The share price of the meal delivery service Just Eat fell by more than 5% on Thursday after US competitor Uber Eats announced plans to cut the fees it charges restaurants, amid an intense battle for customers in the takeaway sector.
Uber Eats will also allow restaurants in 100 towns and cities to use their own delivery drivers on meal orders placed using its app – a marketplace model – alongside its core business, where it provides the delivery service.
Uber Eats, which is owned by US taxi app company Uber, is to reduce the cap on fees it charges restaurants from 35% to 30%. The fee for the new Uber Eats marketplace service will be 13%, undercutting the 14% charged by Just Eats.
The launch of Uber’s marketplace means it is in direct competition across its UK business with both Deliveroo and the larger FTSE 250 company Just Eat. Last September it was reported that Uber Eats had been in talks to buy Deliveroo for up to £1.5bn. Both companies refused to comment on the reports at the time. Uber, which remains heavily lossmaking, is thought to be preparing for an initial public offering of its shares this year.
Telephone bookings remain the largest source of UK meal deliveries, but Just Eat is the largest online provider, according to estimates produced by the company last June.
The intense competition between the food delivery websites has prompted each to launch new services as they fight for market share.
Just Eat makes most of its earnings from its marketplace, although it started its own delivery service last year. Deliveroo started as a delivery service, but it launched a marketplace service to rival Just Eat in June.
Marketplace sales have thus far proven more profitable, without the need to centrally manage a fleet of delivery drivers. Just Eat’s fees for its newer delivery service are thought to be similar to Deliveroo and Uber.
Just Eat is also facing a campaign from an activist investor, Cat Rock Capital, urging it to seek a merger with companies including Takeaway.com, a German business which does not currently compete in the same markets.
Just Eat’s former chief executive, Peter Plumb, stepped down last month, only 16 months after he joined, after forecasts of flat profit margins caused disquiet with top shareholders.
Uber Eats’ move could also impact Deliveroo, a direct competitor in larger cities. Deliveroo is reportedly seeking more funds from investors, while efforts to gain market share have included the launch of “dark kitchens” in 2017 to cater to increased customer demand.
Liberum investment analysts Ian Whittaker and Harry Read said Uber Eats’ move was “too little, too late” in the face of Just Eat’s dominance of the market – and could even pave the way for a takeover attempt from the well-funded US company.
Just Eat and Deliveroo declined to comment.
