** UPDATE – JUST EAT released their first-half 2019 results today and we have analysed them. Menulog customer numbers fell 10%! Read our updated analysis for more details. **
Could a merger between Just Eat and Takeaway.com force Menulog to close in Australia? The future for Menulog in Australia and New Zealand became substantially murkier overnight with the press release confirming an in principle agreement between Just Eat and Takeaway.com to merge. Tech Crunch is reporting that the 2 companies are in advanced negotiations to merge the 2 companies, each of which has a market cap of around $5 billion.
If successful, it would create a company which processed 360,000,000 orders worth US $8 billion and would be dominant in a range of countries. Australia, however, is not one of those countries.
Why would Menulog close?
Smart Company has detailed that the merged group may not be prepared to support the ailing Australian business. Cat Rock Capital’s Alex Captain described the Menulog business as “pretty challenged”.
Captain continued, “The UK is a phenomenal market and we think that Australia‘s a fundamentally very challenged market, where you have the same delivery fee and lower selection than a logistics player. If you look across what customers care about on online food delivery, they care about selection, they care about price and delivery fee, the care about the speed of delivery, they care about the technology and the UI, the user experience. Uber offers a better product on all of those criteria, vis-a-vis EatNow and Menulog in Australia. We would advocate that JustEat not spend a lot of resources trying to beat Uber in that market because it’s a structurally worse market than some of the other markets that Just Eat has.”
Menulog is a long distant third in the delivery business and unless they can retain their order part of the business, losses will mount. Delivery companies have been fairly rational world-wide, understanding that if you aren’t at least a strong second, there is no way to close the gap.
We expect that given the recent events, the issues with the brandjacking, which still may work their way through the courts and the wages issues with independent contractors, the Menulog business may not be worth the ongoing investment and may struggle to find a buyer.
If Just Eat forced Menulog to close, what would it mean for your Restaurant?
We believe that the value that Menulog creates is with new customer discovery. Our Restaurant customers using Menulog often run order direct and save campaigns, enabling them to drive customers to their own Free Restaurant OnLine Ordering system and starting to collect the customer details. This has enabled Restaurants to get to the point where the number of customers using Menulog is less than 10% of their overall online orders, enabling them to be much more profitable and retain the great service and ingredients that the customers are after. Restaurants should look now to alternatives, either with a FROLO or some sort of POS system that enables them to take orders online.
JUST EAT 6 months results are due out this week and we will look to analyse them to see what the impact will be moving forward.