Takeaway orders drop as food prices skyrocket

The cost-of-living crisis has hit growth at food delivery companies Deliveroo and Just Eat

Pearson asset library: AL1544979

The cost of living crisis has hit order growth at food delivery companies Deliveroo and Just
Eat Takeaway, as inflation compounds an industry slowdown after last year’s lockdown
restrictions eased.

Deliveroo on Friday blamed “tough market conditions” for a 1% year-on-year drop in orders
globally for the three months to September. It also saw a “slightly more pronounced” decline
in monthly active customers than its usual seasonal fluctuations, down from 7.8mn in the
second quarter to 7.3mn in the third.

Earlier this week, Just Eat Takeaway said group orders declined 11% year-on-year. Both
companies said that the order declines were offset by growth in customer spending on their
apps, as restaurants raise their prices and delivery fees rise.

Will Shu, Deliveroo chief executive, pointed to a divergence in consumer behaviour. While it
is “quite clear that . . . there are people that are struggling out there”, Deliveroo was also
seeing that “the more affluent a consumer, the higher the engagement is on the platform”.

Jitse Groen, chief executive of Just Eat Takeaway, told reporters on Wednesday that while
the end of Covid restrictions since last year accounted for the “lion’s share” of its fall in
orders, “we do believe that part of the trend is caused by a more difficult environment for
consumers”.

Restaurants are raising prices by “a lot”, he added. “Especially in Europe, prices are
increasing quite a bit,” Groen said. “I think delivery is getting quite expensive in the UK.
That’s going to be a bit of a challenge.”

Students aged 16-19, their teachers and schools around the world can read FT.com
for free. Sign up or check if you are registered at www.ft.com/schoolsarefree
Recommended The Big Read The future of farming: how global crises are reshaping
agriculture Rising food prices have been a key driver of inflation in the UK, particularly in
recent months as fuel prices have fallen.

Food and non-alcoholic drink prices rose by 14.6% in the 12 months to September, the
Office for National Statistics reported this week. That is up from 13.1% in August and is
believed to be the highest rate since April 1980. Food delivery apps have come under “huge
pressure” this year to show investors they can turn a profit, said Peter Backman, a food
industry consultant.

To boost earnings, some apps, including Deliveroo, have raised fees at the same time as
restaurants have increased menu prices. But Backman warned this tactic could backfire.
“Squeezing the customer right now is not a good idea,” he said. He added: “People aren’t
going to casual dining chains in the numbers that they were and that’s only going to get
worse.” Delivery apps are already seeing that in their numbers. Shu said that restaurants
that have marked up their prices “more aggressively” because of inflation are seeing lower
conversion rates than others who have taken a “more measured approach”.

(Adapted from the article in the Financial Times by Tim Bradshaw October 21 2022
https://www.ft.com/content/7c51f641-75f1-419b-8a7b-6241736bdbd5)

Topic areas:
1.4.3 The marketing mix
2.2.2 Price
2.3.2 Working with suppliers
1.5.4 The economy and business
1.5.5 External influences

Research activity:
1) What does ‘inflation’ mean?
2) What is the average UK income?
3) Read the extension article https://www.ft.com/content/06626f2e-f32a-4021-a94b-
6cd2cecd9747
What impact is UK farming likely to have on Deliveroo and Just Eat?
4) Research the article “tags” linked to the article on the FT site.

Exam-style questions:
1) Outline one drawback of Deliveroo and Just Eat increasing their prices (2 marks)
2) Analyse the impact on Deliveroo and Just Eat of increased petrol prices (6 marks)
3) Evaluate the impact of Deliveroo and Just Eat targeting the affluent consumer as a
market segment (12 marks)

Students aged 16-19, their teachers and schools around the world can read FT.com
for free. Sign up or check if you are registered at www.ft.com/schoolsarefree