16 Mar 2018 3 min read

Delivering the goods

By Matthew Courtnell

I have a confession to make: I’ve never been the biggest fan of the British takeaway. I realise, however, that based on industry data I’m clearly in the minority. In the era of platform economies, global food aggregators such as Just Eat and Deliveroo have risen to meet the demands of the great British appetite. This is driving considerable change in consumer behaviour and potentially offers tasty returns for investors in the process.


Globally, the food market is estimated to be valued at €8 trillion (11% of global GDP). Within this, the global delivered food market is growing rapidly, currently worth around €250 billion. 

Drilling down further, Barclays Research estimate the global online ordered food delivery market is worth €60 billion. They project this could grow at a 19% compound annual growth rate to 2025. This portrays a clear message and highlights the total addressable market is much bigger than most investors think, with mobile adoption and technology helping to fuel the offline-to-online shift.

Chart showing the rapid growth of global online food delivery and it's potential over the next 7 years

Leveraging the dual benefit of an aggregator business and digitalised marketplace, companies such as Just Eat and Delivery Hero are facilitating a change in consumer behaviour, designed to disrupt the more traditional food industries. 

These companies have successfully created global brands, and we believe are now well positioned following historic investment spent acquiring customers in the early lifecycle of the business. While these disruptors face constant challenges from new entrants (for example UberEATS), industry consolidation has meant only a few players have a wide footprint. Furthermore, the survival-of-the-fittest dynamic ensures that the listed, public companies, remain as innovators. 

Just 35% of total global orders are currently placed online

Despite consistently delivering double digit revenue growth in recently years, a further growth spurt for the industry could come from multiple structural factors.

Harnessing strong network effects of marketplace business models, this creates pricing power, which makes barriers to success high. Most countries, with some exceptions (Germany), have a clear market leader. This presents an opportunity for the platform aggregator to increase the restaurant commission (‘take-rate’), notably in areas where it has a stranglehold on the market. For emerging regions, there is a long runway for growth, with opportunity to roll out technology and a model set to deliver a clear route to profitability.

A big part of the growth stems from an increase in online penetration and order frequency. Mobile and search has combined to create a platform of vast choice. Yet, there is significant potential for further conversion to digital orders.

Just Eat estimate the average consumer has 25 takeaways per annum, with well over half of these orders still made offline. Nevertheless, the gap is closing, and we see the channel shift process being inevitable in all markets.

Finally, logistics and delivery look set to play a bigger part in the future as platforms looks to expand their addressable market. This provides customers the option of ordering from branded chains that do not currently offer home delivery. Such a strategy will drive a deeper network effect with quick-service food chains, where we know brands such as KFC and Subway are looking to roll-out delivery. Despite requiring more investment, this represents a natural and very incremental segment for long-term growth.

The total addressable market is much bigger than most investors think, with mobile adoption and technology helping to fuel the offline-to-online shift

Looking ahead, as the shape of the food delivery sector progressively changes, we consider the economics of a marketplace model an attractive secular theme. These are relatively asset-light businesses, have M&A optionality (in the form of asset swaps) and the underlying market is structurally supportive. As investors, we continue see a ‘winner takes all approach’, with returns in mature and new international markets increasingly appetising.

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Matthew Courtnell

Responsible Investment Analyst - Active Strategies

Matthew is a responsible investment analyst within the Active Strategies team and has over 16 years industry experience working in asset management. Matthew is focused on equities, with his role covering company sustainability analysis, ESG thought leadership, portfolio management and being heavily involved in corporate engagement as part of our active ownership model. Matthew also applies the same level of passion for investing to the wine industry, where he has actively worked for several years on events and consulting. 

Matthew Courtnell