Uber Eats plans Germany launch in challenge to Just Eat Takeaway

Uber is attempting to break what it called Just Eat Takeaway.com’s “monopolistic” stranglehold on the German food delivery market, in the biggest test yet for the Silicon Valley company’s use of employed couriers instead of gig workers for meal conveyance.

Uber Eats will launch in Germany for the first time over the next few weeks, starting in Berlin, in its biggest entry to a new country since 2018.

Pierre-Dimitri Gore-Coty, Uber’s senior vice-president of delivery, told the Financial Times that Germany was one of its fastest-growing markets in ride-hailing, which it operates in 13 cities, and a “strategically important country” as it strives for group profitability for the first time this year.

“Europe in particular has been a bright spot for [Eats], both in terms of some of the growth we’ve seen, but also, frankly, in terms of the strengthening of our market position,” he said, pointing to market share gains in the UK and Spain.

More than 24m people in Europe used Uber Eats to order meals from more than 126,000 restaurants last year, which were delivered by about 370,000 couriers.

But in Germany, Gore-Coty said, “you have one player that is effectively dominating that country”, describing Just Eat Takeaway’s commission rates as “extraordinarily high”. “That translates into consumers and merchants actually being quite desperate for additional options,” he added.

Uber Eats’ couriers in Germany will be employed by fleet management companies, similar to minicab firms, who are contracted by Uber. The scheme is similar to how its passenger business already operates in the country, which bans the use of drivers without a passenger transportation licence.

Uber will pay its German partners for each order. It is then up to those fleet managers how they pay their employees. A similar model was already put in place at its food delivery business in Geneva after a court case in September last year, but Germany would be a far larger test for its profitability.

Gore-Coty said working with a fleet manager “typically adds cost to the system” and can make it harder to expand beyond larger cities, but it can also “create some efficiency” in how workers are managed. “There are a lot of factors at play” in how the economics compare with its original gig-worker model, he said.

Despite their arguments that workers prefer the flexibility of being independent contractors, Uber and other gig-economy companies are facing regulatory challenges across Europe, after February’s UK Supreme Court ruling that Uber drivers should be classified as workers rather than independent contractors.

Prosecutors in Milan have threatened online delivery services with fines running into hundreds of millions of euros after a year-long investigation into working practices. In Spain, the government is planning to give employee status to tens of thousands of delivery workers, forcing Uber to consider switching to a German-style employment model.

“We will continue to advocate for an independent contractor model,” said Gore-Coty, arguing that workers preferred its flexibility. But Uber is having to get used to changing its approach. “I don’t know that there will necessarily be a single and well-aligned answer across each and every European country,” he said.

Uber Eats’ expansion into its largest untapped takeaway market in Europe follows a period of retrenchment. Last year it exited India and several smaller markets in eastern Europe, Latin America, the Middle East and Africa, after leaving South Korea in late 2019.

In several cases, Uber sold its struggling local businesses in return for sizeable stakes in the dominant participant. One of them, Singapore’s Grab, plans to soon go public via a special purpose acquisition company, or Spac, at a value of almost $40bn. Uber’s 14.3 per cent holding in the company would be worth more than $5bn at that value.

In the markets where it remained, Uber Eats has seen explosive growth during the pandemic. In a recent filing, it said food delivery had in March reached a $52bn annualised gross bookings run rate, up more than 150 per cent on pre-pandemic levels.

Just Eat Takeaway.com, whose acquisition of Grubhub is taking it into Uber’s home market of the US for the first time, has dominated online food ordering in Germany since Deliveroo withdrew from the country in 2019, leaving few competitors of meaningful scale.

Germany has become a vital source of profits for Just Eat Takeaway as it invests heavily to build up its “Scoober” in-house logistics network in the UK, where the battle for market share against Uber and Deliveroo has been intense.

Uber’s challenge to Just Eat Takeaway in its second-largest market by order volumes comes just a few months after Finnish delivery start-up Wolt first arrived in Germany. Jitse Groen, Just Eat Takeaway’s chief executive, has been so confident of its position there that in January he dismissed Wolt’s German launch as “possibly the worst investment case that I’ve seen in the [food delivery] business thus far”.

Gore-Coty said Uber had already signed up “dozens” of restaurants, including some large household-name chains. “If I judge by the experience we have in places like Spain or even in smaller countries like Netherlands or Belgium [where Just Eat Takeaway also dominates], I’m pretty convinced that this will translate into actually very rapid growth for Uber.”

This article has been amended to show that Grab is a Singaporean company