On your bike: Deliveroo’s latest investment round gave it a reported valuation of about $1bn © Getty

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The appetite for food delivery in the UK has never been greater. Data from Euromonitor, the market research company, show that growth in the home delivery and takeaway food sector has outpaced that of restaurants each year since the financial crisis, as consumers place a greater value on ease and convenience than ever before.

Between 2010 and 2015, the western European market for takeaway and delivery grew 2.2 per cent, to £18.4bn, while the value of food bought in restaurants fell by 7.6 per cent to £135.3bn, Euromonitor says.

Investors have been scrambling to grab a piece of the growing market, pouring hundreds of millions of pounds into start-ups such as Deliveroo, whose latest investment round last November gave the London-based company a reported valuation of about $600m.

Deliveroo, which was set up just three years ago, now operates in 12 countries, targeting restaurants that do not have their own couriers. In London alone, its network of more than 3,000 self-employed cyclists delivers food for over 2,500 restaurants.

“It is a huge space in terms of consumer demand,” says Luciana Lixandru, an investor who helped lead venture capitalist company Accel’s investment in Deliveroo. “People eat three times a day.

“It is one of these markets, like the transportation market, that is so large and it is expanding because it is more affordable now,” she adds, before adding that no new food delivery start-up should be discounted. “It is very early days in Europe. I don’t think you can underestimate anyone.”

To be sure, Deliveroo is just one of many well-funded food delivery companies in Europe vying for the same meals.

For example, Take Eat Easy, based in
Brussels, counts among its backers Rocket Internet, a German investor that has acquired more than €600m of equity in food delivery rivals across Europe and Asia.

Larger competitors include the UK’s Just Eat, which debuted on the London Stock Exchange in 2014 and now has a market capitalisation of close to £3bn, and Germany’s Delivery Hero, which has raised $1.4bn from investors. Both target the less-expensive end of the takeaway market.

And then there is the latest, and largest, entrant into the increasingly-crowded space: Uber. The San Francisco-based company, whose ride-hailing app has already caused upheaval in the taxi industry, is aiming for similar disruption in the food-delivery market, landing in London and other big cities with an aggressive marketing campaign and free introductory offers for its UberEats app.

Most analysts agree it is too soon to tell what effect UberEats will have on existing food-delivery companies, as the app was only rolled out in select markets for the first time earlier this year.

But Uber, which is known for investing heavily in new markets in order to drive out competition for its ride-hailing app, recently received a $3.5bn investment from Saudi Arabia’s sovereign wealth fund, which means Uber now has about $11bn in its war chest, leaving few to believe it will tread lightly in the restaurant delivery space.

To make matters more worrying for incumbents, Uber’s move into the market comes at a time when investment in food delivery companies is beginning to slow. According to CB Insights, an investment data service, funding to food delivery start-ups, including not only restaurant delivery but also grocery delivery services such as German meal-kit company HelloFresh, has increased rapidly since 2012. It reached record highs last year, when nearly $5.5bn flowed into the category globally.

But CB Insights says food delivery start-ups have pulled in just over $609m across 23 deals in the first quarter of 2016, which puts the category on track for only half the funding it saw last year, and fewer than half as many deals since 2015. Yet the slowdown does not appear to be troubling bullish investors, who say the trend reflects the so-called “hype cycle” — a term used by research firm Gartner to describe a pattern often seen with tech companies.

“You have the early stage, where you see a lot of fast-growing companies,” says Martin Mignot, a partner at Index Ventures, a London and San Francisco-based firm that has invested in both Deliveroo and Just Eat, among other food start-ups.

“That attracts a lot of interest, attention, funding and competition,” Mr Mignot adds, saying consolidation and a “harder time” often follow. “We are kind of at the trough after the peak,” Mr Mignot says. Overall there will be fewer companies, but the winners are going to do well, he says.

Mr Mignot does not deny there are difficulties in running a successful food delivery company — many start-ups in Europe, Asia and the US have failed, foiled by the complexities of a three-sided business model that needs to satisfy restaurants, consumers and couriers. But he insists that a handful of market winners would continue to see growth fuelled by a fundamental change in consumer behaviour.

“I think we are looking at a major shift in the way people are eating, and buying and consuming food,” Mr Mignot says. He notes that younger professionals are less likely to cook and more likely to shop online than their older peers, most of whom still use the telephone to order an occasional takeaway.

“We are just scratching the surface of that shift,” Mr Mignot says.

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