Deliveroo Targets Breakeven In Two Years; Just Eat Agrees Delivery Partnership With McDonald's

By Dave Simpson
Deliveroo Targets Breakeven In Two Years; Just Eat Agrees Delivery Partnership With McDonald's

Britain's Deliveroo ROO.L has set out a path to profitability, saying that it would break even in approximately two years as the proportion of revenue spent on marketing in the competitive food delivery sector falls.

The company, which competes with Just Eat and Uber Eats, remained cautious about the short-term outlook, forecasting a slowdown in growth as the economic environment worsens for consumers and its restaurant partners.

The company predicted a 15% to 25% rise in the value of gross transactions (GTV) on its platform this year, a slowdown from 70% in 2021 when lockdowns boosted its first half.

"When we look at the three sides of our marketplace - the riders, the merchants and the consumer - we do see some headwinds, mostly coming from inflationary pressures," chief executive Will Shu told Reuters.

"We are setting cautious guidance for 2022, but overall we are very, very enthusiastic about the future."


Deliveroo reported a 57% rise in revenue to £1.82 billion on £6.6 billion of orders, but its adjusted core loss widened to £131.4 million from £10.8 million, reflecting technology investment and increased marketing spend to drive awareness and acquire new customers.

Deliveroo, which is expanding its grocery delivery service and its restaurant business, said it aimed to reached adjusted core earnings breakeven in the second half of 2023 or first half of 2024, and achieve a positive margin of 4% by 2026.

Shares in Deliveroo, which have lost more than two thirds of their value since listing at 390 pence in March 2021, were trading up 8% at 126 pence.

Analysts at Bernstein said guidance for this year was potentially disappointing but longer term guidance and disclosure was positive.

Just Eat Agrees Delivery Partnership With McDonald's

The above news was followed by news that Just Eat TKWY.AS, Europe's largest online restaurant food ordering service, said on Tuesday 22 March that it has entered a "long-term global strategic partnership" with McDonald's Corp. MCD.N to expand delivery.


Financial details were not disclosed. The partnership will "support growth of the McDelivery business and will lead to increased operational benefits for Just Eat," Takeaway said in a statement.

The companies have had agreements in individual markets, but the new global agreement will reduce complexity and improve operational efficiency, Takeaway said.

McDonald's, the world's largest restaurant company, offers delivery at 33,000 restaurants in 100 countries through a variety of platforms, including Takeaway rival Uber EatUBER.N.

Takeaway shares have been in a sharp decline since late 2020, amid fears that COVID pandemic-driven growth would eventually slow, and following Takeaway's 2021 acquisition of Grubhub for $7.3 billion. Shares are down 36% in 2022 and closed at €31.16 on Monday 21 March.

India's Zomato Faces Heat For Plans To Deliver Food In 10 Minutes

All of the above news was followed by news that Indian food-delivery giant Zomato Ltd ZOMT.NS is facing a backlash on social media for its plans to roll out a 10-minute food service that critics say raises road-safety risks for delivery riders.


CEO Deepinder Goyal said in a post late on Monday the service "Zomato Instant" would rely on a densely located network of so-called food "finishing stations", which will house bestseller items from restaurants and use a sophisticated demand prediction algorithm.

"Nobody in the world has so far delivered hot and fresh food in under 10 minutes at scale," Goyal wrote on LinkedIn and Twitter. "We were eager to be the first."

Within hours, Zomato's announcement sparked a flurry of responses. A lawmaker questioned the business model while executives raised concerns about rider safety on Indian roads.

Zomato, which counts China's Ant Group 688688.SS as an investor, did not respond to requests for comment.

Many on social media urged a rethink, saying food can wait as even ambulances in India take longer to reach patients. Some on LinkedIn questioned the need for such a model.


"I don't want to eat food that someone has brought to me while keeping his life at risk," wrote Gunjan Rastogi, a researcher at India's RSB Insights & Analytics.

Karti P. Chidambaram, an Indian lawmaker, tweeted: "This is absurd! It's going to put undue pressure on the delivery personnel."

The Zomato CEO's Monday 21 March announcement started by saying: "We will start with a clarification ... we do not put any pressure on delivery partners."

After it failed to convince many, Goyal issued another tweet on Tuesday stressing that delivery will be "safe" for riders who will face no penalties, urging people to understand the model "before the outrage".

"Quick commerce" grocery startups in India have been a rage with SoftBank-backed Blinkit and rival Zepto expanding rapidly. Reuters reported in January delivery bikers said they faced pressure to meet deadlines, which often led to speeding, for fear of being rebuked by store managers.

Critics say risks are too high on Indian roads. Even in cities, most roads are riddled with potholes and motorists violate basic rules. The World Bank says India has a death every four minutes on its roads and crashes kill around 150,000 people each year.

Nevertheless, many customers have been hooked to quick commerce grocery services to meet their instant shopping needs.

"I would be happy to get my food in 10 minutes," said one LinkedIn user, Sonu Sekharan.

News by Reuters, edited by Hospitality Ireland. Click subscribe to sign up for the Hospitality Ireland print edition.