Online food delivery - UBS Evidence Lab inside: What does the data say about restaurant supply? (Hubert Jeaneau, CFA) Full Report
Fears in food delivery revolve around restaurant supply. Look inside for the latest UBS Evidence Lab data tracking Deliveroo.
Concerns around supply: we look at UBS Evidence Lab data on Deliveroo
Online food delivery is likely to be resilient in the context of the Covid-19 outbreak.
Demand signals are broadly positive, but risks are centered on restaurant supply (see
our recent note here: how resilient?). While lock-downs are leading some restaurants to
shut down operations temporarily (e.g. McDonald's, Greggs and Nandos in the UK),
online platforms are seeing record levels of sign-ups. What does the data tell us so far?
UBS Evidence Lab Deliveroo tracker shows that restaurant listings are up in March
month/month, with high levels of additions/removals. While we need to keep a close
eye on how those figures develop, we see this as a positive early signal.
Deliveroo restaurant inventory up in March; Spain most negatively impacted
Listings are up +2% MoM from Feb to March on Deliveroo, with +2k net restaurant
additions, below the average monthly net adds for the past 12m (at +3.5k). Deliveroo
inventory expanded in March in most European countries, including France, the UK and
Italy, with no large differences between tier one cities and the rest. The only exception
is Spain, where listings figures are down -4% MoM in March, mostly driven by Madrid
(-7%) and Valencia (-5%). Outside of Europe, Hong Kong and Singapore have seen
steady expansion over the past 3 months, while UAE figures were stable in March.
Early signals are positive, adoption set to increase
We see the online food delivery sector as likely to face near term headwinds from
supply constraints, however it should benefit from higher levels of adoption. That
Deliveroo is able to increase its offering given current Covid-19 disruptions in Europe is
a positive sign. Restaurants temporarily shut down should return on those platforms
while most of the recent sign-ups are likely to stay. It remains to be seen if prolonged
lockdowns translate into permanent restaurant closures which could still have negative
impacts medium term on industry growth.
We have Buy ratings on JET and DHER
We have Buy ratings on JET (£97/sh) and DHER (€94/sh): high quality structural growth
stories, resilient in the current environment, with benefits from increased adoption.
