The Spanish food delivery business is cooling and brands are upping the ante on promotions. It faces a contraction in 2023 after years of unstoppable growth driven by the COVID-19 pandemic. This change in its dynamics is due, on the one hand, to consumers’ growing preference for in-restaurant experiences, reflecting a gradual recovery from pre-pandemic habits. The share of in-restaurant consumption versus food delivery already increased by 4 percentage points during 2022.
Between January and April 2023, the delivery business has experienced a significant decline of -8.9% in its active user base. As Simon-Kucher’s study “The evolution of food delivery in Spain” points out, although there were already signs of a slowdown in 2022, it is the impact of inflationary pressures in 2023 that has finally triggered the end of the growth trend.
In the midst of this inflationary spike, the highest the foodservice sector has faced in the last three decades, food delivery companies are seeing significant changes in consumer habits.
However, inflation itself is only an indicator; what really impacts on spending patterns is how consumers perceive inflation. According to Simon-Kucher’s quarterly inflation observatory, users of the delivery channel are currently experiencing inflation more than three times higher than actual inflation as a result of unsophisticated price changes – and in traffic-leading products – by the industry.
Carles Munich, Senior Director at Simon-Kucher, points out that “although inflation has stabilised in recent months, consumers’ perception of inflation continues to rise. The break in price optics, the halo effect and confirmation bias are behind this multiplying factor”.
Brands reacting to keep up
This amplification in perceived inflation has transcended into the consumption habits of delivery users who, compared to 2022, have reduced the frequency of their orders by 10% and spend up to 20 seconds more per session looking for offers and promotions.
As for the business benchmarks, Burger King – the undisputed leader until now, reaching penetration levels of 15% during the confinement – is joined by Glovo in 2023. Both with an average of 3 million active users per month so far this year, although they reached figures close to 3.5 million at the end of 2022 driven by the indulgence of the Christmas holidays.
The main delivery players have been trying to minimise churn
In this context of changing trends, the main delivery players have tried to minimise churn through aggressive, frequent and sustained retention initiatives. Among other actions, brands are promoting targeted communications (push notifications and reminder emails) as well as gamified promotions that encourage recurrence.
In the words of Miguel Afán, partner at Simon-Kucher, “promotions are a good lever for traffic activation, but they require careful planning to avoid competition between products and traffic cannibalisation. A poorly executed promotion can have serious consequences in terms of profitability”.
In the case of Glovo, it is not only trying to maintain activity among its existing user base, but has also invested in acquiring new users via paid downloads, i.e. improving the visibility and positioning of its app in app shops. Despite experiencing a slight decline at the beginning of 2023, it is one of the few delivery players that has achieved positive growth in the number of active users in the last 12 months.
According to Victor Lorenzo, manager of Simon-Kucher: “After years of growth, the food delivery business is facing an inflection point where unfavourable macroeconomic factors – such as inflation – converge with other endogenous factors such as the apparent saturation in the penetration of the channel. So much so that 65% of Spanish consumers claim to have made use of home delivery services at some point. After a massive adoption of the delivery channel by the restaurant industry in the wake of the pandemic, now is the time to look for ways to make it profitable.