Just Eat to ramp up expansion of delivery business

Expansion of Delivery Business

Just Eat will step up expansion of its delivery business as it searches for a new chief executive and faces growing competition from rivals Deliveroo and Uber Eats.

In recent months, the UK’s largest food marketplace has come under pressure from its main competitors, which have both launched competing “marketplace” products to connect diners with restaurants that use their own delivery people.

Until recently, Uber Eats and Deliveroo have mainly used their own couriers to deliver to customers, while charging restaurants higher commissions than Just Eat. But as Uber prepares for an initial public offering this year, and Deliveroo attempts to raise fresh investment, both companies have launched less-costly marketplaces in several countries.

The rivals have also said they will introduce takeaway options like Just Eat’s in multiple markets, so customers can order food through the app but collect it themselves.food-delivery-apps

At the same time, Just Eat has also been testing its own delivery service for chains including Burger King and KFC, investing £40m in services across Canada, the UK and Australia.

As it published its full-year results on Wednesday, the company said it would invest expected profits from its Canada business to further expand its delivery businesses in the UK and Australia this year.

“We will have rolled [delivery] out by the end of the year to all the marketplaces that we want,” said Peter Duffy, interim chief executive.

Just Eat had not “felt an impact”

He also maintained that Just Eat had not “felt an impact” after Deliveroo launched a new marketplace last year.

“The [Just Eat] marketplace is 30,000 restaurants in the UK . . . with sales teams that are going out to visit them on a regular basis,” Mr Duffy said. “We’ve seen a number of players come into this space and fail.”

On Wednesday, Just Eat reported revenues of £779.5m for 2018, a 43 per cent increase compared with the previous year, and in line with analysts’ expectations. But pre-tax profits of £101.7m in the 12 months to December 31 were lower than the £149.8m expected by analysts, according to Bloomberg.

The company said it had spent £51m over the period on “strategic initiatives to deliver on [its] hybrid strategy” of operating the marketplace and deliveries businesses. It reiterated guidance that full-year revenues in 2019 would be between £1bn and £1.1bn.

Peel Hunt analyst James Lockyer said the level of investment the company made last year was “disappointing” given Just Eat will “come under growing pressure from competition”.

The company’s shares fell 2.2 per cent in mid-morning trading in London. Uber Eats and Deliveroo, which are privately owned, are burning through cash to fund their expansions and keep prices low in the battle for market share. Uber Eats said last month that it would cap the fees it charged to restaurants at 30 per cent of the value of an order, compared with a current maximum fee of 35 per cent.

Just Eat has come under pressure from activist investor Cat Rock, which owns about 2 per cent of the company’s shares and has urged it to shed assets such as its stake in iFood, a food delivery business used in Brazil and Mexico. Cat Rock has also called for Just Eat to initiate merger discussions with rivals, but Mr Duffy on Wednesday declined to say whether the company had done so.

Mr Duffy also ruled himself out as a replacement for Just Eat’s chief executive Peter Plumb, who stepped down in January after only 16 months in the job.

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Source : https://www.ft.com/content/fba51a2e-3fe1-11e9-9bee-efab61506f44

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