October 16, 2021

Hunger Games Start Between Platforms After The Goodbye Of Deliveroo

4 min read

The announced goodbye to Deliveroo in Spain - which has yet to be set a definitive date - has caused the “hunger games” to start among its competitors in the food delivery sector, knowing what to do with that “piece of cake “It would tip the balance in their favor and allow them to deliver an almost definitive blow.

Executives of delivery companies, hoteliers and consultants warn of how much companies are at stake at this time, when the interest in taking over the part of the business that Deliveroo represents - sector sources calculate it at around 16% - is maximum .

His departure opens a new opportunity for Just Eat, Glovo and Ubereats, and especially for the latter two, who are in a fierce fight for second place.

Combat can be key, since there is speculation about the possibility of new concentration movements -due to the need to gain volume in order to make the business profitable- and that there end up being two instead of three operators that control the market completely .

About 10,000 restaurants affected
The departure of the British Deliveroo affects the nearly 10,000 restaurants with which it collaborated, although most worked simultaneously with several platforms.

But not all. These companies fight hard to guarantee the “exclusivity” of large chains and smaller restaurants but with pull among consumers, since it is a way to generate traffic through their application and subtract orders from the rest.

The negotiation to extinguish these exclusive contracts is already on the table, and may even entail “compensation,” according to industry sources.

“We are evaluating options, the opportunity is incredible. We are one of the most desired boyfriends, we have become the play that can facilitate the final check,” explains to EFE the head of a group whose home delivery depended on Deliveroo and that now listen to offers to choose a new partner.

The strategy of the platforms to acquire exclusive brands has a significant economic cost for their accounts, and from the sector there is talk of a kind of “gold rush” in which the house is being thrown out the window.

“You talked to some locals to attract them exclusively and they told you no, that others assured them up to one million euros per year,” a former manager in one of these delivery companies reminds EFE .

The Secretary General of Hospitality of Spain, Emilio Gallego, recognizes that home delivery has gained weight in the income of bars and restaurants, but highlights the message of “absolute tranquility” of the platforms despite the controversy over the entry into force of the “rider law”, which aims to force delivery workers to be hired as wage earners instead of being self-employed.

“Covid-19 has been an accelerator of home delivery, the sector must now enter a stabilization phase and that includes the possibility of an operator remaining. What is not normal is to send food home at almost a lower price for the client that if he goes to the premises as before, “he argues.

Questions about the decision to leave
Deliveroo will leave Spain despite the fact that the sector does not stop growing: its turnover has shot up more than 80% in recent months compared to two years ago, before the pandemic, according to a market study by Ameba Research.

The firm itself blamed the strong competition for the decision to close its operations due to the difficulty in recovering the lost ground at the quota level, and according to members of the company itself, the approval of the “rider law” and the increased costs that it implied led to the drop that broke the camel’s back.

“It is strange that they have not made a better and more organized exit. Instead of reaching an agreement with some other operator and having sold their client portfolio in exchange for a reasonable price, they suddenly leave”, analyzes the person in charge of a Spanish consultancy specialized in hospitality.

In the sector they influence that, to understand what happened, it must be remembered that the strategy of these multinational companies depends largely on the financial resources allocated to each country: while Ubereats has focused on Spain since 2019, the British firm stopped giving it such a priority in early 2020.

At that time, Deliveroo was also waiting for the UK authorities to authorize a major injection of Amazon funds into its capital, key to being able to continue investing at the same rate as its adversaries; the permit ended up arriving months later, but in the national market they had already lost their position.

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