EMEA Online Food Delivery Market Set To Grow At 7.4% CAGR 2022-27E
The Food Delivery Market TAM in the EMENA region is expected to surpass $150 billion by 2027, regardless of flat population growth, due to an acceleration of digitalisation, urbanisation, and the rise of middle class population.
Shift In Population Segmentation Demands Higher Volume
Strong Economics Push Transaction Values Higher
Digitalisation, urbanisation, and the rising middle class are critical secular trends that drive long-term demand for online food delivery services.
In the EMEA region, there are 156M people who we consider as the “total addressable market”. We expect the TAM to grow slowly mainly due to a few opposing driving forces.
These conflicting conditions include: flat population growth (+0.1% p.a.) counterbalanced by a rising middle-class, low unemployment rates, an increasing rate of urbanisation (+0.25% p.a.), and digitalisation, including internet access, (now at 90%), which will also play a key role driving significant volume growth for online food delivery services.
The buying volume will be generated by a higher monthly order frequency (4.4% p.a.), strong customer stickiness (70% customer reactivation), and increased market penetration of the large online food delivery apps (50% in 2022).
Rising nominal GDP per capita (+3% p.a.) and resilient food spending (5% of nominal GDP), even in times of economic uncertainty, are expected to elevate transaction values.
We expect the annual gross transaction value per customer to increase at a 2022-27E CAGR above 7% from $680 to $1,000. The total addressable market (in value terms) is set to surpass $150B by 2027 (vs $107B in 2022).
The Food Deliver Market in the EMENA region is expected to see an increase its average transaction value per customer close to $1,000 by 2027
Largely Untapped & Growing Online Restaurants Supply
Largely Untapped & Growing Online Restaurants Supply
There are roughly 1.1M active restaurants in the EMEA region, of which only 60% are listed on UberEats, Just Eat, Delivery Hero or Deliveroo. This leaves room for the major online food delivery apps to widen their online restaurant network and further expand their geographical capitalization. According to the latest annual reports, food aggregators have more than doubled their online restaurants in the last three years. We expect these food aggregators to continue investing in onboarding more restaurants in the ecosystem to match the growing demand.
Restaurants Need Higher Volume To Offset Sticky Headwinds
Running a restaurant is hard, in fact almost 80% of restaurants fail in the first five years of operation.
The high failure rate is largely due to higher barriers to entry (i.e upfront expenditures and high borrowing costs), soaring running & maintenance costs, fierce competition and seasonality.
In the last few years the hospitality space has been severely impacted by critical headwinds such as growing inflation, higher energy costs (+12% y/y), escalating rental prices (+2% p.a. since 2019), rising food cost (+17% y/y), pressure from minimum wage (+3.4% p.a. since 2014), and stronger seasonality due to “hybrid” or “full remote” working policies still broadly being in place.
Finally, restaurants are experiencing staffing problems as 80% of facility managers claim to struggle to find key work personnel. Restaurateurs must be creative in finding an alternative as some of these headwinds are proving to be “stickier” than expected. The online food delivery market is solid, with a 75% lower-CAC and a growing customer base, providing a notable solution to restaurateurs. However, since food aggregators have experienced similar pressure on their margins, they have all slightly increased their average take rate by 2% y/y. An infrastructure play, allowing restaurants to make extra sales and food aggregators to extend their restaurant network, could be a profitable asymmetric solution for all parties.
