March 21, 2016    4 minute read

Just Eat’s Overindulgence

   March 21, 2016    4 minute read

Just Eat’s Overindulgence

Just Eat, the world’s leading digital marketplace for takeaway food delivery, announced last month that it has agreed to acquire four businesses from competitors Rocket Internet and Foodpanda for €125 million in aggregate.



Source: Own

Source: Own


The entities acquired are online takeaway food businesses scattered across Spain (La Nevera Roja), Italy (PizzaBo/hellofood Italy), Brazil (hellofood Brazil) and Mexico (hellofood Mexico). According to Just Eat, the acquired businesses are highly complementary to Just Eat’s existing portfolio, and the move is in line with its strategic ambition to become a market leader in the geographies in which it operates. Experts have estimated that the takeaway delivery market in these four markets is worth over £8 billion.

Source: Yahoo! Finance

Source: Yahoo! Finance

Bankers from J.P. Morgan Cazenove, the UK-focused arm of the firm, have been acting as Just Eat’s financial adviser throughout.

David Buttress, Just Eat CEO, commented:

“This transaction reflects our ambition to make strategic, value-enhancing acquisitions that consolidate our leadership of the global digital marketplace for takeaway food delivery. Just Eat has enhanced its market-leading positions in geographies that we understand and where our existing businesses are performing strongly.”

Acquisitions that have been hard to digest

Why has Rocket Internet been so quick to divest? It acquired Spain’s La Nevera Roja just one year ago for €80 million.

Just Eat CEO David Buttress disclosed in March 2016 that he had sold 3.19 million shares of his company, getting rid of about 60% of his initial position. Finance director Mike Wroe sold 1.7 million shares himself, slashing his ownership in Just Eat by 55%. One of Just Eat’s original backers, venture capital fund Index Ventures, has also been selling down: it got rid of 3.7% in November 2015. What is driving this short selling frenzy? What do Mr. Buttress and Mr. Wroe know about Just Eat’s prospects that others don’t?

An obsolete system

The first crop of restaurant delivery services (JustEat, Grubhub, Delivery Hero and the like) act as a pure software provider that aggregates a fragmented offering of independent restaurants, which manage their fleet of delivery people.

These software-only marketplaces’ main selling point to restaurants is to bring in new orders and to replace their antiquated phone-ordering system with an optimised web and mobile platform, that is integrated with their kitchen order flow.

As they don’t handle the food at any point, these platforms charge a low fee of around 10-15% of the price of the order. These startups are highly scalable and have managed to experience remarkable growth, particularly at inception. But their reliance on the restaurants’ couriers means that they are somewhat limited in their food offering and price points. As a result, they have become associated in consumers’ minds with relatively low-end fast food takeaway. It also means that they cannot control and optimise the speed and quality of the delivery.

UberEATS to revolutionise food delivery

The controversial San Francisco-based start-up is seeking to make its mark in the highly competitive food delivery market. After test-driving its restaurant delivery app in Toronto and Los Angeles, the service launched in three new US cities in March with plans to expand quickly to over 12 cities globally.

UberEats intends to tap into Uber’s vast network of drivers to complete deliveries. When a customer makes an order from a participating restaurant, Uber will locate drivers nearby and prompt them to complete the order and collect a delivery fee. Drivers will be able to take multiple orders at the same restaurant to increase efficiency.

The delivery fee is expected to be a generous $5, considerably more than when ordering from restaurants on first generation apps.

The new app is expected to launch by the end of March. What this means for Just Eats and its peers remains to be seen. However, short-sellers are starting to see Just Eat as a target and consolidation in the industry is undoubtedly on the horizon.

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