Just Eat revs up for food fight

Did somebody say JustEat? Probably yes, given that orders through the takeaway delivery platform jumped 88 per cent in the first two months of this year. Combined revenues grew by more than half at Just Eat Takeaway.com (JET) in 2020 - but the group, like its peer Deliveroo, still did not manage to turn a profit. Its losses widened to €147m (£126m), compared to €88m the year prior. 

Competition is getting tighter in the food delivery space as Delivero moves closer to an IPO, so it is not surprising that Just Eat has made much noise this week about being the ‘clear market leader’ in the UK, at least in terms of orders. It processed 588m of them in 2020, up by more than two-fifths against 2019. Meanwhile its own delivery business accounted for more than a quarter of orders for the first time, where improved efficiency should eventually help to lift the group’s overall margin. 

Elsewhere, management flagged its holding in iFood, a takeaway platform based in Brazil. iFood is also expanding at pace, with order growth doubling in 2020 to reach 478m. JustEat has already said that it would be open to monetise its 33 per cent stake, although it has already turned down several bids - the highest of which was €2.3bn. Such a sizable cash injection would be welcome, especially as the company ploughs more resource into protecting and growing its market share in the UK and Europe. Marketing expenditure more than doubled to €369m last year. 

Just Eat expects further acceleration of order growth compared to 2020, which might be difficult if the end of lockdown affects the number of people staying in rather than returning to restaurants in-person. But analyst consensus points towards a 27 per cent increase in 2021, compared with 42 per cent last year, according to broker Jefferies. 

The company’s already robust foothold in the sector will be strengthened by its all-share takeover of GrubHub, which is expected to complete by the end of June. Combine that with management’s laser-sharp focus on its pricing strategy, as well as its delivery margins, and JustEat looks like a formidable competitor for any business to take on. There is plenty of buzz around the potential arrival of Deliveroo on the public market, but investors should be wary of the titan that it is going up against. Hold.