Food delivery: seconds out!

food delivery
Michele Caprini
30 Jun 2020

The food delivery market was already in the process of a restructuring exercise, especially in the last year. Seconds out in fact as round two is now about to begin. 

In January, the Dutch group Takeover.com (owner of the Takeaway brand) won the battle against South African Prosus for the control of 80% of the share capital of Just Eat. The transaction, worth €7.2 billion, led to the creation of the largest European food delivery group, with a combined market capitalisation of €12.5 billion.

A year ago, Amazon decided to remedy its ill-fated attempt to break into this market, following the axing of its food delivery unit Amazon Restaurants UK, forced to close under the heavy blows of Deliveroo, Uber Eats and Just Eat. The path chosen was “a minority investment” ($575 million) precisely in Deliveroo.

But not everything goes as planned. CMA, the UK’s Competition and Markets Authority, was expected to deliver its ruling by 11 June, but has now extended this deadline to 6 August. According to many observers, the English platform, marked by the closure of a large number of restaurants during the lockdown, would risk bankruptcy without Amazon’s investment.

THE GRUBHUB DEAL THAT BEAT OUT UBER

Two weeks ago, the new food delivery giant, Just Eat Takeaway, acquired the U.S. app Grubhub in a deal worth for $7.3 billion. In 2019, the two companies processed a total of 593 million orders and more than 70 million active customers, with a network of partner restaurants in 25 countries.

The deal represents the first step towards the creation of the first food delivery business around the four largest catchment areas in the world, excluding China ($51 billion expected in 2020): the United States, the United Kingdom, the Netherlands and Germany.

Retuning to our boxing metaphor, this turned out to be a knockout blow for Uber, who had been in talks with Grubhub with an acquisition offer. This would have given a combined market share (45%) of the U.S. food delivery services equal to that held by the current market leader DoorDash, de facto, restricting competition to two players.

BIG NUMBERS

Ever since Pizza Hut launched the first online pizza order in 1994, the food & beverage market has shown continuously increasing trend. The aggregator platforms have expanded thanks to reliable technological infrastructures and to the recourse to e-commerce expertise and consultancy and to attractive commission rates for restaurants.

But today’s competitiveness passes through pricing pressure and working conditions of the workforce (riders), making balance precarious. For some operators, the offer includes technology, apps and dedicated riders, while others exclude delivery. This is reflected in the fees paid by the restaurant for the service. On average, 15% for mediations without riders, up to 25% for mediations including delivery.

The growth of food delivery services should reach its highest peaks in the 2020-2025 five-year period. According to Statista’s estimates, revenues of 21 billion dollars are expected this year, which will go up to 29 billion in 2024 (9 billion of which in Europe), with an annual growth rate of 8.2%.

Over the period considered, the number of users of platform services will reach 180 million, and around 100 million for deliveries managed directly by restaurants.

ITALY

In Italy, the sector has recorded a phenomenal growth, even if there are been some aftershocks. In 2018, in fact, the German Foodora pulled out of Italy due to low operating margins.

According to Daniele Contini, Just Eat Country Manager, the growth in 2019 was the highest (+ 56%) in the entire Food & Grocery sector. The most interesting figure is the reduced share (only 18%) – compared to the rest of the world – of food deliveries mediated through digital platforms: Therefore, if most of the market is still offline (phone orders), the prospects for development are extremely interesting.