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Just Eat/Deliveroo: fair copy


The World Cup typically evokes memorable soccer adverts. Few are more strange than Simply Eat’s newest. It reveals followers licking the face of soccer legend John Barnes. Buyers within the UK on-line meal-ordering service now have one thing else to show their stomachs. On Wednesday rival Deliveroo stated it deliberate to expand the variety of eating places it served by 50 per cent. Shares in Simply Eat dropped 6 per cent.

The response displays jitters about intensifying competitors. Variations between the enterprise fashions utilized by Simply Eat and Deliveroo are eroding. In March, Simply Eat introduced plans to invade Deliveroo’s turf by delivering some meals itself. Now Deliveroo is aping Simply Eat. Eating places now not have to make use of its couriers.

It’s no shock rivals need a slice of Simply Eat’s enterprise. It has grown quick, incomes working revenue margins of 22 per cent. Earlier than Wednesday’s fall, Just Eat shares traded at 47 instances subsequent yr’s earnings. Deliveroo, brainchild of the ebullient Will Shu, has a powerful model, expertise and logistics and says it’s now worthwhile within the UK. Its market share has elevated to as a lot as 20 per cent. Even so, it’s unlikely to pose a critical aggressive risk to Simply Eat. This can be a market the place the winner takes most, if not all.

Pioneering on-line platforms can garner highly effective community advantages. The attraction of their service relies on the variety of prospects and suppliers. Within the property market, for instance, the dominant portal Rightmove has strengthened its working revenue margins — as much as a whopping 73 per cent final yr — regardless of fierce competitors. Simply as property consumers choose web sites that present probably the most homes, diners choose takeaway apps that cowl probably the most eating places.

That stated, the UK takeaway market is increasing, so Deliveroo can too. It usually delivers meals from posher eating places. Overlap ought to be restricted with Simply Eat, which companies mass market eateries. It’s unlikely to take a lot commerce away from its bigger rival, whose purchasers usually rely closely on it for orders. Deliveroo’s model is much less acquainted to most Britons. Simply Eat’s provocative World Cup advert will solely widen that hole.

Lex recommends the FT’s Due Diligence publication, a curated briefing on the world of mergers and acquisitions. Enroll at ft.com/newsletters



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