THE STATE A Global Analysis

Mobile ordering, powered by

Want to know more? preoday.com Contents Why you need to read Contents this white paper: The restaurant and home delivery market is in the midst of an industry revolution - your business cannot afford to be left behind. Overview

Preoday supports businesses, like yours, around the world and has its finger on the industry’s pulse. This white paper will make sure that you’re up to date on the latest trends in key regions across the globe. North America What you will learn: Asia Australasia • The value of the restaurant market in each territory and how it’s predicted to change in coming months and years Conclusion • In which regions digital ordering is experiencing the strongest growth, and why • Which online ordering and delivery companies are competing to take control in each market About Preoday • The role of mobile internet penetration in furthering the march of online ordering

2 Contents Contents Overview In Summary

No one-size fits all is no real limit to the number of In Summary: There’s no one sentence that can accurately they can sign up. However, as has • There is no single, unifying factor for success, but there is strong investment and interest in describe the state of the global and drink seen recently, rapid growth and investment online and mobile ordering everywhere, amid a rapidly changing market market. Every region is experiencing different does not automatically result in profit. And • is going digital with 25 percent growth expected between 2015-18 in key markets highs and lows, trends and technologies. ? As of October 2017 its shares were • The aggregator model is seeing investment but its success is potentially short-lived The economy of the USA is different to that falling rapidly and investors marked its shares • Businesses are increasingly considering their own branded platforms of the UK and naturally, this impacts growth as ‘Sell’. and changes in the industry. Equally, it is not possible to talk generally about “food and Going off the aggregator drink” trends; in order to draw out meaningful While the aggregator model has gained much insights we need to be more specific about of the world’s attention until now, white-label the type of business. products could soon pull ahead as businesses look to carve their own digital ordering Here we look specifically at the restaurant identity. Such technologies not only facilitate Projected value of Annual value of industry and break the facts down by region. order and, sometimes, delivery, but also the online delivery the online pizza market by 2022 delivery industry We aim to answer the question, what do reduce in-restaurant queues for guests. Quick restaurants need to be aware of so they service food outlets, catering to busy office don’t fall behind in North America, the UK, workers in particular, are realising the benefit Asia and Australasia? of click and collect .

Strong investment all round Of course, the rise of both aggregator and of all restaurant orders that now Across the world, the business of delivering venue-specific ordering technologies is being come from digital channels, in currently partnered outpacing phone orders (5 restaurant meals to the home is undergoing driven by consumer demand for convenience. with the UberEATS food percent) for the first time Global Figures** rapid change as new online platforms race As people choose to stay at home, rather than delivery service to capture markets and customers. Related head out for a traditional dining experience, to this, there has been significant investment many are seeking more convenient ways to in technology companies aiming to disrupt eat quality food. When out and about, they the market with new ordering and delivery want to be able to their food on-the-go, methods. rather than spending a significant portion of their time waiting in a queue. Aggregators in particular, have caught the imagination of the industry, though we argue With these new online platforms making their of internet users who told of commission costs research analysts they had that their reign might prove short-lived. So mark around the world, the food-delivery charged to participating ordered food delivery in the far Grubhub has been through six rounds of industry is in the midst of a dramatic channel restaurants by ordering past year; another 20 percent platforms such GrubHub, said they plan to try it soon funding, raising $84,100,000 in the process; migration. According to McKinsey & Co, we UberEATS and DoorDash Deliveroo’s six rounds have seen it raise can expect online delivery to grow by 25 $859,597,403. The reason companies like percent per year from 2015 to 2018 in key of online orders which come from a this have seemingly done so well is that there markets. mobile device **data sourced from PYMNTS.com

4 Contents The Restaurant State: A Global Analytics 5 United Kingdom

Where the takeaway market is mature but open to disruption Kitchens are going dark Deliveroo Editions champions ‘dark kitchens’: Within the UK, and are delivery-only kitchens that exist solely in the The UK has the largest share of the online But it’s not just home delivery people are perhaps the best known of the aggregator online space without any traditional shopfront. takeaway market and is the most advanced looking for; there are more than 32 million order and delivery companies and have It says it provides restaurants with unique country in Europe. We are therefore focusing people in work in the UK, and few have time to the widest reach, although more recently insights “that allow them to tailor menu items on it as a leading light of the region and one take a relaxed lunch break. This demographic UberEats and Deliveroo have been gaining and pricing to the customer base, leading which other countries are carefully watching. is one that increasingly uses its smartphone to headway with their disruptive approaches. to increases in sales of up to 400 percent”. place lunch orders, avoiding lengthy queues in Deliveroo’s Editions programme, for instance, Whether true or not, the kitchens aren’t order to collect favourite on-the-go. has opened up new lines for business for the universally loved and are facing significant The UK by numbers online ordering industry. controversy. As the Guardian reports, • Britain will spend £8bn a year on According to Vianet, consumers in the UK are Southwark Council told Deliveroo to suspend takeaways by the end of the decade twice as likely to use their smartphone to pay Because has particularly high operations at a site in Camberwell, south for lunch than they were a year ago (a figure • There are people in the UK in commercial rents (there’s been a doubling of London, on account of the company not having 32m that will include tap-and-go payments as well work and many experience rushed business rates in some areas), it’s not possible appropriate planning permission. It remains to as online order and payments). Additionally, lunch hours for some restaurants to afford a property with be seen if and how this trend grows. analyst house CGA revealed, during a enough cover seats to turn a profit. Noting this, • 35 percent of mobile device presentation at the 2017 Lunch! show that using weekly food-to-go users use a smartphone to speed up food orders • The phone is the biggest threat to online Snapshot of Europe* 35% of 'Online Takeaway' market volume in 2017 (in US$) takeaway companies - more than 40 mobile percent of orders for takeaways are still 5000 made using a phone in the UK device using 4500 weekly food- 4000 to-go users 3500 use mobile Time-poor consumers look to takeaways 3000 According to the NPD Group, outside of the devices to 2500 USA, the majority of growth in foodservice speed up 2000 traffic comes from the quick service food orders. restaurant (QSR) segment. In 2015 it was 1500 predicted that Britain would spend £8bn 1000 a year on takeaways by the end of the And why? Because 500 decade. The given reasons were a surge we are constantly seeking 0 in smartphone use, alongside time-pressed more choice, greater convenience households cooking fewer meals. Since that and faster opportunities to get what we want. Austria Poland Russia Norway Portugal Sweden prediction, if anything, the nation’s urge to Switzerland order online has grown. United Kingdom *Data sourced from Statista

6 Contents The Restaurant State: A Global Analysis 7 United Kingdom North America

Disrupting the industry their own online and mobile ordering options Where take-out is king and big brands are investing in digital technology Within localised areas of the UK, restaurants which help them cut down on excessive costs regularly express concern about the costs of the and avoid commission on every order placed. Backed up with statistics services provided by traditional aggregators. Using their own technology they can incentivise North America by numbers In 2015, for the first time,Americans spent This is leading to the rise of new, commission- customers by offering discounts, and access • 70 percent of consumers think of online more at restaurants than at traditional free services. Oxford Orders, for example, is the owned customer data for future marketing services as the most crucial elements of grocery stores. Since then growth has first in a series of local marketplace solutions campaigns. Most important, they give the restaurant technology stagnated in the traditional restaurant intended to promote regional restaurants by ability to control their , such • Online delivery already represents 43 space, but not for order-ahead venues. bringing them and other businesses together as delivery deals or menu creation, rather than percent of all delivery orders in the Here technology use is on the up. In fact, under a single e-commerce platform. Because having it created by a third party. region and this is growing according to Webstaurant Store there has it won’t charge commission, and will only • In the last year, 18 percent of delivery ever serve residents within a set location, it orders were placed digitally through a been a 50 percent increase in the use of is expected to foster greater relationships technology across the industry and 70% UK - key takeaways website or app between businesses and consumers. of consumers now think of online services • People don’t have time for relaxed • 85 percent of consumers would visit quick services venues more often if they as the most critical element of restaurant lunchtimes, particularly at work Despite incoming competition, Hungryhouse’s had an app technology. CEO Alice Mrongovius said last year that she • Using smartphones to order food is an • ’s digital mix of orders is increasing trend - consumers in perceives the main threat to online takeaway around 50 percent, while Papa John’s Online delivery already represents 43 percent the UK are twice as likely to use their companies to be the phone: and Domino’s are both seeing well over of all delivery orders in the region and if smartphone to pay for lunch than they 60 percent penetration Cowen is correct, that number will continue were a year ago to grow. The investment firm has predicted more than • Just Eat and Hungryhouse have been, a 79 percent upsurge in the total U.S. food 40% of orders perhaps, the best known of the Own-brand digital ordering platforms delivery market by 2022, a number which will aggregator order and delivery are taking off take figures from $43 billion to $76 billion. As for takeaways companies and have had the widest Despite the success of aggregators such as a demonstration of this, in the last year alone, are still made reach in the region GrubHub and the rise of UberEATS across the share of orders placed online through a • New players are disrupting the North America, many of the bigger brand delivery service website or app increased industry, providing new types of names in food have forgone such platforms using a phone from 15 percent to 18 percent. in the UK. services and business models to invest in their own technologies, or partner • Businesses are increasingly considering with technology providers that offer white- label platforms. McDonald's, Tim Hortons, Mobile solutions provider DMI released Just one month later it was announced, rather investment in their own mobile and complementary data demonstrating the online ordering services Panera Bread, Papa Johns, , Dominos, controversially that, Hungryhouse was being and others, are all seeing great success with growing dependence consumers have on acquired by Just Eat. loyal customers downloading and regularly online and mobile ordering. Of the 2,500 using their own branded services. people it questioned, 63 percent had at least Also gaining ground on the online ordering and one quick-service app on their phones and delivery aggregators are technology providers Read our guide, Four Stories of Mobile and As for the 'dark kitchens' created by the likes 35 percent said they use mobile every time that build individual platforms for brands. Online Ordering Success, to gain insight into of Deliveroo in the UK, these have had mixed they visit a quick-service restaurant (or at least Eateries such as Vital Ingredient and how other companies have benefitted from success in North America. Delivery-only regularly). Perhaps most significant is that 85 Churchills Fish and Chips have launched having their own branded ordering platform. restaurant Ando has performed well in New York. percent would visit quick-services venues Others have tried and failed to sustain successful more often if they had an app that appealed services which suggests that the wider customer to them. experience and a strong brand association is important to the American consumer.

8 Contents 9 Contents North America Asia

A slice of the pizza pie programme, a move that is seen as a game Where consumers are keen but growth varies according to each country’s internet penetration If there was one market in North America changer, not just in the USA, but further afield. where digital ordering has been pushing India forward faster than any other, it’s the pizza Making digital ordering affordable Asia by numbers (figures in US$) market. The region’s leading pizza chains Of course, while online delivery growth should • Indians access the internet through have seen enormous digital ordering growth. be good news for fast food restaurants, it can Online delivery outpacing traditional their mobiles nearly 80 percent of restaurant dining be difficult finding an affordable service. As the time in the UK, the leading aggregator solutions In India, where the biggest market player Pizza Hut's digital mix of • The food order and delivery market is , the key driver for online charge exorbitant commission fees which expanded by from 2015 orders is around 50% while 30 percent ordering is noted as a lack of time to go out take chunks out of a restaurant’s online to 2016 Papa John's and Domino's are profit. However, also like the UK, alternatives • The online food and delivery business and dine. both seeing well over 60% including own-brand platforms are gaining in is worth $15bn in India but 80 percent penetration. popularity. Preoday is behind the upcoming of online orders in India originate Here the overall restaurant industry grew 11 launch of a new aggregator solution in North from just five cities percent from 2015 to 2016 but was outpaced America, set to provide a cost-effective • 20% of the world’s population lives by food order and delivery which expanded solution for restaurants and to offer greater in China by 30 percent. As we reach the end of 2017, access to customer data and intelligence than • The number of online users in the we would expect online orders to have current market vendors. Chinese online ordering and deliver escalated further. market has exceeded 200 million • Ordering through apps and other digital North America - key takeaways interfaces accounts for 40% of all • Big brands are building their own digital orders ordering platforms • Where in-restaurant dining is 900 stagnating, ordering for home delivery is increasingly popular 800 • Online delivery is already a significant part of all delivery orders and is growing 700 That’s a figure eating into phone-based orders • Digital ordering is experiencing a strong 600 as well as in-restaurant ordering. upward trend - particularly in pizza restaurants 500 Figures aside, Amazon’s entry into the food • Amazon Restaurants is an indicator of 400 delivery space is a clear indicator of the the potential for the industry potential this market holds. Amazon doesn’t do anything unless it sees a clear path to 300 profit and room for significant expansion. 200 In September, the retail giant announced it will Visit our website to find out how you create work with restaurant delivery service group your own aggregator or local marketplace 100 Olo to bolster its Amazon Restaurants delivery solution. 0 2000 2007 2013 2016 2021

Growth in India’s Internet Population (millions)

10 Contents The Restaurant State: A Global Analysis 11 Asia

Internet access presents a barrier The success companies China While much of India’s population still lacks have found in the country is centered around access to the internet, this is slowly changing. the country’s biggest municipalities; more than The biggest population on earth A cashless future Greater internet penetration means more 80 percent of orders for these companies China is one of the world’s largest and most One factor aiding in the growth of mobile people are connected to the World Wide Web come from the top five cities. Yet, despite populated countries; in 2013 it was estimated ordering in China is the country’s movement than ever before. Moreover, when it comes to this, the online food ordering and associated that 20% of the world’s population lived towards being a cashless society. Already accessing the internet, Indians are apparently within its borders. Boasting a population of delivery business is flourishing. Said to be paper money and coins are being used less, more mobile than the rest of the world. Half 1,379 billion, the national food and beverage with mainland Chinese stores and services went online in worth a sizeable $15 billion, it is experiencing market is, as you might expect, gargantuan. of the world’s internet users increasingly requesting payment from mobile February 2017 using their mobile; in the UK 10 percent year-on-year growth. With an average annual increase of 11.7%, in pay apps like WeChat Pay and Alipay; $5 and US, where more than 80 percent have 2015, its revenue has now exceeded 3 trillion access to the internet, a third of internet Awash with potential Yuan (US$ 455,297.4m). trillian in 2016 according to data cited by traffic is via mobile. In India, however, mobile That Google sees potential in the market Hillhouse Capital. This shift in attitude plays is by far the most common tool: while those can be observed by the launch of its Areo The Chinese market is known to be naturally into the digital ordering of food; in India are keen to use their mobiles to order restaurant delivery platform in April 2017; technologically advanced and this is reflected China is a country where a love of mobile their food, they are demanding as to ordering UberEATS followed suit in May. Indeed, in the growth of online and mobile ordering in technology, speed and convenience is driving perfection. Research by Business World market data suggests that restaurants using the country. Research from China-based Daxue industry changes faster than anywhere else. showed that punctuality was clearly the most mobile apps are prospering; mobile ordering Consulting shows that ordering through apps important factor for consumers with 87 percent systems get 23 percent more check-ins on and other digital interfaces accounts for 40% It really shouldn’t be a surprise that the of those asked considering only a 10-minute an average, and 70% of all food delivery or of all orders. We are also told that 18.5 percent online takeaway market in China is the of the population, or 256 million people, used delay acceptable. takeout orders are places via mobile in the largest in the world. online food ordering services in China in 2016, country. Difficult past, bright future? a number that is expected to grow to 346 million by 2018. These are amazing figures Despite the success of the smartphone, the The Indian online ordering and delivery market restaurant in India has faced difficult considering that digital ordering services market is brimming with potential despite already cover 1,300 cities; the market is times. Consultancy firm,RedSeer commented still being in its infancy. When compared expected to reach a value of over that: “The Indian online food delivery industry to other regions, its penetration is minimal experienced many roadblocks in its growth and venues rely predominantly on the large, story in 2016, with multiple players scaling multinational food aggregator platforms. 240 billion yuan down their operations or shutting shop. This Online orders represent a tiny 2 percent of (US$37 billion) was also visible in low investor sentiment restaurant takeaways compared to 13 percent in wherein the industry saw a total funding of the US, and 32 percent in the UK (according to by next year. less than $80 million in 2016 against $500 RedSeer). Still, much of this can be attributed to million same period year before.” the country’s lack of internet access.

As internet and mobile growth continues, online ordering should do the same, and venues may start to look at alternative ways to reach out to their mobile customers.

12 Contents The Restaurant State: A Global Analysis 13 Asia Australasia

Market dominance Where market barriers are slowly being dismantled You would imagine that such a large territory Asia - key takeaways would support hundreds of industry vendors, • Online ordering is strongly focused The impact of online ordering to date has and yet the market is actually dominated by on five key cities in India - there’s Australasia by numbers (figures in been measured by YouGov which found just : Dianping, two core companies limited movement outside of these AUS$) almost half of Australians ordered food via backed by Tencent, and Ele.me, its main areas • Australian restaurant industry revenue an app in 2016. Further evidence of growth investor being Tencent’s rival Alibaba, also is expected to surpass $30 billion by within the market is provided by a National • In China, there are 1,300 cities active the owner of the South China Morning Post. A 2022 Bank report showing 5.8% of third large operator, Waimai, backed by with digital ordering and this number • Just Eat bought out the Australian Australia's $20.1 billion online spend is Baidu, was sold to Ele.me, meaning that the will increase company for $855 million down to take away sales. market is now essentially a duopoly. • In India, limited internet penetration is • Half of Australians ordered food via preventing the market from reaching an app in 2016 Market consolidation of Australia’s This is something we don’t anticipate its full, considerable potential • 5.8% $20.1 Online and mobile ordering isn’t new to the billion online spend is down to take region. Back in 2013, PayPal announced changing; there seems surprisingly little room • Mobile is the only way forward in away sales for new market entrants in China. As these China - nowhere else in the world is it that more than 2,000 Australian restaurants • In New Zealand 53% of consumers let their customers use phone apps to two companies start to corner consumers as pervasive has purchased takeaways thinking order drinks and meals. Still, when the in smaller cities we would expect them to that they are more affordable than • Despite its size, the Chinese market is online ordering and delivery companies first branch out with new offers products and controlled by two main players, cooking the same from scratch. entered the region, there were questions as services that keep users loyal and block future allowing little room for new entrants disrupters. Chinese companies are known to to whether the industry could sustain all of • In India, Foodpanda is the largest evolve, replicate and adapt at speed when the emerging companies. To an extent this player, but the market hasn’t settled Australia has proved true, companies have come and challengers try to break in; it will be this that and others may yet find dominance gone and international giants have absorbed ensures the two players remain the major Small but confident smaller, local businesses. In 2015, for market forces. Forecasts for the market are positive. Financial researcher IBISWorld predicts example, Just Eat bought out the Australian revenue growth of 2 percent for the company Menulog for $855 million while If you’d like to find out how mobile and restaurant industry in 2017/18 (reaching $21 acquired Suppertime. online ordering can help your business, billion) and expects that to reach 5.8 percent check out our Complete Guide to Online in 2018/19, with revenue then surpassing $30 and Mobile Ordering. billion in 2021/22.

There is considerable confidence in the market and again, the new breed of online ordering and delivery technologies is making the difference to the way people respond and behave around mealtimes. Here though, other names are receiving prime exposure; Delivery Hero, Menulog and , along with Deliveroo dominate the Australian online food aggregator space.

14 Contents The Restaurant State: A Global Analysis 15 Australasia Conclusion

New Zealand “New Zealand is following a trend that is well The state of the food and drink - or restaurant Preoday provides these added benefits at established in other countries where healthier market - looks very different now to how no extra cost to you. You can discover the The importance of health options and upmarket food delivery is growing it presented just five years ago. No doubt, top five reasons our clients love working New Zealand is taking a similar path to the one and becoming commonplace.” another decade will see it represent with us and using the Preoday platform seen in Australia, with many of the same market differently again. But at this moment, many here. Once you’d done that, send us leaders in play. As in other regions, the uptake of The future looks bright for online ordering and companies are still figuring out how to make an email, we’ll be ready to answer your online ordering and then delivery is increasing delivery in Australasia but the question as to online ordering, and then delivery, profitable questions on trends in the market and on as a result of consumer time constraints. It whether the crown will go to the technology while still meeting customers' needs. How our technology. seems that humans the world over are turning aggregators or to owned and venue branded close they are to discovering the answer to takeaways to counteract increasing work apps remains to be seen. Venues are starting varies from region to region as you've now While some regions are ahead of others commitments and time pressures. to develop their own branded ordering seen. in terms of revenue, technology or market platforms, but they are perhaps behind the penetration, in all of them, mobile ordering is Back in 2015, research showed that curve of the rest of the global industry. The best advice we can give any of these becoming a crucial part of restaurants' plans companies is this: consider the opportunities and a way to enhance sales. Online orders provided, not by aggregator technologies, often result in larger basket sizes and greater 53% of New but by own branded platforms. While the customer experiences lead to improved Zeland's consumers Australasia - key takeaways Deliveroos, Just Eats and Grubhubs of the loyalty and a better rate of repeat ordering. If purchased • The markets in Australia and New world charge commission fees for every order you picture the market a decade from now - takeaways thinking Zealand are smaller than those in received, many white-label technologies in North America, India, the UK or Australasia that they are more North America and the UK but are have predictable and manageable monthly - you should see mobile ordering sitting at the affordable than expected to grow costs. And, while there are few added heart of the customer's experience, no longer cooking the same • In Australia, company consolidation benefits to partnering with an aggregator, just as a point of differentiation. meal from scratch. and acquisitions have led to a small white-label platform providers come with number of dominant market players extras including access to customer data Preoday is active across the world. From Since then, what has changed is that the • Online ordering and then delivery and in-built marketing functions such as push sport stadiums in Australasia, to theatres notifications. The data restaurants collect can locals are said to be setting aside their love is seen as a way to combat time in North America and restaurants in the help them determine customer preferences, UK and across Europe, we serve food of full-fat food for health and mindful eating, constraints though might disagree! adapt their menus, assess performance and companies of all types and sizes. We know Nielsen • Mindful eating is a trend that is even understand each customer's inclination your market and we can help you grow expected to impact the online menus Menulog, which has a stronghold in both to spend. within it. Email us on [email protected] Australia and New Zealand, and partners with of restaurants in New Zealand and let us explain how. more than 850 restaurants in the latter, claims • A perception that takeaways are a the health movement is so marked that is is ‘cheap’ option has driven orders in deliberately partnering with more restaurants the region that offer healthy options to meet demand:

Email [email protected] to find out how we can support your online and mobile ordering ambitions

16 Contents The Restaurant State: A Global Analysis 17 About Preoday Preoday builds bespoke e-commerce platforms offering mobile and online ordering along with strategic solutions such as GDPR compliancy services.

Preoday enables hospitality businesses to offer branded online and pre-ordering facilities to customers purchasing food, drink, merchandise and making bookings. It provides a white-label service to companies across the hospitality industry, from quick service restaurants and cafes, to theatres and stadiums. Preoday works both directly with hospitality businesses and partners including resellers, ticketing agencies, technology providers and food tech start-ups.

For more information, visit www.preoday.com

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