A Crucial Year for Food Delivery in Europe

As top-line growth becomes more elusive and the focus moves to profitability, rationalizing will continue in European fast grocery delivery and restaurant food delivery businesses. We expect closures, market exits, and partnerships to drive the remapping of the European food delivery sector, leaving fewer but more powerful operators. The process can bring attractive partnership opportunities for food retailers and even their suppliers.

A New Reality for Food Delivery in Europe

Covid-19 lockdowns boosted demand for food delivery in Europe, raising expectations of sustained growth and a future in which food delivered directly to the home on demand would be a significant part of total consumption. However, the end of Covid restrictions, paired with an inflation-driven reduction of disposable income, has brought such growth to an end: In Q4 2022, orders for Just Eat Takeaway (JET) in northern Europe were down by 6.5% YOY, with an 11% decline in the UK and Ireland. In the same period, Deliveroo’s orders were stagnant in the UK and Ireland, despite having gained market share in the region. Inflation and higher fees partially mitigate the decline in total orders, but the numbers suggest that growth rates from now on are likely to be closer to those of established businesses and no longer resemble those of startups.

Fast grocery delivery is unlikely to escape this trend. In addition to slower growth, more difficult access to cash has forced many fast grocery delivery startups to close or be bought out. Getir’s purchase of Gorillas in December 2022 was the last major movement in this market.

Q4 trading updates from JET and Deliveroo, and Sainsbury’s announcement of a partnership with JET this month, point to a new reality for fast delivery in Europe. (JET already has agreements with Getir, Asda, Ahold, and Carrefour among others; Sainsbury’s has partnerships with Deliveroo and Uber Eats.)

The Focus Shifts From Growth to Profitability and Cash

Lower growth perspectives have forced operators to prioritize profitability and cash preservation. Cost cutting has become a must, affecting marketing, central, and operational expenses, including cost per delivery. Where possible, operators are also increasing fees and commissions, as indicated by JET and Deliveroo in their trading updates. At the same time, operators need to preserve cash and are critically reviewing their portfolios, exiting markets where their competitive position is questionable (Deliveroo exited Spain and the Netherlands, and JET has put Grubhub up for sale).

Both restaurant and grocery delivery players are expanding their scope into adjacent activities/sectors to leverage their logistics network. In some cases restaurant delivery platforms are partnering with food retailers, flower shops, or pharmacies (e.g. JET in the UK and Glovo in Spain). In others, they are teaming up with fast grocery delivery operators (e.g. JET-Getir in Europe, Deliveroo-Zapp in London). And Deliveroo is testing its own “dark store” model – Deliveroo HOP – for fast grocery delivery in selected cities.

What’s Next? The Winner Takes It All

While short-term growth at the industry level is expected to be low given tough comparables, growth and value creation in the future will be critically important for the industry and its companies. Additional growth may come from increasing fees, gaining market share from exiting competitors, and attracting new partners like restaurants, supermarkets, or non-food retailers. These growth opportunities are likely to revert to leading regional players, as leaders can offer partners more attractive value propositions. Within each country, the same operators tend to have leading positions in multiple locations. This reshuffling process is likely to end with a couple of players dominating the national landscape. Such scale and national coverage makes them even more relevant, and retailers may choose to team up with fewer or just one delivery partner. This increased scale may create new collaboration opportunities, not only with grocers but also with their suppliers, who could, for example, offer tailor-made assortments for a delivery company.

Food delivery in Europe-breakout box