American subsidiary remains a source of concern for meal delivery company Just Eat

A few years ago, meal delivery company Just Eat Takeaway.com (JET) hastily looked for a way to enter the American market, but the company is now struggling with a completely different question: how does it get away?

For more than a year and a half, the Dutch parent company of Thuisbezorgd.nl has been looking for a buyer for Grubhub, the brand with which JET operates in the United States. That search has not become easier over the past year. Not only have prospective buyers become more cautious in their spending, Grubhub has also become less attractive. The company is rapidly losing customers, it became apparent on Wednesday.

American consumers placed an order on the platform 281 million times last year. That seems like a lot, but it represents a decrease of 13 percent year on year. Perhaps even more problematic: the value of those orders also fell, by 14 percent to just under 10 billion euros. JET makes its money from commissions, a percentage of the amount on the receipt. It only reports how high the turnover was and how much profit was made in the annual figures at the end of February.

Grubhub, which was once acquired with so much pride, therefore stands out considerably compared to JET’s activities in many other regions. In the United Kingdom and Western Europe, the two other major divisions, there was also a dip in orders last year, but that contraction is almost over. The amount ordered has been growing again since the second half of 2023.

Reason for optimism for CEO Jitse Groen, he said in a telephone statement on Wednesday. After a few difficult quarters, “you can conclude that the company is starting to grow again.”

Student room in Enschede

The American Grubhub has only been part of JET for a few years, a company that was founded in a student room in Enschede in 1999 and has rapidly grown into a delivery giant through acquisitions, especially since 2014. The merger with the British Just Eat, completed in the spring of 2020, made the company the second largest meal delivery company in the world, after China’s Meituan.

Only: the group was not present in the most important and attractive delivery market in the world, the US. So when the opportunity arose in the summer of 2020, CEO Groen quickly acted. While the merged company was still busy merging Just Eat and Takeaway.com, it bought Grubhub for 6.4 billion euros.

That purchase actually came too quickly, Groen later admitted NRC. But such an opportunity “occurs once every fifteen years.” Moreover, it was perhaps the last opportunity to participate in the American market. The other major American delivery companies, Doordash and UberEats, did not fit in with JET in terms of business operations and starting from scratch in a market that is already in such a decline is, according to Groen, a hopeless mission.

Shareholders were critical of the purchase from the start: did the company want too much? Initially, Groen ignored those concerns, until some major shareholders threatened to intervene in the spring of 2022. JET then decided to put its American acquisition on sale again, so far without results.

What doesn’t help is that Grubhub has lost a lot of ground to Doordash and Uber Eats in three years. While it was still the market leader in 2018, it is now number three. At the same time, it has become a lot more difficult for potential buyers to raise capital for acquisitions: due to rising interest rates, investors prefer to invest their money in companies that are currently generating returns rather than in a company that is growing rapidly but is mainly making losses.

For JET, this changing sentiment was reason for a major change of course in 2022: instead of growth, it decided to focus primarily on profitability. Everywhere in the company we looked at how costs could be lowered. Among other things, the budgets for recruiting new customers fell sharply. This made it more difficult to maintain customer base, especially in markets where competition is fierce, such as the US.

‘Don’t burn money’

All these efforts to improve profits are having an effect, Groen said on Wednesday. JET expects an operating result of 320 million in 2023. This significantly exceeds the target set at the beginning of last year. This profit largely comes from Western Europe and the United Kingdom. In the US, the meal delivery company mainly tries to “stabilize business operations and ensure that we do not burn money,” says Groen.

What plays a role in this is that New York has set a maximum on the commission that delivery companies can charge. This measure reportedly costs the company $100 million per year. Groen acknowledges that it is difficult to sell a part in such a situation. About the sales process, he would only say that JET is “conducting active discussions with a number of candidates.”

If an agreement is reached, it seems unlikely that the takeover sum will come close to the 6.4 billion that JET once paid. At the end of 2022, the meal delivery company already wrote off 3 billion on its American subsidiary.

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