Deliveroo quits Australia amid tough competition

Food delivery firm Deliveroo said on Wednesday that it has ended its operations in Australia after it failed to keep up with competitors.

The company's Australian subsidiary has been placed into voluntary administration and will permanently cease trading imminently.

"This decision is driven by the company's disciplined approach to capital allocation," Deliveroo said.

"Management is committed to driving growth and delivering on its path to profitability while aiming to have strong, profitable businesses in each of the markets in which it operates, built on the foundation of leading hyperlocal market positions."

Deliveroo noted that the market in Australia is "highly competitive", with four global players. The company itself "does not hold a broad base of strong local positions," it said.

The group said it would not have been able to reach a sustainable and profitable scale in Australia without considerable financial investment, and that "the expected return on such investment is not commensurate with Deliveroo's risk/reward thresholds".

Chief operating officer Eric French said: "This was a difficult decision and not one we have taken lightly. We want to thank all our employees, consumers, riders and restaurant and grocery partners who have been involved with the Australian operations over the past seven years.

"Our focus is now on making sure our employees, riders and partners are supported throughout this process."

Victoria Scholar, head of investment at Interactive Investor, said: "There are many rivals in Australia like Uber Eats and DoorDash which makes fighting for a slice of market share more challenging and costly.

"The food delivery business has already exited other markets including Germany and Spain for various reasons. There are concerns that Deliveroo is not well positioned to weather the economic downturn with takeaways a discretionary spend that consumer can easily slash as belts tighten. With soaring inflation rates, the cost-of-living crisis, rising mortgage costs and depressed consumer confidence, households are seeking ways to make cutbacks with Deliveroo in the firing line.

"The company has had a rough ride ever since its disastrous IPO in March 2021. Shares are down by two-thirds over a one-year period, although they have been attempting to regain ground lately, up over 20% in the last months thanks to broader risk appetite and accompanying demand for equities."