Sue Mitchell
April 17, 2018
AFR
Australia’s largest online food ordering platform Menulog expects at least half the $18 billion food service market to move online over time, mirroring the digital shift in travel, insurance and job ads.
Menulog says 25 per cent of Australians are currently ordering food online, but with high levels of smartphone ownership and internet access that is expected to rise to at least 35 per cent in the short term – similar to that in the UK – and eventually reach levels similar to those in travel bookings and job ads, where between 50 and 70 per cent of business has shifted online.
“There’s no reason why those numbers couldn’t be well in excess of 50 per cent if we look at other industries such as travel, insurance and careers,” said Menulog managing director Alistair Venn.
“We have all the right infrastructure for Australia to do far more online transactions when it comes to the food service sector – it’s really just a case of newness and the ability to grow into it.”
Menulog now has 10,200 restaurant partners, double the number in 2014, while active customers rose 13 per cent to 3.1 million, three times that in 2014. Nicole Thomas
Menulog has kicked off a major marketing push after launching a new delivery service to augment its online ordering service, with the aim of attracting more restaurants and customers to its site and increase its share of the market.
According to a report issued by Menulog this week, the online food service market is worth $3.5 billion and growing eight times faster than the total food service market, driven by demand from time-poor consumers seeking greater convenience.
Menulog’s estimate of the size of the market is more than double that of investment bank Morgan Stanley, which believes the market grew 30 per cent to $1.5 billion in 2017.
Menulog saw revenues rise 25 per cent to about $88 million in 2017 and generated gross sales of $645 million for its restaurant partners.
Morgan Stanley expects the online takeaway food market to reach $4.2 billion by 2025, with aggregators including Menulog, UberEats, Foodora and Deliveroo forecast to lift transaction values from $600 million to $2.4 billion.
The report highlights the pressure on cafes, restaurants and fast-food retailers to establish an online presence to augment sales from brick and mortar outlets and protect their market share.
Menulog’s restaurant partners rose by 2600 to 10,200 in 2017 – double the number in 2014 – while the number of active customers rose 13 per cent to more than 3.1 million, three times that in 2014.
Mr Venn said Menulog had identified about 88,000 suitable restaurant partners across Australia and plans to step up recruitment this year as it rolls out the new delivery service.
“We have 3.1 million active customers now and it’s our job to provide them with the maximum amount of choice as possible,” Mr Venn said. “It unlocks new supply and new choice for our customers, which is a really important driver of growth for us.”
Morgan Stanley has described the seismic shift to online ordering as a double-edged sword for restaurants, who risk losing control over pricing, quality and customer data after signing up with aggregators. Morgan Stanley estimates that in order to avoid pressure on margins restaurants need at least 50 per cent of orders to be from new customers.
Mr Venn said Menulog consulted with restaurants to ensure their online businesses delivered profitable growth, sometimes making counter intuitive suggestions such as shrinking delivery areas or increasing delivery fees to recoup costs.
“We don’t judge success by the number of orders or deliveries but how many dollars and cents are left in the till at the end of the month,” he said. “In order for this to be successful it’s really critical we provide incremental growth to our restaurant partners.”
Menulog is also launching a suite of new technology including orderpads, which help restaurants manage orders and couriers, and more personalisation for consumers, including an app that issues notifications and tracks the progress of deliveries.
Menulog’s British parent Just Eat, which paid $855 million for the business almost three years ago, slashed the value of its Australian and New Zealand assets by $322 million or almost 40 per cent last month after cutting cashflow forecasts and factoring in the extra investment in delivery services.
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