Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 378

Add extra fries: the growing appetite for food-delivery services

Restaurant and grocery delivery companies are the latest feeding frenzy for investors who are betting that appetites for food brought to homes and workplaces will keep growing beyond the end of the COVID-19 pandemic.

Investors looking to get a slice of the food delivery pie should keep their eyes peeled for trends around popularity and platform use, especially as the world starts to ease lockdown restrictions.

Food delivery giants UberEats, Grubhub, Just Eat Takeaway and Dominos are some of the top names but there is a plethora of platforms underneath fighting for a share of a growing market.

Total worldwide restaurant industry sales are projected to reach US$2.1 billion this year, with revenue expected to show an annual growth rate of 7.1% and project market volume of US$2.7 billion by 2024, according to Statista.

Closer to home, market researcher Roy Morgan says the number of Australians over the age of fourteen who use food delivery services has doubled to nearly 4 million since 2018, driven by the 25% of millennials and Generation Z who regularly order in.

Food delivery popularity during COVID-19

COVID-19 has driven the most recent boom in food delivery as restaurants, bars and cafes were shut down by lockdown regulations but remained open for takeaways.

As some people turned to baking their own bread and getting creative in the kitchen, others turned to food delivery services in order to get their ‘comfort food’ kicks. In fact since the pandemic started, UberEats reported the term ‘comfort food’ had broken through the top searches on the platform.

Menulog, Deliveroo and UberEats have all reported rapid growth in new restaurants on their Australian platforms, user numbers and delivery numbers since March.

In August UberEats announced that its delivery revenue grew 103% year on year, as a result of more people ordering from Uber Eats than ever before.

While Menulog recorded a 54% increase in orders on the platform from Melbourne customers, and Deliveroo chief executive Ed McManus said 1700 new restaurants joined the platform in the weeks following lockdown closures in Australia.

This includes higher-end restaurants and venues which prior to the pandemic typically had long lines of customers waiting outside their doors, such as Melbourne's Chin Chin.

The buzz around food delivery has spurred acquisitions overseas, with European platform recently buying JustEat for $6.2 billion. Shortly afterwards the newly named JustEat Takeaway pounced on GrubHub for $10.6 billion, after a deal with UberEats fell through. Last year, low-brow delivery service DoorDash also bought high-brow delivery service Caviar.

Since their low in March, Grubhub shares have climbed 142%, which coincides with its revenues in July of $459 million, a 41% year on year increase from $325 million in the second quarter of 2019.

Not all foodies are sold

Despite the growth of the food delivery services industry during the global pandemic, not all Australian consumers and restaurants are sold.

Rather than relying on the food delivery platform giants, which charge high commissions for using their platforms, some restaurants are encouraging customers to pick up orders themselves or offering cook-at-home meals.

In an industry where net profit margins often fall in the low single digits, this commission structure works for highly-profitable restaurants for which delivery represents additional incremental sales and profiles. But for moderately profitable restaurants, low order volumes can be detrimental to the bottom line.

Some industry experts believe once the pandemic has passed and restaurants are allowed to operate as usual, hype built around food delivery services may die down or return to past performance levels.

The innovative future of food delivery

It’s easy to forget the food delivery sector is relatively young: Deliveroo launched just six years ago, Glovo four years ago, and UberEats entered the market in 2016.

But all are working on new products to further smooth the food ordering process.

Restaurants such as Dominos have already started planning for the future, allowing customers to order pizza through social media platforms such as Twitter by simply tweeting a pizza emoji. The pizza giant has also launched an app which allows customers to order pizza through their smart watches.

Pizza Hut partnered with Accenture and Visa to develop an in-car food ordering system, allowing drivers to buy pizzas while on the road. The secure medium lets customers order food by voice, eliminating the need to check the screen.

Automotive manufacturers Ford, Toyota and GM have successfully trialled autonomous vehicles for food delivery services across the US, in what promises to be a flood of driverless vehicles being employed by online food platforms.

In April 2019, Google’s parent company Alphabet was approved to trial drone delivery in Canberra to over 100 eligible homes. UberEats were also given the green light to trial drone delivery in San Diego this year, after a successful pilot at San Diego State University in partnership with McDonalds.

The growth of the online food delivery industry has also given way to a virtual restaurant model known as ‘dark kitchens’ or ‘ghost kitchens’ that exist only to deliver food. Some established breakfast or lunchtime venues can rent out their unused kitchen in the evening, and new ventures can trial their wares without major overheads. Deliveroo has launched its own dark kitchen precincts, called ‘Deliveroo Editions’, which are easily accessible by their delivery riders.

Room to grow

There’s still a whole lot of room for growth in the food delivery service industry including plenty of space for new contenders and appetite for fresh offerings, but that will be matched by battles for market share as well as other hurdles along the way.


Josh Gilbert is an Australian analyst at eToro. This article is general information and does not consider the circumstances of any investor.



Leave a Comment:



Apps and ‘dark kitchens’ are changing food delivery

What do 11 stock market crises over 148 years tell us?


Most viewed in recent weeks

400th Edition Special: 45 of the best investment ideas

Over eight years since February 2013, Firstlinks has become a leading financial newsletter, publishing thousands of articles from hundreds of writers. To mark this milestone, 45 experts have joined the celebration for our 400th edition bringing their best investing ideas for the next few years.

Four bubbly market pockets show heightened risk for investors

At the top of every market, there are signs that investors look back on and say the excesses were obvious. While many parts of the market are fairly valued, here are four bubbles which show irrational exuberance.

Turning point: the 2020s baby boom retirement surge

Every week, 2,500 Australians retire, or at least, reach the age of 65, and 2021-2027 will represent the peak years of the baby boom retirement surge. Longevity of life comes with dangers and opportunities.

Hume and Frydenberg reset super with two buzz words

The solutions to retirement problems are obvious. All we need are 'efficiency' and 'flexibility'. Learn what these two words mean and the future of superannuation policy is clear. Just don't tell Paul Keating.

How long will my retirement savings last?

Many self-funded retirees will outlive their savings as most men and women now aged 65 will survive at least another 20 years. Compare your spending with how much you earn to see how long your money will last.

The world in 2030: Six investing tips for the next decade

Six portfolio managers look at how life may change by the end of the decade and how shifting trends are influencing their investment decisions. It's an optimistic view of the world in 2030 as a better place.

Latest Updates


How long will my retirement savings last?

Many self-funded retirees will outlive their savings as most men and women now aged 65 will survive at least another 20 years. Compare your spending with how much you earn to see how long your money will last.


Why you can't invest in residential property on the stock exchange

Residential property attracts little interest from institutional investors and the listed market. Here are three reasons why retail investors have an advantage over well-resourced institutional investors.

Investment strategies

Three charts on the surprising rise of Australian retail investors

It may surprise even industry insiders that over 30% of all trading on Chi-X comes from retail brokers. What is the growing influence of retail investors on Australian stock exchanges and who are they using?

Investment strategies

Five reasons why EM equities could power ahead in 2021

A broader rebound beyond tech companies is likely to accelerate. Structural reforms may regain momentum after COVID and a lower risk premium is warranted for emerging markets equities compared with prior crises.


Consumers need an effective super performance test

Fund performance varies over time. A fund may have strong capability and perform well over time, but it may fail the performance test at some point. The YFYS reforms create unwelcome and unintended consequences.


Unlimited potential: innovation wrap for March 2021

This month's look at innovations changing the world explores computer chips, cryptocurrencies, renewables, cybersecurity, robotics, mobility, alternative foods, finance ... there is no limit to human ingenuity.


My 'purpose of super' is probably not yours

One problem with defining a single and universal purpose of superannuation is that people have contributed to super for years, even decades, with different ideas and intentions.



© 2021 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.