Industry analyst Peter Backman says latest financials from three of the largest players in food delivery underscore how difficult it is to make a profit despite soaring sales growth.
Over the past week, Deliveroo reported 65% growth in the UK and Ireland during 2020, Domino’s Pizza saw online delivery order values increase by 21% and Just Eat rose 54% globally.
While the figures bring into sharp relief what industry commentators have been saying about the rapid growth of delivery during Covid, Mr Backman said the numbers “are not the whole picture and they also hide nuances”.
Domino’s made £101m profit before tax, but Deliveroo lost £225m globally having never made a profit since being founded in 2013, while Just East lost £129m globally.
“These figures underline the difficulties that deliverers have in creating profits even when growth rises by more than 50% as it did last year,” said Mr Backman.
“The integrated Domino’s model, on the other hand, is demonstrably profitable because it recognises the essential loss-making aspect of last mile delivery and subsidises any loss with profit made by selling the product itself.
“As Stuart Levy, CFO of Domino’s Pizza, Inc., said during an investor call last month: ‘In 60 years we’ve never made a dollar delivering a pizza. We make money on the product, but we don’t make money on the delivery. So we’re just not sure how others do it.’”