which, according to its own figures, grew by nearly 500% over the last year.
Jüsto competes in the Mexican and Latin American market against startups such as online retailer Jokr, which was founded in Germany and is based in New York and launched in Mexico in March 2021. Jokr reached the unicorn milestone with a $1.2 billion valuation before the first anniversary of its founding.
Jüsto also competes with Merqueo, the Colombian startup that ceased operations on June 8 in Mexico, but has had a presence in Brazil since 2021.
Unicorn status takes time
Although many entrepreneurs consider that being a unicorn is not the only goal for their startup, the race to reach that milestone has accelerated more than ever in the last two years due to the abundance of capital.
“We are in a world where priority is given to immediacy in every sense. And we must understand that entrepreneurship is a marathon, they are long processes,” Weder says.
For this reason, the entrepreneur recommends focusing on achieving long-term objectives.
In 2021, a record amount of investment in venture capital was set in Latin America, totaling $15 billion, according to data from the the Latin American Venture Capital Investment Association (LAVCA), and which was more than triple the levels of 2020, which was $4 billion.
“The liquidity we saw last year in the markets was not sustainable, and now we are seeing a correction”
Ricardo Weder, CEO and founder of Jüsto
That excess capital, Weder says, causes companies to spend a lot more.
“And if market sentiment changes, and they can no longer raise, then they go out of business; you always have to be responsible in raising capital and using capital.”
The challenges for online retailers
Weder says that Jüsto entered a complex industry, “there are many barriers to entry; in all countries it is one of the largest industries, and yet you don’t see new competitors”.
One of the problems, Weder adds, is that to excel in the consumer industry, in most cases, it is not about the best product, it is about access to and control of distribution channels. And that, he says, is a barrier they wanted to break down.
Jüsto has tried to generate the entire value chain and address all the operational challenges in the industry.
When it comes to online supermarket shopping, Weder says that, in Latin America, market penetration is around 2.5%. In China, the adoption rate is between 35% and 40%.
“We expect to reach over 15% penetration in the next 10 years,” Weder says.
In Mexico, 14.5% of the population orders groceries online, according to a study on Internet user habits in the country in 2022, conducted by Asociación de Internet MX.
Weder therefore believes that Jüsto’s competition is not other startups, but rather traditional supermarkets.
“We are not focused on convenience, but on a customer’s complete supermarket purchases, where quality in perishables and, above all, fresh produce is very important.”
The entrepreneur, who is also an angel investor, competes with prices, which are very similar to those of the supermarket market leader, but with the added bonus of a better shopping experience, he says.
In May, Jokr made a move in direct competition with Jüsto by buying PLAZ, a Colombian startup that distributes fruits and vegetables from local producers, and in response, Jüsto strengthened its fresh produce offering.
The ‘phygital’ experience
Jüsto currently operates in Mexico, in the cities of Guadalajara, Monterrey, Puebla and Querétaro; Brazil and Peru, where in late 2021 it acquired online supermarket Freshmart, and which recently opened a physical store.
Weder says that the multi-channel experience in Peru is interesting, although he does not plan to replicate it in Mexico or Brazil anytime soon.
“Multi-channel is the future, and being able to serve in both channels to our users adds value, but at the moment we have so much to grow that we don’t see ourselves doing it in the short term,” he adds.
In the last year, the O2O (Online to Offline) trend has grown, after the Covid-19 pandemic accelerated online shopping and, at the same time, made the ‘phygital’ shopping experience - a mix of physical and digital channels - the new modus operandi.
According to the Winning Omnichannel Latam 2022 report by consultancy Kantar, “the growing number of different digital sales access channels has led shoppers to have greater exposure to online fast-moving consumer goods (FMCG) brands”, referring to household items purchased at the supermarket and pharmacy on a daily basis.
The online category’s growth is 10 times greater than the offline category, according to the Kantar report, and therefore understanding the ‘phygital’ shopper journey has become more important than ever.
After the Freshmart purchase, Weder is not ruling out more acquisitions in the short term.
“We are constantly evaluating options, eventually we want to participate in other markets, such as Colombia and Chile, but there are also opportunities to acquire some companies in Mexico,” he says.
A ‘genuine purpose’
For Weder, what the company has built so far is just the beginning. Currently with 2,500 employees, whom he calls justicieros, the company continues to expand its team amid a wave of layoffs by other unicorn startups such as Mexico’s Bitso, which has laid off between 80 and 100 people, and Merqueo, whose exit from Mexico left at least 100 people unemployed.
In the past year, the team has grown around five-fold, and all its delivery drivers are on contract.
“We are not a sharing economy model, all our people are hired, they are full time with us, we offer all the benefits stipulated by law, unlike other models where they do not have those benefits,” he says.
Other platforms, such as PedidosYa, Rappi, Uber and Didi, by contrast, cannot boast the best working conditions for their drivers, and in Panama, some 2,000 PedidosYa delivery drivers recently went out on strike to demand better conditions, and that the Uruguayan company pay a minimum rate per order, cover clothing expenses and accident insurance.
Weder also claims to apply fair practices for its suppliers, more than 70% of which are small and medium-sized enterprises. To achieve this, Jüsto uses technology to streamline processes, reduce costs and, above all, to personalize the customer service.
With its Series B capital, Jüsto plans to improve its artificial intelligence algorithms to better align consumption data with production data, especially for small and medium-sized producers who have very little market data on consumption trends, and because non-alignment between demand and consumption leads to 65% of fresh produce going to waste, a problem that Jüsto wants to help to combat.
Based on his experience as an entrepreneur, Weder advises his peers to have a “genuine purpose”.
“Any purpose is valid, as long as it resonates with you and is authentic to you, beyond financial gain, because this is a roller coaster. I’ve seen that people who are really doing things that are aligned with their purpose are much more resilient and follow through when things get complicated,” he says.
And, he says, by constantly listening and learning, one can build a startup that is trusted by the world’s most prestigious investors.
“This is a constant learning process and the more you learn, the more you realize the importance of empowering others. This is just the beginning of our story.”
Translated from the Spanish by Adam Critchley
