What’s next for the fast delivery industry?
News that just Eat’s plans to purge from the United States is not an indication that the European food delivery giant plans to immediately sell GrubHub, the US company that bought it back in 2020. Instead, the Just Eat CEO said, the move is aimed at cost savings. The value of Just Eat’s US stock — listed on the Nasdaq — has fallen from more than $22 a share in 2021 to about $8.50 this morning, a massive write-down.
The Just Eat retreat wasn’t the only hard-hitting event to hit the on-demand market, where former startups struggle once they hit the public markets. Delivery Hero is another example of the trend; its value fell sharply last week after the 2022 forecast turned out to be a flop. (The Exchange recently dug into Delivery Hero’s hunger for Spanish delivery company Glovo.)
From a share price of around €130 last year, Delivery Hero saw its value drop to around €41 per share. The company’s CEO actually apologized for his company’s declining value on Twitter, which felt quite humane of him — in a good way, mind.
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UK-based Deliveroo has suffered since its IPO last year, losing around 65% of its value, as measured from its 52-week high.
And there’s more bad news domestically thanks to the declining value of DoorDash.
Given all this, you might think that investors would pull back on investments in the delivery space. And yet we have seen capital in the delivery market even faster in recent quarters, thanks to the enthusiasm of startups to bring consumer goods and groceries in even faster time frames.
There is a yawning gap between what public market investors are saying about delivery companies and what private market investors are hoping for the next crop of public companies from space. Let’s take a look at what each group says and what it means for a large number of betting startups.
Growth is concerned, profit is important
In reverse order, let’s start with Just Eat Takeaway.com, as it is formally known. Its CEO, Jitse Groen, told a Dutch television program that his company’s decision to abandon its US listing in favor of its European listing is a “cost-saving measure”. The company, Reuters reports, has “come under pressure from shareholders to sell the unit”.
The latest data we have from Just Eat is a January document detailing order growth of 33% in 2021 and a 14% increase in year-on-year orders in the fourth quarter of 2021. Gross transaction volume (GTV) rose in 2021 by 31% compared to 2020, but only 17% yoy in the fourth quarter.
Notably, Just Eat also said its “adjusted EBITDA margin improved significantly in the fourth quarter of 2021,” making it the “midpoint of [its] guided range of minus 1% and minus 1.5% of BTV,” according to the document.
Growth was then low-30 for the company in 2021, with about half that growth rate in the last quarter, albeit with rising profitability that is only slightly negative on a highly adjusted basis. More traditional accounting practices will likely lose Just Eat a package, once costs like share-based fees and other expenses are included in the bottom line.
Our read? Slowing growth and ongoing losses are not a good mix.