The boss of Just Eat Takeaway.com launched a thinly veiled swipe at Deliveroo this morning, calling into question its ability to make a profit from the food delivery model.
Jitse Groen said that his own company was making a profit only on its marketplace business, where its restaurant partners deliver the food, and losing money on its smaller logistics business, where it also carries out the delivery.
Asked whether he felt his loss-making competitor could ever make a profit, he said: “I won’t comment on them specifically but it is incredibly difficult to make a profit on logistics. Currently we are not making a profit on logistics, but we are on marketplace and just to remind you, we are three to four times bigger than the company you just mentioned. We have scale.”
The Just Eat Takeaway.com chief executive said the only place his company made money on logistics was in Canada where users paid tips and were willing to pay more for delivery than Europeans.
“On top of that there is a lot of competition in logistics. Let’s say you charge £10 for delivery. You can then make a profit on logistics. The problem is there are other people who are not charging £10, and to deal with such a situation you are in a very difficult spot. You can either increase your delivery fees and face a smaller business, or you can decrease delivery fees and face more losses. I think that’s what some of the operators in Europe face.”
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Groen’s comments will put a renewed focus on some of the issues that cast a cloud over Deliveroo’s recent stock market listing at 390p a share, valuing it at £7.6 billion. Doubts over its business model and the employment status of its riders contributed to a 30 per cent slump in the shares on the first day of trading, although they staged a minor rally this morning — up 8.75p, or 3.5 per cent, to 259.75p — after the announcement that it was expanding its trial to deliver groceries for Sainsbury’s to 100 stores across the UK. In November it started a trial in ten stores.
Groen, again without referencing Deliveroo directly, said that the issue of riders’ rights was becoming a serious one across Europe. “A lot of our competitors are not necessarily following the law. So you will see a lot of court cases, a lot of fines, a lot of back taxes and social security that need to be paid. I think this is very problematic,” he said.
When the FTSE 100 group launched its own logistics business to enable it to work with big chains such as McDonald’s, Greggs and Starbucks, it contracted out the delivery to third-party courier operations. But it has now set up its own delivery operation, called Scoober, which it is rolling out across Europe, with Liverpool set to become the third UK city after London and Birmingham to have a Scoober operation.
Groen said Scoober riders had extensive rights. “We wash the clothes of the couriers, we provide the bikes, social security, insurance, pensions, paid leave and all these things,” he said.
He said that in Italy, where the freelance courier model was being hit by fines of “hundreds of millions of euros,” Just Eat had become the first food delivery company to sign a collective bargaining agreement with the biggest unions for the employment of its couriers.
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Just Eat Takeaway.com was formed in February last year via the £10 billion merger of Just Eat and Takeaway.com, its Dutch rival. Just Eat was launched in Copenhagen in 2001, entered the British market in 2006 and was floated on the London Stock Exchange in 2014. Takeaway.com was founded in 2000 by Groen. The group has its headquarters in Amsterdam and operations in countries including Germany, Canada, Australia, France, Spain and Israel.
The Dutchman was speaking after the group reported total order in the first quarter of this year up 79 per cent to 200 million — the fourth consecutive quarter of growth acceleration — with UK orders up 96 per cent to 63.8 million on the back of investment in the recruitment of new restaurants, a step up in marketing including advertising featuring the rapper Snoop Dogg and the introduction of its logistics delivery business.
Delivery orders almost tripled to 69.4 million, with the highest rate of growth being in the UK, where orders leapt by 695 per cent to 22.9 million.
The gross value of the orders amounted to €4.5 billion in the first quarter, up 89 per cent on a constant currency basis compared with the first quarter of last year, with the UK up 88 per cent to €1.4 billion.
Groen said that while its marketplace and delivery operations had contributed almost equally to order growth, its marketplace orders had been “highly profitable”. Conversely, its price leadership strategy on delivery orders meant they were “priced very competitively”.
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He said the company was predicting further order growth acceleration for the full year, although it would continue to “invest heavily and prioritise market share over adjusted underlying earnings”. Its investment includes a wide-ranging sponsorship deal with Uefa that encompasses the delayed Euro 2020 tournament, the Champions League and women’s and youth football.
Shares of Just Eat Takeaway.com rose by 212p, or 2.9 per cent, to £75.66 in morning trading.
