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Off the menu

1 April 2020 By Karen Kwok

Sometimes the best dishes are found off-menu. Online takeaway groups like Deliveroo and Uber Eats, whose restaurant suppliers are struggling amid the pandemic, similarly need to think outside of the delivery box. Ferrying groceries, instead of just hot meals, to couchbound punters seems like the best survival recipe.

Perhaps surprisingly, virus-induced lockdowns have been far from a feeding frenzy for the sector. Shares in listed groups Grubhub, Just Eat Takeaway.com and Meituan Dianping are down 12% on average this year. The lucrative office-lunch run is no more, while restaurant closures have hurt supply. U.S. group Grubhub’s founder Matt Maloney reckons up to 30% of eateries may have to shut, perhaps for good.

Meanwhile, supermarkets, like Britain’s Tesco and France’s Carrefour, have the opposite problem. There’s an ample supply of groceries, for now, but a bottleneck in getting them to customers, given social-distancing measures. Grocery-delivery specialist Ocado is effectively fully booked; delivery slots have become like gold dust in lockdown Britain.

Partnerships between grocers and delivery groups therefore make a lot of sense. Uber, for example, on Wednesday unveiled a string of deals to offer delivery services on behalf of retailers including Carrefour, Brazilian pharmacy chain Pague Menos and Galp Energia, an energy group with convenience stores at its gas stations in Spain. Deliveroo, which has 30,000 drivers, recently announced a tie-up with Marks & Spencer stores in BP gas stations.

The beauty of these deals, from the delivery groups’ perspective, is that grocers can afford to pay delivery fees right now, while restaurants cannot. Just Eat, for example, recently promised to give back one-third of the 14% commission it charges independent restaurants to “help them to keep their doors open”. Supermarkets, flush with cash from panic buying, can more easily cough up.

Admittedly, individual grocery deliveries may be no more lucrative for the profit-starved industry than hot meals. The average supermarket-delivery transaction is around $30, according to Spanish delivery startup Glovo, roughly the same as the average takeaway order. That means the same high cost structure applies. Deliveroo and Uber have historically lost money after IT and marketing expenses are deducted.

Yet boosting orders by adding grocery deliveries gives them a better chance of out-earning those overheads. Better still, punters might stick with their crisis habits once the pandemic subsides.


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