UK-based Deliveroo, a food delivery group, announced on Wednesday that it is planning to cease operations in the Netherlands. This is in accordance with the company’s methodical capital allocation strategy.
Deliveroo says it does not hold a strong local position in the Netherlands and the country represented 1 per cent of Deliveroo’s Group GTV in H1 2022.
Reason for ceasing service in the Netherlands
According to a statement, Deliveroo’s management team is dedicated to achieving sustainable cash flow generation and driving profitable expansion.
The company says, “To generate attractive financial returns in the food delivery business, hyperlocal network effects are more powerful than overall scale. Improving and winning local market share positions yields outsized unit economics, and unit economics is the key to overall profitability.”
Deliveroo has made its decision to consult on ceasing its activities in the Netherlands because it has assessed that it would take an excessive amount of expenditure with unclear returns to achieve.
The company believes that the stakeholder consultation process will start in August, and it is attempting to determine a probable date for the Netherlands’ final day of business, which may be at the end of November.
Deliveroo says it is dedicated to sustaining sustainable growth and enhancing profitability through 2022 and beyond. Because of inflationary pressures, post-COVID consumer behaviour, and the geopolitical and economic effects of the situation in Ukraine, management projects for 2022 reflect current concerns, particularly across European markets.
The company’s YoY GTV growth was 12 per cent in the first quarter and 2 per cent in the second. Its full-year GTV growth is expected to be in the range of 4 per cent – 12 per cent in comparison to its previous forecast of 15 per cent – 25 per cent last month.
The food delivery company posted a pretax loss of £147M (approximately €173.97M) in the first half compared to a loss of £95M (approximately €112.43M) a year ago. Last month, Deliveroo cut its full-year revenue projection due to a steep slowdown in its second quarter.
The management is still confident in the company’s ability to adjust financially and change the macroeconomic environment through increased gross margins, effective marketing spending, and strict cost control. Deliveroo claims its balance sheet is still robust.
William Shu, Founder and CEO of Deliveroo, says, “So far in 2022, we have made good progress delivering on our profitability plan, despite increased consumer headwinds and slowing growth during the period. We are confident that in H2 2022 and beyond we will see further gains from actions already taken, as well as benefits from new initiatives.”
“We remain confident in our ability to adapt financially to any further changes in the macroeconomic environment. We continue to be excited about the opportunity ahead and our ability to capitalise on it,” adds Shu.
Founded in 2013 by William Shu and Greg Orlowski, Deliveroo owns and operates an online food delivery platform in the UK. Its platform allows users to order food from local restaurants. Currently, the company works with over 170,000 restaurants and grocery partners, as well as over 190,000 riders to provide the “best” food delivery experience to its customers.
Deliveroo operates across 11 markets, including Australia, Belgium, France, Hong Kong, Italy, Ireland, Netherlands, Singapore, United Arab Emirates, Kuwait, and the UK. It has over 2,000 employees worldwide.