A big appetite for online grub
Prosus intends to triple the size of its food business by 2025
● Prosus aims to grow its food delivery division to a business worth $15bn (more than R220bn) by 2025, it said in a presentation to investors this week.
The company, in which Naspers holds a 74% stake, has invested $2.8bn in Brazil’s iFood, India’s Swiggy and Europe’s Delivery Hero, among others, over the past two years. Prosus now values its food business at $4.5bn.
At stake is a global market Prosus expects to double to $330bn over the next three years, as branded scooters and bicycles carrying meals become part of the urban fabric.
“It’s not going to be winner-takes-all, but it will be winner-takes-most,” Prosus’s global head of food delivery, Larry Illg, told Business Times this week.
And growth is not going to be only organic.
Prosus last month made a £4.9bn (nearly R100bn) hostile takeover bid for Just Eat, the UK’s largest online food business, which has an app linking take-out customers to restaurants, which then deliver the order. If successful in its bid, Prosus will extend Just Eat’s own-delivery capabilities.
Amsterdam-based rival Takeaway.com had in August already convinced Just Eat’s board to back a merger proposal. And this week the UK company’s shareholders will give the first clues as to whether Prosus’s cash offer could trump the share combination offered by Takeaway.com.
The initial closing date for Prosus’s offer is Wednesday, but the company can extend it to the end of January.
If it manages to bag Just Eat, it will probably plug it into the global network it has built up.
When it comes to ordering food online, consumer behaviour is 80%-90% the same across the world, says Illg. And this makes it possible for the businesses to learn from each other.
“These businesses are insanely local, so there is no threat that, say, Swiggy will launch in one of iFood’s markets.”
And in the developing world, where Prosus has a strong footprint, the restaurant infrastructure is not as extensive as in Europe or the US, so food-delivery businesses have to work around this obstacle.
That is why iFood is using artificial intelligence (AI) and data science in Brazil.
AI helps to predict what people will eat in advance, says iFood founder and CEO Fabricio Bloisi, which aids planning and logistics.
“We can predict production three, four, five days in advance,” says Bloisi. This cuts food-preparation costs by 50% and makes it possible to deliver many more meals per trip.
iFood began making a profit quickly, but it has since sacrificed some of the easy money to grow the business. Since the middle of last year Prosus has dialled up investment to increase iFood’s control over its own logistics, says Illg.
This is part of Prosus’s strategy to go all out for own-delivery (also called first-party delivery), which means it handles the technological backbone that connects independent couriers — the army of scooters, small cars and bicycles — to restaurants.
And that is also what it has in mind for Just Eat, in which it plans to invest a mountain of cash to get the UK business’s owndelivery model up to speed.
Takeaway.com is more a fan of the traditional model, where restaurants themselves provide the delivery logistics.
But that model is old hat according to Illg. It leans too heavily on an established ecosystem of restaurants, something the lucrative developing markets do not have.
Consumers want access to everything out there, Illg says, and don’t want to be restricted to only those restaurants that have their own delivery personnel.
“The internet consumer is absolutely ruthless,” he says.