What will the Deliveroo takeover mean for takeaways?

Cheerio, Deliveroo! Or should that be ‘Later, dude’?

Hungry US giant DoorDash has submitted a formal order for a takeout of Deliveroo, with a side of fries. The UK delivery outfit said it was happy with the £2.9bn price it was quoted.

Founder Will Shu, who is known to still take shifts delivering the regular kind of meal, will get a handsome tip. Estimates have put that at roughly £170m, based on the size of his stake.

Those who bought in when the company became a rare example of a tech firm that stayed at home when it floated in London may have mixed feelings about that (though perhaps we should call it tech-adjacent, given that it’s primarily a delivery business and just happens to use the internet).

Deliveroo floated in 2021 at 390p a share, which valued the company at roughly £7.6bn. The dismal subsequent performance of its stock helped to put the entire London IPO market into cold storage.

More fool those who believed the hype and bought into a marginally profitable outfit with, shall we say, “issues”. Those included the pay and conditions of the freelancers who bring the food to customers’ doors, who have staged a number of protests.

We will now, no doubt, hear concerns expressed about, yes, another UK business being gobbled up by a rival from the US – all the more so given the deeply hostile economic behaviour of America’s Trump-led government.

But while that’s understandable, the reality is that if it wasn’t DoorDash, it would have been someone else. The food-delivery business is consolidating fast, and is set to become dominated by a handful of global giants. JustEat’s takeover by Prosus in February is another example of this.

Deliveroo has a handy position in the UK and France. But global it is not. DoorDash, which is a global player, has done what big companies do. It is buying a strong position in a pair of decent-sized markets in which it wasn’t previously strong, by snacking on one of the big local cheeses.

Does this matter for the food on your plate – beyond the fact that you may, in future, be clicking on DoorDash rather than Deliveroo, after the new owner has finished the inevitable review of its purchase?

Not on the face of it. Your takeout will arrive as it always has. But what about the cost? Well, that’s where it gets interesting. Companies like to make claims about their deals being good for consumers, lowering costs, improving service, blah blah blah.

Right on cue, the announcement of the deal being signed off said this: “The combination with Deliveroo will strengthen DoorDash’s position as a leading global platform in local commerce, enabling the combined entity to better serve businesses, consumers and couriers.”

But will it? Delivery services have become very popular with cash-rich, time-poor consumers. Deliveroo has grown its order numbers fast. Its logo, and those of its rivals, can typically be found splattered all over the doors of your favourite restaurants. Many didn’t previously get involved in the takeout business, but the emergence of companies like Deliveroo has generated extra orders for them. Good news, especially on days when there aren’t many tables booked and the kitchen staff are hanging around with nothing much to do.

However, there is a price to be paid for this. Consumers currently pony up a service fee that maxes out at £2.99 plus a delivery charge. The latter depends on how far the delivery rider/driver has to travel. It can be reduced via (frequent) offers, and there is also, inevitably, a subscription service that pays for itself with a couple of orders a month, and pays Deliveroo, too, because you’re unlikely to use its rivals if you’re signed up to it. Amazon, a significant shareholder, also offers a year’s free “silver” membership to its Prime subscribers.

But Deliveroo also charges a commission to restaurants. This can be up to 30 per cent per order, sometimes more. Chains can, and do, negotiate better deals. But it is tough on the smaller players.

Commission like this injects an extra cost into the system. It won’t necessarily hurt the consumer via higher prices if Deliveroo generates enough extra business, and thus profits, for its restaurant customers. But at 30 per cent, you need quite a bit of extra business to make it pay. And we’re now in a world where a restaurant not signing up to one or more of these firms is cutting off its nose to spite its face.

Could these charges now increase? When markets become dominated by a few big players, there is less incentive for them to compete with each other. Prices then go up. The Competition & Markets Authority is supposed to keep this in check. But will it do that in its new “pro-growth” – translation: don’t rock the boat – guise? The one ushered in by a government desperately in need of some economic good news?

Of course, consumer groups like Which? are more than capable of making a fuss and generating bad PR for businesses that soak consumers. And there are plenty of resources out there to help you minimise the cost of everything from your takeout to your home insurance.

But make no mistake: while this deal is good for shareholders, providing the ones who got in early with a means of capping their losses, it could yet lead to a bout of indigestion for those who don’t much fancy cooking and are inclined to order in at the end of a long working week.