Favo closes operation in Brazil and lays off 170 employees

Favo has just announced the interruption of its operations in Brazil. In another reflection of the global turn of the scenario for startups, the online supermarket platform focused on the C class will meet orders placed until the 30th of this month – for representatives with less than five customers, service has already been closed. Yesterday, 170 employees were laid off.

“We are very sad. It’s not an easy decision. For the practical part, business, of course, but also for all the people involved. But we are transforming that feeling into an attitude”, said co-founder Marina Proença to Pipeline. “We will do everything to make it not a ‘goodbye’, but a ‘see you soon’. I can’t wait to call you to tell you we’re back.” Favo’s plan is to resume operations in early 2023.

A number of startups have made adjustments in recent weeks to preserve cash and margin. Yesterday, it was 2TM, the controlling group of Mercado Bitcoin, that laid off 90 employees, in a list that already has names like Vtex, Quinto Andar and Facily. Companies have also made adjustments to their strategies.

About 20% of Favo’s workforce had already been relocated to the Peru operation, where the company’s activities continue normally. Of the 500 employees on Favo’s payroll, 320 remain. The technology, product and data teams were not only preserved, but should grow in the coming months, aiming to strengthen the Peruvian business. Employees work remotely.

The company says it will also help negotiate the hiring of more than 7,000 sales representatives, by other ecommerce platforms and competitors in the segment — meetings are already taking place with Muni, perhaps the most similar in business model.

These are the partners that locally distribute the products that leave the distribution centers in São Paulo, Salvador and BH, for a commission ranging from 7.5% to 15%. This group, however, did not have exclusivity with Favo and a small percentage depends entirely on the income linked to the company – many also work with Facily, Muni itself and Natura. The company is also trying to relocate the approximately 45 couriers.

Last October, the startup raised BRL 141 million in a round led by Tiger. It also attracted Nubank founder David Vélez and Kevin Efrusy, an early investor in Facebook.

But since January of this year, the pressure on the accounts has increased. Favo had been trying to improve margins and gain efficiency with investment in technology and sales and logistics strategy, but the macro scenario did not help.

Class C, Favo’s main audience, spends around 30% of their income on food — every economy counts. On the platform, consumers could find prices 15% below the traditional market, but the discount was not enough in the crisis. The average ticket dropped and the consumer began to constantly change brands, in search of lower prices, bringing a challenge to the mix of inventories.

Favo’s plan, aligned with investors, is to strengthen the operation in Peru, where the startup has just opened a second distribution center. In the meantime, the platform plans to test new models for Brazil, with the sale of other products and services, such as courses and travel, while maintaining the representative model.

“The logistics cost in Peru is much lower, we sell more, it’s a more balanced ecosystem and there’s no competition like here. The idea is to mature well and conquer Latin America, regardless of trying the models here”, says Proença, who was once the COO of ClickBus.

Founded in 2019 by entrepreneur and Alejandro Ponce, the company was inspired by Chinese social commerce platforms such as Meituan and Pinduoduo.

Source: Value Pipeline