Eat Out or Order In? Investors Can Choose

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Too many cooks? Not for the usual lunchtime onslaught at Vapiano. Source: Picture Alliance

Order food online for home delivery, or pop around the corner for a quick bite? The question confronting an ever growing number of consumers worldwide is also of ever more pressing interest to investors. In June, for example, fast-causal Italian-restaurant chain Vapiano and restaurant food-delivery company Delivery Hero listed on the Frankfurt stock exchange.

For now, at least, investors are clearly choosing the “order in” option over eating out. Vapiano’s shares have been trading below issue price almost since day one, while Delivery Hero’s stock is trading comfortably above its initial public offering price. Delivering other restaurants’ food seems a more palatable business model to investors than operating restaurants.

Both companies have developed different strategies to benefit from a global trend – increasingly more consumers in industrialized countries staying out of their kitchens. Just 39 percent of Germans, for example, last year used cooker or oven every day. The country’s food-service revenues are forecast to grow by at least one fifth by 2021, from €52 billion last year.

Form Mexico City and New York City via Europe to Sydney – Vapiano counts about 190 restaurants in 30 countries. They cater to office workers and other people in a hurry, and more than half are owned by Vapiano directly. CEO Jochen Halfmann wants to use the €85 million the company netted through its IPO to double the number of restaurants worldwide.

Active as far afield as Bogota, Berlin and Bangalore, Delivery Hero raised more than five times that amount, some €483 million after deductions. But CEO Niklas Östberg’s priority is to pay off €310 million in debt, the result of an aggressive acquisition strategy. Before going public, he added German rivals like Foodpanda, as well foreign ones like Kuwait-based Talabat, to the Delivery Hero portfolio.

As a result, Delivery Hero has posted losses every year, a trend analysts at Berenberg Bank expect to continue until the end of 2019. But Mr. Östberg’s rush for market share has seen revenues more than triple to €297 million this year from €88 million in 2014, and rivals edged out in 35 of 42 markets. Six out of seven analysts following it give the stock a “buy” rating.

With 16 new restaurants last year, Vapiano’s growth has been less break-neck. While the company increased revenue by nearly two-thirds between 2014 and 2016 to almost €249 million, it continued to operate at a profit. The flipside, as analysts at US investment bank Jefferies point out, is that Vapiano faces much stiffer competition in its markets.

Germany's food-service revenues are forecast to grow by at least one fifth by 2021, from €52 billion last year.

The US chain Chipotle Mexican Grill, a market leader in its home country, has opened its first branches in the UK, France and Germany as the prelude to broader European expansion. On top of that, say the Jefferies analysts, German chains Dean & David and Hans im Glück as well as UK-based Wagamama could well give Vapiano’s Mr. Halfmann a run for his money.

Then again, Delivery Hero is not home and dry, either. It takes care of more users, orders and restaurant partners in more countries than any other platform. But it might be spreading itself too thin: Main rival JustEast has sales 25 percent higher from operations in only 13 countries, and its market capitalization of €4.6 billion is roughly the same as Delivery Hero’s.

Across the Atlantic, U.S. market leader Grubhub announced record second-quarter results earlier this month, with revenues growing by a third to nearly $159 million. CEO Matt Maloney hailed 2016 a “transformative year” in which revenues grew to $493.3 million from $361.8 million the prior year. These results dwarf Delivery Hero’s 2016 financial performance.

But the German company has turned to a new investor to help generate business in South America, in particular Brazil. Naspers, the South African media conglomerate, recently took a 10-percent stake in Delivery Hero. CEO Bob van Dijk said the move “will help us rise to global market leader.” If he’s wrong, investors can always switch to the “eating out” option.


Kevin Knitterstedt reported this story from Frankfurt for Handelsblatt. Amanda Price in New York adapted this story for Handelsblatt Global. 

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