(Bloomberg) — If any business did well during the coronavirus pandemic, it was food delivery for lockdowned diners. For Just Eat Takeaway.com NV, it’s been a period that’s left investors fed up.
The Dutch company has seen its stock languish since Covid-19 took hold in Europe in February 2020 while German rival Delivery Hero SE is up 70% even after a recent decline. Prominent shareholders in recent weeks have flagged up Just Eat as ripe for a takeover after management decided to U-turn and invest in grocery delivery while building out its own network of employed orange-clad riders to handle more orders.
Losses peaked in the first half after the company spent heavily to fend off competition, Just Eat reported on Aug. 17. Chief Executive Officer Jitse Groen expanded its reach with the purchase of U.S.-based Grubhub Inc. in June, a deal valued at more than $7 billion when it was announced last year.
The problem is that Just Eat is struggling to match its words with actions, according to investors and disgruntled riders. It all amounts to a minor identity crisis for a firm that staked out leading positions in Europe, Canada, Israel and Australia since 2000. They blame Groen for a lack of clarity on the company’s plan. Just Eat said it will provide a strategy update at an October investor day.
Hedge fund manager Alex Captain, who holds about 5% of Just Eat via his fund Cat Rock Capital Management LP, published a report on July 27 calling the company “deeply undervalued” and vulnerable to a bid. Other shareholders such as Lucerne Capital Management LP also weighed in. Just Eat “has no future as an independent company,” it said.
“That was kind of enough is enough,” Captain said. “Really what it came down to is continued excitement about the operation, but just immense frustration with respect to the communication of it, which was terrible.”
Groen, 43, started the precursor to the company as a college student facilitating online takeout orders. In its original model, Just Eat simply matched customers to restaurants, and let the eateries deliver themselves.
There’s now a change of tack. Groen told analysts as recently as 2020 that “you can’t make any money in Europe” on delivery logistics. Yet his firm is building a fleet of couriers that now execute more than 25% of orders to stay competitive with rivals like Deliveroo Plc, whose shares are up 50% over the past two months after a troubled initial public offering this year.
Competitors, meanwhile, rushed into grocery delivery, eying a market even larger than restaurant meals. Groen said there wasn’t enough money it. Just Eat is now expanding that business across multiple markets.
“We have to work to do to explain to the market what company we have become,” Groen said on Aug. 17 in response to the investors’ complaints. “On grocery delivery, on logistics, it’s fair to say that our thinking about it has evolved in the last couple of years.”
The CEO has also taken a stance on labor issues, saying that he aims to end gig jobs across Europe by rolling out a new employment model. Captain, the fund manager, backs the idea as a way to reduce rider turnover and improve the experience for customers.
The company now has about 40,000 employed riders in 14 countries, twice the count at the end of last year. Many more remain as freelancers outside Europe. Just Eat is seeing employed drivers stay longer, but the logistics business is only profitable in the U.S. and Canada where gig workers do the delivery, said Jorg Gerbig, the firm’s chief operating officer.
“You have more idle time and you are paying for the idle time and that’s making that employed model a bit more complex,” Gerbig said. “On a positive note, though, you’re actually able to instruct your drivers, train your drivers, your drivers are actually having to accept an order.”
Groen has criticized competitors for their working practices, though the company has some complaints of its own.
When Uber Technologies Inc. said it was expanding food delivery into Just Eat’s key market of Germany, Groen shot back in a tweet to Uber CEO Dara Khosrowshahi that the company should “start paying taxes, minimum wage and social security premiums.”
However, some riders say that the talk is not fully backed up by their conditions. Alice Barker, who handles orders in Edinburgh as a gig worker and is an affiliate of the U.K.’s IWGB union, said she still has to sign up for shifts on the Just Eat app and starting only a few minutes late could lead to losing her next jobs for 24 hours.
“It’s quite disingenuous for them to be using that in their PR as much as they do,” said Ethan Bradley, a Just Eat rider and an IWGB representative. “There’s real flaws in their system and it’s riders that pay the consequences for it.”
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