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Will it come down to survival of the biggest for the food delivery sector?

The recent $10 billion merger between Just Eat and Takeaway.com, creating one of the world’s biggest online food delivery firms, is a logical, and unsurprising move.

Perhaps as predictable as its new name: Just Eat Takeaway.com.

The strategic deal between the two European-born companies is further evidence that consolidation is on the rise in the food delivery sector, a space where scale is vital to survival.

The food industry has turned several corners in recent years, and no segment is growing faster than online delivery. In 2015, for the first time, Americans spent more money at restaurants than at grocery stores. In urban areas such as New York and Chicago, restaurants are commanding a larger share of the retail budget than ever before. In Manhattan, food service locations have been responsible for more commercial leasing than clothing stores and banks combined, and it isn’t showing any signs of slowing down. Next year, it’s predicted that more than half of restaurant spending will be outside of an actual restaurant; deliveries and takeaways will soon overtake dining inside bricks-and-mortar restaurants. In a literal and somewhat ironic sense, restaurants have now become more of the place you buy food to eat somewhere else than the grocery stores themselves.

Previously, food delivery was dominated by pizza and Chinese food, but that too is changing. Where pizza used to amount for 60% of deliveries, that number is declining every year thanks to a wider choice on offer, from higher-end fare to global cuisine, and nearly one in four Americans are choosing to have food delivered last year.

And eCommerce has allowed consumers to choose convenience above anything else, and that’s where the real value lies.

As younger consumers continue to enter the market, the world they grew up in comes with them too. With the baby-boomers making their gradual exit and Generation X being just a blip on the generational radar, nearly 50% of consumers are now under the age of 35, and nearly 40% under the age of 30. These people are busy, on the move and seeking solutions to their problems right now. Food delivery is a perfect fit for this environment. Frequently referred to as convenience maximalism, this trend can be seen across the digital world in the success of eCommerce and online delivery of virtually everything else we need in our lives. Food delivery is just the next logical step. In surveys by the National Restaurant Association, millennials say they are spending more time working and commuting than they used to, and modern life in general is a constant see-saw between work time and screen time, for both work and pleasure. Prepared and to-go meals have become a matter of necessity for multitasking modern professionals.

In a world where convenience is king, eating in is the new dining out.

It’s also the promise of convenience that’s driving businesses like DoorDash, UberEats, Just Eat and Takeaway.com to join forces in order to dominate the market.

Whilst there is currently a lot of buzz around online delivery, behind the glossy façade pressures are also mounting, and the future is uncertain. For starters, if you strip back the marketing spiel, none of these companies are actually profitable yet; UberEats’ parent company is losing $1 billion a quarter, and despite DoorDash’s recent $600 million in funding, its earnings are still negative.

Labour concerns are also putting pressure on delivery companies as reports of bad labour practice have come to the surface on social media. This is in addition to mounting social interest about the state of their environmental conscience, and the restaurants themselves deciding they are paying too much to belong to all of the third-party delivery programs. As a result, I see a rocky future ahead as investors will eventually tire of throwing money at underperforming companies, which will force further mergers and acquisitions or see many lose the battle.

Globally, there will be a few dominant services, which is perhaps what we are seeing the beginning of now with the Just Eat – Takeaway.com merger. With strength of scale on its side, Just Eat Takeaway.com is currently perfectly positioned to expand into less saturated markets ahead of its rivals, and perhaps be a looming threat to established food delivery companies in the US where consolidation in the food delivery sector has not yet started.

But where one treads, others stampede. When will Amazon-backed Deliveroo and UberEats bite back? 

Despite Uber having just reported its biggest-ever loss, its chief executive Dara Khosrowshahi still insisted it will continue to invest heavily in “healthy growth” as the company reached over 100 million monthly active users for the first time, showing that it has become an integral part of everyday life in cities around the world. Couple this with the large cash-reserves that Amazon has to support underperforming businesses it deems strategically significant for other reasons, it will be an uphill battle for all of the food delivery firms to iron out the labour and logistical challenges alone, and in just one or a few markets. Consolidation and expansion into new markets to find new sources of revenue is the only path of survival for any sector that Amazon has shown an interest in.

Whether Just Eat Takeaway.com maintains its new-found leadership position for long is the question.