Trends, growth & profitability in the Food Delivery Industry

Floris van der Pijl
Published on
September 14, 2022

The foodservice industry was hit very hard by the outbreak of COVID-19. With governments imposing lockdowns and other restrictions, restaurants had to adapt and make changes overnight to still be able to serve customers. Let's take a closer look at how food delivery companies coped during this period.

In this blog we share insights on the food delivery industry coming from our Foodservice Industry Trendreport. The report shares how the biggest companies (top 250 chains worldwide with a turnover of more than €100 million) in the foodservice industry fared through the pandemic and whether they recovered in 2021.

Growth of the Food Delivery Industry

A report on foodservice chains would not be complete without a look at the growth and profitability of large food delivery companies. Beyond COVID-19, these companies have benefitted from a trend towards digitalization and convenience in general. The overall growth in 2020 was 187% and 100% in 2021, including acquisitions.

Net sales delivery
Figure 1: Net Sales largest food delivery players 2018-2021

Some notable acquisitions over the years

  • 2019: Takeaway acquires Just Eat and becomes Just Eat Takeaway; Doordash acquires Caviar, specializing in food delivery from upscale urban restaurants, for $410 million.
  • 2020: Just Eat Takeaway acquires Grubhub ($1 billion in sales) for $8.4 billion.
  • 2021: Doordash acquires Wolt for $8.1 billion.

As their scale improves, companies are getting closer to profitability and start identifying paths & timelines to realize that. Many food delivery companies are already profitable in their main markets. Having exiting markets with a low presence will only boost that. The next years will determine if (food) delivery can provide a healthy operating margin.

After 2021, the investing environment for loss-making fast-growing companies changed. Investors wanted to see profitability. Rather than perform acquisitions, companies focus on profitable growth. Companies in the delivery space brought down job vacancies and exited markets.

  • 2022: Uber Eats exited Brazil; Deliveroo has announced it is planning to exit the Netherlands; Just Eat Takeaway exited Romania in May, agreed to sell its 33% share in iFood Brazil to Prosus for $1.8 billion, and is exploring the sale of Grubhub after it already wrote off $3 billion of the total $8.4 billion acquisition fee.

Profitability in the Food Delivery Industry

Profitability in the food delivery sector depends largely on restaurant and customer density. Therefore, more country operations can be expected to be evaluated. Is there enough room to grow toward profitability or is it better to exit now?

With valuations of tech and delivery companies falling and interest rates rising, evaluations will have to become more strict as loss latency becomes more expensive. Both because interest costs are rising and because raising equity funding requires giving up a higher percentage of shares.

On the positive side, all companies are close to operating profitability (% Adjusted EBITDA) and expect higher margins with scale:

  • Just Eat Takeaway stated in its Q2 earnings call that it expects operating margins to improve in the second half of 2022, before turning positive again in 2023. CEO Jitse Groen: “After a period of exceptional growth, Just Eat is now two times larger than it was pre-pandemic. Whilst this growth required significant investment, we have continued to focus on executing our strategy to build and operate highly profitable food delivery businesses.”
  • According to its latest earnings call, Deliveroo is expected to become profitable in the second half of 2023 or the first half of 2024 and is targeting an adjusted EBITDA margin of 4% by 2026.

Share-based compensation is one of the major items affecting profit after tax. Shares paid to employees are not included in the % adjusted EBITDA figures, but largely contribute to the loss after tax. As an example: Doordash offered its employees $486 million in share-based compensation (roughly 10% of sales) in 2021. In Europe, such compensation is less common, as evidenced by Just Eat Takeaway paying 1.5% of sales (€76 million) in share-based compensation.

Figure 2: Operating profitability - % Adjusted EBITDA

More on the Foodservice Industry

Want to find out more about the food service industry? In our food service trendreport we share the latest insights, trends, and developments on the performance of the industry and its top performers. Dowbnload it for free via the button down below.

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