Consumer Sector Comment – October 2016 – Food Delivery: Some Facts to Take-Away

 

It’s a market currently worth €27.5bn and according to industry experts has the potential to be worth €200bn. Since successful IPOs (initial public offering) of both the UK’s Just Eat and the US’s GrubHub, it seems that news of large-scale fundings or new service launches have been making headlines each week, making food delivery one of the hottest sectors in the consumer world today.

It’s a sector that has turned the heads of tech titans Facebook, Google and Amazon, all of whom have got in on the action looking for ways to move beyond their tradition functions. September saw the launch of Amazon’s food delivery concept, Amazon Restaurants, in London, following a successful launch in the US last year. The e-commerce giant sees themselves going head-to-head with the likes of UberEATS, powered by transportation provider Uber, and Deliveroo, the UK’s global on-demand service currently experiencing substantial growth.

Since its inception in 2013 Deliveroo has launched in 84 cities in 12 countries across Europe, Asia and the Middle East, raising a total of €430m along the way. Their recent €250m Series E round of investments, led by pan-European private equity firm Bridgepoint, followed a €93m Series D funding in November 2015, since which the company has achieved over 400% growth – proving just how fast growing the sector is!

However it’s not just the UK market which is hot right now. Food delivery is a global phenomenon.

Leading German player Delivery Hero, founded in 2011 and now present in 33 countries, is continuing to see sales growth of over 50% per annum. The company, owned by Rocket Internet, holds a 37% share of their domestic market and believes that an IPO in 2017 could be possible if favourable market conditions continue. Since inception they have been consolidating the food delivery market with deals including the purchases of Germany-based Foodora, Brazil-based iFood, Greece-based Online Delivery, Turkey-based Yemeksepeti.com, and UK based Hungryhouse.

US market leader GrubHub has also been on a consolidation spree in the last year, snapping up three US based firms, LABite, Delivered Dish and DiningIn.com. The company, which went public on the NYSE in 2014 raising €176m, has seen sales more than double in the last 3 years and now works with over 40,000 restaurants in 1,000 cities in all 50 states.

In the Netherlands, leading player Takeaway.com is also close to an IPO as it seeks to become Europe’s biggest food delivery company. The company plans to launch on the Euronext Amsterdam in the coming weeks, following substantial growth which has seen them take a 90% share of their domestic market.

So what does the future hold? Demand for delivery has never been greater but competition is fierce. With the likes of Amazon and Facebook now operating in the market, it’s possible that newly launched companies will struggle to survive; with delivery costs outweighing revenues per order. And will the giant that is Apple join its tech friends and launch its own concept? Only time will tell.

 

Selected consumer deals

Giraffe Restaurant Group, which was brought by Boparan Restaurant Holdings (BRH) from Tesco earlier this year, acquired American-themed restaurant chain Ed’s Easy Diner. The deal sees BRH acquire the brand, the head office team and 33 Ed restaurants; with the other 26 sites set to close.

TriStyle Mode GmbH, the Germany based fashion retailer backed by Equistone Partners, purchased Amery Capital backed Long Tall Sally, omni-channel tall women’s clothing specialist. Long Tall Sally will join TriStyle’s other brands for the over-45s market, Peter Hahn and Madeleine.

H. Young Holdings plc, privately owned active wear business and owner of the well-known Animal and Madison brands, acquired outdoor clothing retailer and brand owner Rohan Group, which operates around 55 stores across the UK. The deal marketed an exit for the Cann family – owners of the Bollin Group – who acquired Rohan in 2007.

British fashion retailer Jack Wills, was acquired by founder Pete Williams and private equity house Bluegem, owners of iconic department store Liberty – providing an exit for private equity firm Inflexion, who acquired the company in 2007. The sale allows for an injection of cash to grow the Jack Willis brand in the UK and internationally.

US-based Kettle Foods, subsidiary of NASDAQ listed Snyder’s-Lance, acquired the remaining 74% stake in UK premium popcorn brand, Metcalfe’s Skinny, following the initial purchase of 26% in January 2016. Metcalfe was founded in 2009 by Julian Metcalfe, the co-founder of Pret A Manger and founder of itsu.

Private equity firm True Capital acquired a majority stake in online furniture retailer, The Cotswold Company. True Capital will help accelerate online growth, expand product and category ranges, and increase the retailer’s showroom footprint across the UK.

Asia-based private equity firm Baring, purchased a substantial stake in iconic British brand Cath Kidston, marking an exit for TA Associates who bought the company in 2010. Cath Kidston, most well-known for its trademark floral prints, currently operates 226 stores in 20 countries worldwide and the deal allows for further expansion of the brand globally with priority in the Asian region.