Revenue in the Online Food Ordering and Delivery Platforms industry is expected to rise by 12.1% in 2020-21, to $847.9 million. However, revenue growth is starting to slow for the industry.
‘Many Australians were introduced to online food delivery during lockdowns in 2020, and we expect these customers to continue using meal delivery services in the years ahead,’ said IBISWorld Senior Industry Analyst James Caldwell.
Declining incomes hinder demand
The online food ordering industry has grown at an astounding annualised 43.8% over the past five years, driven by rising demand for premium foods. However, revenue growth is anticipated to slow significantly in 2020-21, as the industry matures and demand for takeaway is hindered by a 7.8% decline in household discretionary incomes.
‘The economic fallout of the COVID-19 pandemic continues to weigh on household incomes, limiting the ability of consumers to afford takeaway food in 2021. As a result, consumers are expected to purchase less restaurant food or choose cheaper meal options,’ said Mr Caldwell.
Revenue for the Fast Food and Takeaway Services industry is expected to decline by 0.8% in 2020-21, while the Fast Food Burger Shops industry and Fish and Chip Shops industry are expected to decline by 1.6% and 1.1%, respectively. Revenue in the Restaurants industry is expected to rise by 5.1% in the current year, after falling by 15.0% in 2019-20.
Regulatory threat looms for meal delivery apps
The way that meal delivery platforms classify their workforces is expected to come under increased criticism over the next five years.
‘Delivery drivers are currently designated as independent contractors, limiting the extent to which delivery platforms provide entitlements including paid sick leave, minimum wages, superannuation and other employment benefits,’ said Mr Caldwell.
Uber Eats settled a landmark legal case against a former food delivery rider last month, avoiding a ruling in the Federal Court that could potentially have led to the company’s drivers being reclassified as employees.
‘Wages in the Online Food Ordering and Delivery Platforms industry are expected to account for 5.3% of revenue in 2020-21, while other costs, including subcontracting, utilities and insurance expenses, account for 81.2% of industry revenue. Profit is expected to account for 3.2% of revenue,’ said Mr Caldwell.
Uber Australia accounts for an estimated 67.5% of the industry, followed by Just Eat (Acquisitions), which controls an estimated 14.1%. Just Eat operates through its Menulog and EatNow brands. Deliveroo Australia accounts for an estimated 12.4% of the market.
‘If delivery riders became classified as employees, wages would be anticipated to rise. However, this cost would likely be passed on to consumers through higher delivery charges,’ said Mr Caldwell.
Pushback from restaurants also represents a threat for delivery platforms. Operators in the Online Food Ordering and Delivery Platforms industry charge restaurant partners commission rates of up to 30%, which can significantly reduce the margins available to food service operators in the restaurants and Cafes and Coffee Shops industries.
‘High commission rates are expected to encourage an increasing number of higher-end restaurants to cease offering services on these platforms,’ said Mr Caldwell.
Shifting meal preferences
Consumers are increasingly focusing on healthy, affordable and convenient meals, which is expected to drive a shift in consumer demand for fast food in 2021 and beyond.
‘Growing concerns over health, animal welfare, and environmental sustainability are anticipated to increasingly influence consumer fast food purchases over the next five years, driving demand for healthy meals,’ said Mr Caldwell.
A growing number of outlets are pivoting to capture this shift in demand for fast, affordable, healthy, and high-quality food.
‘Fast food operators are expected to face increasing competition from the Supermarkets and Grocery Stores industry, with major grocery chains expanding their range of home-cooked meal replacements and heat-and-serve prepared meals. Operators in the Convenience Stores industry are also expanding their fast-food product ranges,’ said Mr Caldwell.
IBISWorld reports used to develop this release:
- Online Food Ordering and Delivery Platforms in Australia
- Fast Food and Takeaway Services in Australia
- Fast Food Burger Shops in Australia
- Fish and Chip Shops in Australia
- Restaurants in Australia
- Cafes and Coffee Shops in Australia
- Supermarkets and Grocery Stores in Australia
For more information, to obtain industry reports, or arrange an interview with an analyst, please contact:
Jason Aravanis
Strategic Media Advisor – IBISWorld Pty Ltd
Tel: 03 9906 3647
Email: mediarelations@ibisworld.com
