OD5538 Online Food Ordering and Delivery Platforms in Australia Industry Report 1 PDF

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Business Outlook for Food and Beverage industry...

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INDUSTRY REPORT OD5538

Online Food Ordering and Delivery Platforms in Australia On the line: Declining discretionary income has subdued revenue growth in the current year James Philip Caldwell | November 2019

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Online Food Ordering and Delivery Platforms in Australia

November 2019

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Contents ABOUT THIS INDUSTRY....................................3

COMPETITIVE LANDSCAPE.............................15

Industry Definition............................................................ 3 Supply Chain..................................................................... 3 Major Players.................................................................... 3 Main Activities.................................................................. 3 Similar Industries.............................................................. 3

Market Share Concentration........................................... 15 Key Success Factors...................................................... 15 Cost Structure Benchmarks............................................16 Basis of Competition...................................................... 17 Barriers to Entry.............................................................. 17 Industry Globalization..................................................... 18

AT A GLANCE................................................... 4 MAJOR COMPANIES...................................... 18 Key Statistics Snapshot.................................................... 4 Key Trends........................................................................ 4 SWOT in the Industry........................................................ 4 Executive Summary.......................................................... 4 Industry Structure............................................................. 5 Key Industry Data..............................................................5 Major Players.................................................................... 5 Products & Services Segmentation.................................. 5

INDUSTRY PERFORMANCE.............................. 6 Key External Drivers.......................................................... 6 Current Performance........................................................ 7

Major Players.................................................................. 18 Other Players.................................................................. 22

OPERATING CONDITIONS..............................22 Capital Intensity.............................................................. 22 Potential Disruption........................................................ 23 Technology & Systems................................................... 24 Revenue Volatility........................................................... 24 Regulation & Policy......................................................... 25 Industry Assistance........................................................ 25

KEY STATISTICS.............................................. 26 INDUSTRY OUTLOOK....................................... 9 Industry Life Cycle.......................................................... 10

PRODUCTS & MARKETS.................................10 Products & Services Segmentation................................ 11 Demand Determinants.................................................... 12 Major Markets................................................................ 12 International Trade......................................................... 14 Business Locations........................................................ 14

Industry Data.................................................................. 26 Annual Change............................................................... 26 Key Ratios....................................................................... 26 Additional Resources......................................................27 Industry Jargon...............................................................27 Glossary..........................................................................27

Legend Icons are used throughout the report to indicate impact on the industry. Negative impact Neutral impact Positive impact

Online Food Ordering and Delivery Platforms in Australia

November 2019

About This Industry Industry Definition

Industry players facilitate meal deliveries by operating online food ordering and delivery platforms. These platforms connect users with food-service providers and delivery drivers, who operate as independent contractors. Industry firms take a percentage of the total transaction value booked through their platforms to generate revenue. The industry excludes grocery delivery platforms, farm-to-table services, and meal kit ordering and delivery services.

Supply Chain

Supply Industries

Demand Industries

Computer and Computer Peripheral Wholesaling

Fast Food and Takeaway Food Services Restaurants

Telecommunications Services -

Consumers

Wired Telecommunications Network Operation Software Publishing

Major Players

Uber Australia Deliveroo Australia Menulog

Main Activities

The primary activities of this industry: Operating food ordering and delivery platforms The major products and services in this industry: Italian cuisine Indian cuisine Thai cuisine Chinese cuisine Burgers Desserts and drinks Other cuisine

Similar Industries

G4112 - Convenience Stores in Australia Convenience stores provide an alternative to food delivery platforms, as these stores sell some foods that are also intended for immediate consumption, such as pies, pastries, and sandwiches. H4512 - Fast Food and Takeaway Food Services in Australia A growing number of fast food operators are using food delivery platforms to supplement their revenue. H4511a - Restaurants in Australia Restaurants mainly provide food and beverages for consumption on the premises. However, a rising proportion of restaurants now use food delivery platforms as a way to boost sales. H4511b - Cafes and Coffee Shops in Australia Cafes and coffee shops are currently less likely to use food delivery platforms than other food retailers. This represents an opportunity for industry firms.

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Online Food Ordering and Delivery Platforms in Australia

November 2019

At a Glance Key Statistics Snapshot

Key Trends

Total Revenue 2020

Annual Growth 2015-2020

Annual Growth 2020-2025

$872.2m

76.0%

10.2%

Profit Margin 2020

Wages as a share of Revenue 2020

Number of Businesses 2015-2020

3.0%

6.1%

-3.6%

Competition has intensified following UberEATS' entry into the food delivery market Strong revenue growth has driven rising profitability over the past five years Industry players have spent substantial amounts on advertising to increase their user bases Rising discretionary income is projected to drive demand for industry services Revenue growth is anticipated to slow compared with the previous five-year period Industry operators will likely continue to expand further into more towns and suburbs

SWOT in the Industry Strengths

Weaknesses

Opportunities

Threats

Low Customer Concentration

Low Profit

None

Low Long-term Growth

Low Product Concentration High Labor Efficiency

Executive Summary

High Capital Intensity

Low Short-term Growth Outlier Growth Low Outlook Growth

Revenue growth for the Online Food Ordering and Delivery Platforms industry has been strong over the past five years.

Australians are increasingly leading busy lives due to their work and family commitments, which has boosted demand for convenient meal options. Industry operators have benefited substantially from this trend, as they have filled the gap in the food delivery market. Firms facilitate deliveries of meals and food items through bookings made on their platforms. These platforms connect users of their applications with food-service providers and delivery drivers. The operations of online grocery delivery platforms, farm-totable services, and meal kit ordering and delivery services are similar to those of industry operators. However, these firms are not included in the industry. Industry revenue is expected to rise at an annualised 76.0% over the five years through 2019-20, to reach a total of $872.2 million. However, revenue growth is expected to slow to an estimated 26.5% in the current year. This subdued growth in the current year is largely attributable to falling consumer sentiment and discretionary incomes. These trends limit the amount consumers can spend on luxuries such as takeout food. Ongoing strong demand for quick and convenient food is anticipated to continue bolstering demand for industry platforms over the next five years. However, players are likely to face some pushback from

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Online Food Ordering and Delivery Platforms in Australia

November 2019

restaurants. A growing number of restaurant owners are projected to move away from industry food delivery platforms. In response, food ordering and delivery platform operators are likely to establish partnerships with more premium and mid-range restaurants, to expand their range of quality food products. Rising competition is also likely to keep commission rates low, limiting revenue growth over the period. Revenue is forecast to grow at an annualised 10.2% over the five years through 2024-25, to $1.4 billion.

Industry Structure

Level Life Cycle

Trend

Growth

Revenue Volatility

Very high

Capital Intensity

High

Industry Assistance

None

Concentration Level

High

Level Regulation Level

Light

Technology Change

High

Trend Steady

Barriers to Entry

Medium

Increasing

Industry Globalization

Medium

Steady

High

Increasing

Steady Competition Level

Key Industry Data

Major Players

Products & Services Segmentation

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Online Food Ordering and Delivery Platforms in Australia

November 2019

Industry Performance Key External Drivers

Average weekly hours worked The average weekly number of hours worked in Australia boosts spending on industry services. Consumers lives are becoming increasingly busy due to their work and family commitments. Many individuals therefore prefer to avoid cooking during their free time, and instead eat out or order takeaway from food delivery platforms. The average weekly hours worked is expected to marginally decline in 2019-20. Consumer sentiment index The consumer sentiment index measures how households feel about their current financial situation and overall economic conditions. When consumer sentiment is positive, consumers tend to purchase more takeaway food from food delivery platforms as they are more optimistic about their future finances. Conversely, during periods of negative consumer sentiment, people typically reduce their spending on takeaway food and cook meals at home. Consumer sentiment is expected to decline and become negative in 2019-20, representing a threat to industry revenue. Demand from restaurants A growing number of restaurants use food delivery platforms to boost their revenue. Any changes in demand for these businesses therefore directly affects the industry. Industry operators are expected to benefit as demand for restaurants rises. Furthermore, as more restaurants become aware of the potentia financial benefits of using food ordering and delivery platforms, demand from this market should

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Online Food Ordering and Delivery Platforms in Australia

November 2019

continue to increase. Demand for restaurants is expected to grow in 2019-20, representing an opportunity for industry revenue expansion. Real household discretionary income Changes in household discretionary income affect industry demand. An increase in household discretionary income provides consumers with greater purchasing power to spend on takeaway food using industry services. However, a decline in discretionary income tends to prompt households to cook more meals at home, reducing demand for industry delivery services. Real household discretionary income is expected to decline in 2019-20.

Current Performance

The Online Food Ordering and Delivery Platforms industry has grown significantly over the past five years.

Australians have become increasingly time poor, boosting demand for convenient, quick and high-quality food. Industry operators have stepped in to meet this demand and fill the niche in the food delivery market Firms facilitate deliveries of meals and food items through food ordering and delivery platforms. These platforms connect users with food-service providers, such as restaurants and fast-food chains, and delivery drivers. These food delivery platforms allow customers to access restaurant-quality food and takeaway outside of restaurants, which has driven strong growth in industry demand over the past five years. While food delivery was once associated with lower-quality food, such as cheap pizza, it is increasingly associated with restaurant-quality food. The industry does not include online grocery delivery platforms, farm-to-table services, and meal kit ordering and delivery services. Industry revenue is expected to increase at an annualised 76.0% over the five years through 2019-20, to total $872.2 million. Industry operators generate revenue by taking a percentage of the total value of the order booked through its platforms. This percentage or commission can vary among operators, ranging from 13% with Menulog to up to 35% with UberEATS. In the current year, industry revenue is expected to increase by 26.5%, supported by growing demand for restaurant quality food and rising demand for convenient food options. Additionally, aggressive marketing campaigns by Menulog and UberEATS have raised the brand awareness of these companies, and contributed to strong growth in industry revenue. However, revenue growth has been somewhat limited by the exit of Foodora in August 2018. Industry entries and exits

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Online Food Ordering and Delivery Platforms in Australia

November 2019

The industry only includes meal delivery facilitators, such as UberEATS and Deliveroo, and excludes grocery delivery platforms, farm-to-table services, and meal kit ordering and delivery services. Only a small number of companies operate in the industry, meaning any changes in enterprise or establishment numbers have strongly affected the industry's structure. Although enterprise numbers have fallen over the past five years, competition has intensified following UberEATS' well-publicised entry into the food delivery market in April 2016. Following its initial launch in Melbourne in April 2016, UberEATS has expanded swiftly across Australia. The platform launched in Sydney in August 2016, and in Adelaide, Brisbane, and Perth in October 2016. More recently, the platform has also expanded into regional areas and cities with lower population densities, such as Hobart and Bendigo in May and June 2018, respectively. UberEATS' rapid expansion across Australia is due to Uber's pre-existing reputation as a user-friendly service, attained through its ride-sharing service. There have been some notable exits from the industry over the past five years, despite its strong revenue growth. The most significant exit from the industry was Foodora's departure in August 2018. Foodora operated in the industry for three years before its abrupt exit. The company's reasoning for its exit was that the global parent company, Delivery Hero, was shifting its focus towards other international markets that had a higher potential for growth. However, numerous media reports have suggested the company was in financial difficulty, allegedly owing its riders and the ATO over $8 million. This exit shows demonstrates that, despite the industry's strong potential for growth, operators face many challenges and barriers in the local food delivery market, including intense competition. Consumer trends Busier lifestyles and long working hours have supported demand for quick meal options over the past five years. Consumers have increasingly been seeking more leisure time, causing them to substitute home-cooked meals for takeaway meals. Additionally, Australian consumers are increasingly health conscious, boosting their demand for premium foods. Operators have presented consumers with a convenient link to restaurants providing premium meals, and healthy meals, driving strong revenue growth. However, demand for industry services has been limited by declining discretionary incomes and subdued growth in consumer sentiment over the past five years. These trends have reduced consumers' willingness to spend money on luxuries such as takeaway food, constraining revenue growth over the period. Industry profitability Industry profit has grown significantly over the past five years. This trend has been driven by a rising number of consumers using food ordering and delivery platforms, and high revenue growth. Additionally, wage costs have fallen as a share of revenue, further boosting industry profitability. However, growing subcontracting expenses and rental costs have constrained profit growth. As the industry has only become prominent over the past five years, industry operators previously suffered significant losses attempting to attract users to their respective platforms. Strong marketing is vital to industry success. Large industry players have therefore spent substantial amounts on advertising to build up their user bases, sacrificing short-term profit for long-term gains.

2007

Revenue ($m) 0.30

IVA ($m) 0.10

Estab. (Units) 2.00

Enterprises (Units) 2.00

Employment (Units) 5.00

Exports ($m) N/A

Imports ($m) N/A

Wages ($m) 0.10

Domestic Demand ($m) N/A

2008

0.30

0.10

2.00

2.00

5.00

N/A

N/A

0.10

N/A

2009

0.20

0.10

2.00

2.00

5.00

N/A

N/A

0.10

N/A

2010

0.80

0.60

3.00

3.00

7.00

N/A

N...