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Last Trade - 02/12/21

Sector
Consumer Defensives
Size
Large Cap
Market Cap £6.45bn
Enterprise Value £12.01bn
Revenue £29.84bn
Position in Universe 154th / 1783

RPT-ANALYSIS-Eat or be eaten? Food delivery apps have knives out as pandemic boom fades

Thu 21st October, 2021 6:00am
(Repeats story published on Wednesday)
    * Food delivery growth seen continuing into winter
    * Analysts say loss-making industry is ripe for
consolidation
    * Takeaway to address investors on U.S., grocery strategy
    * Deliveroo raises FY forecasts after strong third quarter

    By Toby Sterling
    AMSTERDAM, Oct 20 (Reuters) - The meal delivery market is
expected to turn to a phase of consolidation in the coming
months as players look to adjust operations after the explosive
boom in demand served up to them during the COVID-19 pandemic.
    The industry, which includes the likes of Uber Eats
 UBER.N , Just Eat Takeaway  TKWY.AS  and Deliveroo  ROO.L ,
generally saw share prices spike during 2020 as lockdowns and
other restrictions kept people eating at home.
    Investor sentiment has turned in 2021 in anticipation of a
return to normal, but experts say consumers' ordering habits
have likely changed permanently.
    "Food delivery app usage has not slowed down, even as
consumers return to in-person dining more frequently," said
Alisha Kapur of Similarweb, which analyses web traffic and app
downloads.
    Yet most of the companies are losing money and the
increasing need for scale means the market is ripe for
consolidation, according to industry experts.
    Kapur said it was "very rare" for significant numbers of
consumers to change the meal delivery apps they're accustomed to
using, with "a few exceptions that demonstrate the largest
players are only grabbing more share".
    Stock prices across the sector have stabilised after the
pandemic-driven spike and many players have actually seen them
fall this year, also hit by developments such as a 15% cap on
commission fees they can charge restaurants in New York City,
imposed in August. 
    While Amazon-backed Deliveroo raised its full-year guidance
on Wednesday, its shares are still trading well below its 390
pence March IPO price.  urn:newsml:reuters.com:*:nL8N2RG1GA 
    
    DIGESTING GRUBHUB
    Just Eat Takeaway has fared the worst, though. 
    Its $7.3 billion acquisition of American rival GrubHub in
June looked smart against the new industry landscape, but it has
left the Dutch-based company heavily exposed to the New York
cap, which it says will cost it around 100 million euros ($116
million) in the second half of this year.  urn:newsml:reuters.com:*:nL1N2PX2RP
    Takeaway shares have sunk more than 20% this year prompting
a major long-term shareholder, Cat Rock, to call on management
to sell assets and explore strategic combinations. 
    As a result, the company is at the centre of industry deal
talk.
    Potential targets for acquisition, according to analysts,
include Takeaway's 33% stake in iFood of Brazil, valued at more
than $3 billion, parts of its U.S. business, which requires
significant investment, and its French business, which trails
Uber and Deliveroo in that market. 
    Takeaway reported weaker than expected third-quarter orders
last week, but CEO Jitse Groen said it was seeing business
improve in several countries as workers returned to offices and
the weather worsened heading into winter.  urn:newsml:reuters.com:*:nL1N2R90EQ
    Groen and other senior executives are due to meet worried
investors on Thursday to outline strategy.
    "Investors are looking for a clear plan to improve in the
U.S., a clear plan to defend market shares in Europe, and
especially in Germany, said Clément Genelot, an analyst at Bryan
Garnier & Co, who launched coverage of Takeaway with a
well-timed "Sell" recommendation in May.     
    "And also a clear vision and a clear plan to quickly roll
out grocery delivery." 
    Takeaway said it was confident it would address key investor
concerns, including an update on "portfolio management" and
investment priorities, at the capital markets day.
    
    'LEANING INTO GROCERY'
    Grocery delivery is proving another hot area for deals and
partnerships in the industry.
    Deliveroo has been most aggressive in working with grocery
chains, with the support of 12% shareholder Amazon.
    Uber told Reuters its meal delivery business was also "very
much leaning into grocery", pointing to a deal with Britain's
Sainsbury's and France's Carrefour. 
    Others are looking to take advantage on a blizzard of
launches of "on demand" grocery delivery startups, especially in
Europe.
    DoorDash  DASH.N  has invested in Germany's Flink. Delivery
Hero, one of Takeaway's oldest competitors, said on Tuesday it
has taken an 8% stake in another German startup, Gorillas. 
    Delivery Hero, a prolific investor, owns 7.4% of Takeaway
and a 5.03% stake in Deliveroo. It also owns 37% of Glovo, and
the pair sold each other operations in the Balkans and in Latin
America during the pandemic.
    Technology investor Prosus  PRX.AS  in turn owns 27.42% of
Delivery Hero and a majority stake in Brazil's iFood, setting
the Prosus-Delivery Hero pair up as possible deal brokers.
    ($1 = 0.8604 euros)
    

 (Reporting by Toby Sterling; Additional reporting by Anna
Rzhevkina, Zuzanna Szymanska, Paul Sandle; Editing by Pravin
Char)
 ((toby.sterling@thomsonreuters.com; +31 20 504 5002;))
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