Just Eat Takeaway: Protecting the Legacy UK Marketplace

Disclaimer: This interview is for informational purposes only and should not be relied upon as a basis for investment decisions. In Practise is an independent publisher and all opinions expressed by guests are solely their own opinions and do not reflect the opinion of In Practise.

Phil what was your role and responsibilities when you were at Just Eat?

I arrived at Just Eat just after the business had done a successful IPO and grew revenue by 20%. It had grown profits even faster but encountered several strategic questions. One was the arrival of effective competition in the UK in the form of Deliveroo and Uber Eats and secondly, whether or not to become a delivery provider and a marketplace aggregator. This needed serious attention because the business had not required a big strategy process before as it had been simple.

Take the original Danish model, roll it out in the UK, sign loads of restaurants, saturate the market and try repeat that in other countries. I was brought in to create a strategy discussion and analysis which delved self-critically into these emerging issues. I also ran a commercial finance team to ensure that any big decisions we arrived at were mirrored in shorter term financial decisions and projects which we would decide to invest in. I tried to close the gap between traditional and strategic finance. That was my existence at Just Eat in what was a tremendously interesting and quite challenging two-year period.

Did you segment Just Eat by cities, suburban and rural areas?

Initially we did not, but that is not to say the business was not analytical. It was, but in different dimensions. The idea was to sign over 90% of the takeaway restaurants with no distinction between urban or suburban. After filtering out the smaller populations, the job was to analyze every zone in the same way and to get the right cuisine mix and proportions of the local population aware of and interacting with Just Eat. We would revisit smaller districts to top up on the quality of the supply and the breadth of the cuisine mix.

Only later, when the delivery question emerged, did the business look at locations where the original marketplace business was the right approach, versus those where, in order to protect or win market share, you needed to implant a delivery business as well. That was the way the analysis was done. Other segmentation at play was the difference between new and existing customers. The business would address a restaurant differently, according to whether it was a new restaurant which had to be given special prominence during its first few periods on the platform, versus established restaurants.There was also a group of well-looked after restaurants which were the highest performers who would attract special treatment. If a restaurant wanted to pay for extra marketing support, that was also part of the Just Eat model.

In Q1 2021 Just Eat UK, 33% of total orders were delivery. Were those mostly London big city urban area restaurants?

Yes, although it is starting to fan out beyond the top 20 cities and into cities which lie somewhere between half a million and a couple hundred thousand. Beyond that, there are some dense parts of even smaller cities where a delivery service would make sense. Just Eat is not averse to being location specific within a city, about where it puts its delivery capability.

How do you think order volume for delivery and marketplace orders increase in future?

It will still be a selective deployment of delivery for Just Eat. Deliveroo's most recent numbers suggests the boost we got from Covid will endure. There has been different research on this but the consensus, until now, has been that half the Covid boost will remain. The long-term boost will lean more towards delivery services than traditional marketplace, nevertheless Just Eat has to protect its marketplace legacy which is the most profitable part.

Certain traditional areas which are sometimes off the radar of opinion formers in the South of the country, Midland and Northern areas are very high performing for Just Eat. Those parts of the country will grow by 10% or more over the next three to five years. In addition to pure delivery, it will also come from some of the marketplace hot spots.

How would you segment those marketplace orders?

The further into the North and Midlands, the higher the marketplace content, although the center of Nottingham, Birmingham, Manchester, Newcastle, Leeds and Sheffield are exceptions to that. Most of London will soon be majority delivery but, bear in mind, London is less than a third of Just Eat's overall order volume.

How much growth is there in the Midlands or Northern areas for Just Eat?

Before Covid, those areas would be hard-pressed to have over 10% order growth. Covid has brought in the older generation and more fast food restaurants doing some delivery. Those areas have a longer runway in the part of the cycle where they are above 10%. Towns and cities larger than 100,000 have a good chance of having over 10% growth in three years.

Just Eat Takeaway have seen an increase in marketplace restaurants over the past year; I am not sure if those were mainly from London or those hot spots. Was there spare supply which did not come onto Just Eat while you were there in 2017?

Yes, there was. Universal truths in 2017 were subsequently proven not to be so. One of those truths was high street fast food quick service restaurants had no desire to offer takeaway, therefore stick to those takeaways who already want to do their own delivery. What has happened since is that, in order to be viable, many walk in only fast food restaurants are drifting into delivery. England has 40,000 traditional takeaway and 20,000 fast food restaurants, many of which will seriously think about delivery or have already joined Just Eat.

Do you mean fast food restaurants like the take away Chinese and Indian?

I am talking about small walk in restaurants with a few tables that traditionally would not be interested in delivery, but now would be.