What's going on?
In a tale of two global food companies, takeout delivery platform Just Eat served investors up satisfying numbers on Wednesday – while subscription meal-kit provider HelloFresh’s stock fell 4% on an unpalatable forecast.
What does this mean?
Just Eat delivered solid 2018 results: it grew sales by 43% and made a tidy, rising profit. But the company, which has British headquarters and operations in 13 countries, plans to accelerate investment in its own delivery service – as opposed to just connecting restaurants and trenchermen – which may have worried investors. Just Eat already spent $67 million on that in 2018, hampering profit growth.
HelloFresh also turned up the heat on its sales in 2018, growing them by 41%. The company simmered down previously high customer acquisition costs, which allowed it to turn a small profit of its own when ignoring one-off spending on new acquisitions and initiatives.
Why should I care?
For markets: The profit is not enough.
Investors sold HelloFresh shares on Wednesday. While it’s promising to break even in 2019, the company’s also predicting slower sales growth. And with 2018 sales totaling only $1.5 billion, some think the amount of dough HelloFresh takes should rise before it worries about actually making money – lest a big competitor like Amazon take a bite out of its business. Just Eat’s investors, who held its stock steady on Wednesday, might be concerned about the same thing: it also has Uber to worry about.
The bigger picture: Combine and conquer?
In ultra-competitive industries, one way to get bigger and more profitable is to team up and merge with a rival – like Uber’s considering doing with Deliveroo. HelloFresh’s downtrodden rival Blue Apron may also get gobbled up by a bigger brand (tweet this). Despite its 2018 profit, one of Just Eat’s investors is pushing the company to look at a similar path – and potentially save itself the trouble of building out that expensive delivery service.