The battle for digital food On-line orders from restaurants and for fast-food are changing the sector grounds
When you last pick up the phone to order a meal instead of using an application on your phone or a website to choose from a huge menu with details and photos? The digital food market is one of the fastest growing segments of the digital economy in the world, and there is no prospect of changing it soon. Transformation of the sector affects all countries - from restaurants to consumers. These changes are part of the talks at this year's DIGITALK conference organized by Capital and the LAUNCHub Ventures funds and NEVEQ. The founder of one of the leaders in the sector - Takeaway.com, Iatese Huron, is also present at the event. He is one of the 40 speakers at the digital conference, where he shared how he managed to create a billion-dollar business for eighteen years.
Takeaway.com became known in Bulgaria with the acquisition of the "Hello Hungry" - the company behind the local BGMenu supplier. The transaction happened two months ago worths $ 10.5 million. The Dutch group started with local supplies in Amsterdam in 1999 and gradually expanded to other countries until it became the leader of almost all the markets it attended. BGMenu's purchase has strengthened the company's position in Eastern Europe. Currently, Takeaway.com has a market capitalization of more than 2.13 billion Euros, and according to first quarter results the company has executed over 20.5 million orders (the main indicator for this business) - 31% more than in the same period last year.
The fight for each throat
Takeaway.com is far from being the only major player in the international food supply market. Delivery Hero, Just Eat, Uber Eats and Grubhub work are in a fierce competition on a number of the world's largest markets. For two consecutive years at the top of the Financial Times chart for the most dynamic companies in Europe are namely such companies - the British Deliveroo and the German HelloFresh. Globally that industry is now estimated at over $ 120 billion. A McKinsey study shows that once a user chooses a platform, he or she never or very rarely switchess to another similar service in 80% of the cases. So the battle is literally for every client.
McKinsey data shows also that the most important is the speed of delivery for consumers, in over 60% of the cases being the key factor that makes them prefer a platform. The optimal delivery time is no more than 60 minutes. McKinsey also writes that customers order food mainly for home and not for work, and that the vast majority of the platform business - 74% of orders - are on weekends.
Each platform has a comparatively different business look, but the unifying feature among them is the common desire to offer its customers the most convenient and fast ordering opportunity. In most cases, this means that the company's application needs to be fully optimized. The competition in this regard is not only for customers but also for their approval and rating in online app stores such as Google Play or Apple App Store.
An example in this relation is Uber Eats. The Uber-based located in the United States structure has recently been announced as the highest-rated food delivery app in both major app stores. Ever since its inception, the company has relied on a very different strategy from its GrubHub competition, which works by buying smaller companies to create a network. Uber, in turn, relies on the mother company's network of drivers, as well as the fact that the delivery application is very much like an interface to the original application. The result: in 9 of the 22 largest cities where Uber Eats is running, the application receives more queries than any of its competitors.
Online against offline
According to McKinsey data for the beginning of 2017, the market is still almost paralleled between online platforms and orders via telephone or other forms of communication. However, the growth of the global web platforms for food is obvious, as only a few years ago their market share was only 8%. Food supply companies will become more and more popular, but there are many obstacles to them, such as work in smaller towns with no network.
The analyst believes that growth will continue, while online orders do not reach 65% of all orders. "We have seen dramatic migration from one channel to another over the past 15 years, especially with players such as Domino's Pizza, and it is likely that the entire food industry will continue along this path", McKinsey reports.
On the European market, the figers range from 43% online vs. offline orders in Austria to 56% for the online sector in Sweden. There is no official data for Bulgaria, but according to sources in the sector, internet business is far smaller - just 7%, and the potential for a storm growth is there. It is important to mention that setting up a network of restaurants is a different challenge in the initiative for each country, and that is why companies rarely dominate in more than a few markets. This also applies to the United States, where the leaders are very different for the individual states.
A deeper analysis of the digital food supply market was presented at the DIGITALK conference organized by Capital with the LAUNCHub Ventures funds and NEVEQ.