Prosus has announced that it will acquire Just East Takeaways.com N.V. (TKWY) with an all-cash offer equivalent to EUR4.1bn. While we do not cover either company or issue recommendations on them, the proposed acquisition presents some interesting demographic challenges, which we think could impact its growth prospects.
We highlight the dependence of the food delivery model on the availability of couriers and find it curious that the requisite supply of these workers is not reflected as a principal risk in its financials. We show how the population in the 15-29-year age group, the likely age of couriers, could drop substantially over the next 15 years. Rising anti-immigration policies in Europe could also exacerbate the situation, as migrants may have taken up a significant portion of the courier jobs.
We calculate that Just Eat’s growth ambitions could require it to grow its courier base from 61 939 workers in 2023 to 81 500 by 2030, and to 99 000 by 2035. Given the shrinking pool of young workers, growing demand for this labour force could drive up delivery costs, in our view.
We show the relatively high cost of employed couriers, noting that the model is better suited for flexible labour arrangements. However, increased regulations in some countries could force the company to take on more employees for its deliveries.
We calculate that, with its current cost structure, it would need to increase order volumes by 175m to break even. This would require around 17 900 additional couriers (a 28.9% increase from its current base), by our estimates.
The decline in the total population in some of its key markets could also affect Just Eat’s topline growth. By 2040, Bulgaria’s population could drop by 12.6%, with Poland falling by 8.7%, Italy by 6.9% and Germany by 4.7%. These smaller populations could reduce its target addressable market, and could weigh on Just Eat’s revenue growth, in our opinion.