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Food-Delivery Profits Shaky, Future of the Industry Unclear

Thanks to the pandemic, digitization has extended itself to the restaurant industry. Convenient alternatives to home-cooking and restaurant dining due to the pandemic has caused the global revenue in the online food delivery segment to nearly double since 2017. Even so, many of these companies are struggling.

The United States is currently the second-largest online food delivery market worldwide. American’s busy lifestyles and a new wave of technologies and platforms have helped to drive the demand for this service. However, news recently broke that Just Eat, the U.K.’s leader in food delivery, is going to delist the U.S.

The CEO explained that this move does not mean the delivery giant intends to sell GrubHub, the U.S. company it purchased back in 2020. Rather, it shows the company’s decision to focus on cost-cutting for future plans and growth. The value of Just Eat’s U.S. shares fell from over $22 per share in 2021 to around $8.50 in Februrary – a huge reduction in worth.

The Public Market Struggle

According to the latest reports, Just Eat is not the only hard and unfortunate change to hit this market. Many former startups have been struggling after reaching the public market. For example, Delivery Hero saw its value slump sharply last week; this was just after its 2022 guidance proved to be a misdirect.

Last year, Delivery Hero’s share price sat at around €130 last year, but it has recently dropped to around €41 per share. The change was so significant that the company’s CEO recently reached out and apologized for the decline on Twitter. Deliveroo, a U.K.-based food-delivery has also struggled, losing close to 65% of its value after what was a 52-week high.

The Gap

Experts say the reason for this is the gap between what public-market investors are saying about the market and what private-market investors hope to see. According to McKinsey & Company, “Succeeding in the fast-growing food-delivery ecosystem will require understanding how overlapping economic forces affect a complex web of stakeholders.”

Even though the food-delivery market continues to expand rapidly, its economic structure is still evolving. Ultimately, consideration of key factors like brand, changing consumer habits and operating efficiency will determine outcomes as the industry continues to develop.

Blair Thomas has been a music producer, bouncer, screenwriter and for over a decade has been the proud Co-Founder of eMerchantBroker, the highest rated high risk merchant account processor in the country. He has climbed in the Himalayas, survived a hurricane, and lived on a gold mine in the Yukon. He currently calls Thailand his home with a lifetime collection of his favorite books.