Evolving Delivery Food Matters Live 22 November 2017
What I’ll deliver • • • • •
The 4 operating models How they are changing … and the impact on retailers What the future holds … and some headwinds to cope with
Top down and bottom up approach Top down Total eating out market – for context Source: Market Structure and Trends
Total eating out market size, historical and forecast trends
Review of the market: • What is happening? • Why? Based on desk research, interviews, discussions
Conclusions about: • Market structure • Models • Drivers Published in Delivery Report. Jan 2017
Information about individual companies from publicly available and private sources • Company sales • System sales • Growth / trends • Revenue streams • Etc
Compile into total: • Segment sales • System sales • Historical trends • Forecasts
Bottom up
Discussions with operators, aggregators, deliverers etc
• • •
Detailed statistical market analysis Conclusions about size, structure and future of delivery Published as: Delivery 2
Delivery in total … and share of total foodservice Market size in 2016
£5.3 billion
4 models: Share of system sales 2016
Delivery share of total value of foodservice: 2016 100%
80%
Growth since 2011
+8.1% CAGR
60%
40%
Source: Peter Backman
Rest of Commercial sector exc Delivery Delivery
Forecast market size in 2018
£7.5 billion
Non-commercial sector
20% Traditional pizza
Traditional independent
Aggregator
Aggregator deliverer
0%
Why has delivery grown? • Historical driver: Convenience
Historical Delivery 6,000
• Recent supply drivers:
•
Technology Emergence of well-funded aggregators and aggregator deliverers Operators searching for incremental growth
5,000 4,000 £ Millions
• •
3,000 2,000
• Recent demand drivers: • • •
Consumers expect and demand delivery They expect it now They increasingly use mobile / other technology
Source: Peter Backman
1,000 0 2011 2012 2013 2014 2015 2016
4 models Traditional independents
Traditional pizza chains
Aggregators
Aggregator Deliverers
1234
How the models are changing Market size in 2016
£5.3 billion
6,000
£ Millions
5,000 4,000
Total Delivery
3,000
Traditional independent
2,000
Traditional pizza Aggregator
1,000
Aggregator deliverer
0 2011
2012
Source: Peter Backman
2013
2014
2015
2016
Where does delivery takes its sales from? • Sales in 2016 that Source of delivery sales 2016
Sales lost by retailers
otherwise would go to retailers
£790 million
2,000
£ Millions
1,500
• Aggregator deliverers’ share
1,000
500
Lost by retailers
Source: Peter Backman
0
2011 2012 2013 2014 2015 2016 2017 2018
13.6% … to double in next two years
Retailers’ lost sales are smaller than they seem • Retailers lost £790
1,000
million
£ Millions
800
Lost sales (at retail selling price)
600
400
200
0 Lost by Retail
Operator margin
Source: Peter Backman
Operator purchases
Retailer margin
Retailers' lost sales at consumer buying price
• But allow for • Margin differential • Alcohol and soft drinks
3rd party income rapidly expanding its share Historical Delivery
Forecast
3rd party aggregators
8,000 3rd party income as % of total delivery sales
6,000
• 8.5% of total delivery system sales in 2016
8.5%
• Rapid increase driven by expansion of the aggregator deliverer model
4,000
2,000 Net Operator income 0 2011
2012
2013
Source: Peter Backman
2014
2015
2016
2017
3rd party aggregator income – commission and other fees
2018
"3rd party aggregator" income
How business model shares will evolve Forecast 100%
Overall growth running at 12% pa
• Aggregator delivers to
80%
increase share – and grow the market
60%
• 3rd party deliverers to
40%
show some growth
20%
0% 2011
2012
2013
2014
Source: Peter Backman
2015
2016
2017
2018
Headwinds
3 important issues The tipping points
Reduced operator margins
The gig economy
Competition
1234
So far, it’s been a case of exploiting opportunities The tipping points
1
•
Delivery grown rapidly
•
On the back of supply-side and demand-side trends
•
Now there’s a tipping point
•
Options: take share from: • Operators’ in store sales • Retailers
The financial case for “dot commissaries” Reduced operator margins £30
With bricks and mortar … With dark kitchen … £25 Price of a meal
2
Cost structures under alternative delivery share scenarios
£20 £15 £10 £5 £0 No delivery
10%
50%
Dark kitchen
Delivery share of total business
Source: Peter Backman
Interacting with the gig economy The gig economy
3
•
Can aggregator deliverers cope with a +10% increase rider costs?
•
Possibly • Charge higher commission • Increase delivery charges • Substantial increase in average order value
An existing pattern of clear market leadership Competition
4
•
Clear leader in each model • Traditional pizza: Domino’s • Aggregator: Just Eat • Aggregator deliverer: Deliveroo • But Traditional independents – no clear leader
•
Is this pattern of clear leadership sustainable?
Over the next two years … The market will continue to grow Its structure will change substantially All players to develop their business models
Note: In January this year, I published a report on the issues that are changing the face of restaurant delivery This latest report adds statistical colour to that earlier one and presents a framework for measuring the sector. It is based on a dual – top down and bottom up – approach described in the appendix. The earlier report is summarised in the second appendix
For more information or discussion, please contact me at
[email protected] or on 07785 242809 November 2017
