Deliveroo CEO Expects Wage Growth to Outpace Food Inflation
As restaurant delivery services around the world have seen demand impacted for years by ongoing food inflation and other financial challenges, Deliveroo expects that wage growth will help drive order growth.
On a call with analysts Friday (Jan. 19) discussing the United Kingdom-based aggregator’s fourth-quarter 2023 earnings results, CEO Will Shu noted that while he expects inflation will decrease, it will still be happening. However, he contended that this will be a very good thing for the business.
If wage inflation is at parity with food inflation, or maybe food inflation is a little bit less, that’s just going to create much more demand, in my view because I think the biggest issue that we’ve seen in our markets in Europe, as food inflation has outpaced wage inflation in some cases 3X, 2.5X, [is that] that just puts the consumer in a really different environment, Shu said.
In the quarter, the number of average monthly active consumers grew by about 400,000 relative to the previous quarter but remained down by about 100,000 year over year, falling 2%. Total orders and revenue held roughly flat year over year.
Overall, Shu highlighted stabilization in customer behavior.
The wage-versus-inflation gap has been a pressing issue for consumers in recent years. In the United States, for instance, the October installment of PYMNTS Intelligence’s Consumer Inflation Sentiment series, Consumers’ Economy Concerns and the Price of High Prices, which drew from a survey of more than 2,100 U.S. consumers, found that 85% said their wages have not kept pace with inflation. Plus, 97% of consumers expressed worry about economic conditions.
As consumers face financial strain, many pull back on ordering restaurant delivery. PYMNTS Intelligence’s report Connected Dining: Rising Costs Push Consumers Toward Pickup, which drew from a survey of more than 2,100 U.S. consumers, found that 48% said inflation has made them more likely to choose pickup over delivery.
Additional research from the Connected Dining series revealed that among consumers who do not use aggregators, 50% stated that aggregators are too expensive, and 1 in 5 nonusers cited this as the most important reason they do not use the ordering channel.
Deliveroo has also been looking to drive adoption, much like its counterparts across the pond, with its subscription program, Deliveroo Plus, offering free delivery options for set monthly rates, among other perks.
One way the aggregator has been looking to drive adoption among young consumers is through pushing its student discounts, according to Deliveroo Chief Financial Officer Scilla Grimble, much as DoorDash has done with DashPass for Students in the U.S. Additionally, Grimble noted that in the United Arab Emirates, the British aggregator has offered Amazon Prime members a free yearlong subscription, much as Grubhub has done with Amazon in the U.S. and as DoorDash has done in Canada.
We’re iterating on the different benefits that we can offer consumers, but it’s a key part of our strategy, Shu added, highlighting that the program has yielded big differences in retention and frequency for members versus nonmembers.
According to Deliveroo CEO Will Shu, wage growth is expected to outpace food inflation, driving order growth for the company. While Shu acknowledges that there will still be inflation, he believes that wage growth at parity or slightly lower than food inflation will lead to increased demand among consumers. The issue of wage versus inflation has been a concern for consumers globally, with many feeling that their wages have not kept pace with rising prices. As a result, consumers have been cutting back on restaurant delivery services. Deliveroo has been working on strategies to drive adoption, such as its subscription program Deliveroo Plus and student discounts. These initiatives have shown promising results in terms of customer retention and frequency.
