Fewer orders and fewer users – yet JET is not worried about inflation

As prices around the world rise at an unusually high rate and consumers look for ways to save, are they seeing food delivery as a cheaper alternative to eating out? Or as an expensive alternative to cooking at home?

At meal delivery company Just Eat Takeaway.com (JET), they assume the first scenario. Asked about the unusually high inflation in recent months, CEO Jitse Groen said on Wednesday that he was not worried about his income. In his view, food delivery is not a luxury service that customers skimp on in difficult times, he said in a comment on the half-yearly figures. “It’s not like you’re talking about a car. We’ll deliver dinner to you.”

Groen (44) does not expect his company to suffer much from possible financial difficulties. “This company has been around for 22 years, in that time we’ve never noticed much in the way of recessions or high prices.” According to him, this is because a meal delivery company does not have to depend on more sales to the same customer to increase its turnover, but can also grow by bringing in consumers who have never ordered from home. And it is still the majority in many countries, he says.

Not everyone agrees. Researchers at the American investment bank Morgan Stanley see a change happening. Based on a consumer survey, they recently concluded that a food delivery service is one of the first expenses to die when an economy enters a recession, Reuters reported last week.

This can already be seen on the American market, the news agency stated on the basis of figures it received from the market researcher NDP. In the 12 months between the beginning of July last year and the end of June this year, 4.8 billion meals were delivered to homes in the United States, a decrease of 6.3 percent compared to the same period the previous year. It was the first drop in six years, although sales last year were extra high due to consumers staying at home during the corona pandemic.

Deliveroo, a mid-sized competitor to JET, also recently warned of the consequences of the “increasing headwinds for consumers” – a euphemism for skyrocketing prices. The total value of meals ordered from the company rose 2 percent year-over-year in the second quarter. A quarter earlier it was 12 per cent. Deliveroo lowered expectations for the full year.

More expensive orders

The half-year figures for Just Eat Takeaway (20,000 employees), the Dutch parent company of Thuisbezorgd.nl, published on Wednesday, show a similar development. Although revenue rose by 7 percent to just under 2.8 billion euros, this was mainly due to the company starting to ask for higher commissions.

Also read: The four problems with the ailing Just Eat Takeaway

On the other hand, both the number of active users of the platform and the number of orders fell last year. JET had 98 million active users in the first six months of last year, now there are 94 million. The number of orders fell even more: by 7 percent to 509 million. This happened primarily in the second quarter, when there was a decline of just over 12 percent.

As in the previous quarters, when the previous years’ stormy growth figures for JET have already leveled off, CEO Groen mainly sought the explanation on Wednesday at the end of the corona pandemic. During the two worst years, people around the world were at home and restaurants were often closed due to corona measures, forcing millions of consumers to resort to ordering apps like JET’s.

Now that most of the measures have ended, it is therefore logical, according to Groen, that the results are a little less brilliant than during the pandemic. That certainly applies to Wednesday’s figures, as they are set against the first half of 2021 – the best period in the company’s history. Groen takes hope from the fact that the gross transaction value, the sum of the value of all orders, has remained the same. In other words: the consumer paid more than 2 euros more per order of one year.

Significant depreciation

Another bright spot, according to the CEO, is that profitability is recovering. Groen looks at the adjusted operating profit, the profit before deduction of tax and one-off and setbacks, among other things. It was 189 million euros negative in the first half of last year and minus 134 million in the past half year.

When the pandemic started, Takeaway had just become operationally profitable, but the merger with Just Eat and the acquisition of loss-making US delivery company Grubhub last summer saw costs skyrocket. For example, JET had to spend millions to acquire new customers and restaurants.

Now that the pandemic has ended, JET says it is looking more selectively at spending. The company recently announced a major reorganization in France. According to Groen, this is a market that has been erratic for years, and where the company would like to remain active, but “not at any cost”. The meal delivery company’s goal is to be operationally profitable again next year.

Below the line, however, the profit is anything but in sight. In the past six months, JET has suffered a net loss of 3.5 billion euros, more than seven times as much as a year earlier. This is largely due to a write-down of 3 billion on American Grubhub, which was acquired last year for 6.4 billion euros.

In April, JET already announced, after strong calls from some shareholders, that it was looking for a buyer for the American company. Groen said little on Wednesday about that process and about the sale of a stake in a large Brazilian meal delivery company. “All I can say is that we are negotiating with the parties on both,” the chief executive said in a call with analysts.

Investors were happy with that so far: JET shares were 3.5 percent higher midway through the day.

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