Devin Sinclair, head of Mr D Food, sees no sign that growth in food delivery services will decline. Picture: Supplied
Devin Sinclair, head of Mr D Food, sees no sign that growth in food delivery services will decline. Picture: Supplied

Each Friday night, at about the same time, an army of scooters descends on gated communities around SA to deliver takeout meals. It’s creating a world of security problems at upmarket estates such as those near Dainfern in northern Joburg.

The estate managers overseeing this influx of delivery vehicles find themselves having to track whether the vehicles are going to the right housing unit and leaving promptly once their deliveries are made.

It’s a problem that didn’t exist a few years ago. That’s because the technology underpinning this service — smartphones with global positioning devices — did not exist at a price point most people could afford.

"Five years ago a service like this would have been impossible," says Mr D Food CEO Devin Sinclair.

The rise in number and increasing affordability of hand-held devices with incredible computer processing power have laid the foundation for a revolution in food delivery, says Sinclair.

The combination of smartphones and the ability to make payments by mobile phone and track deliveries via satellite has created a sharp rise in demand for services such as Mr D and Uber Eats in SA.

These services have also been boosted by the rise in cloud computing, which enables companies to buy processing power and storage as a service rather than spend a small fortune on a mainframe computer.

It has meant they can rapidly scale up their services without too high a cost.

The effect on the online food delivery market in SA has been astounding. The value of food bought online in SA, along with delivery fees, will reach $453m in 2019, growing to $726m by 2023, according to research group Statista.

Research by Insight Survey found similar results: busy consumers are increasingly opting for the convenience of online delivery services when buying fast food.

We are barely scratching the surface. SA is one of our most exciting markets
Rodrigo Arévalo

The move to purchasing food online is particularly good news for fast-food operators, which have felt the pain of the sluggish economy. In December, overall sales for takeaway and fast-food outlets fell 5.1%, while those for restaurants and coffee shops dropped 1.1%.

But online orders as a share of that would seem to be growing. While people might have shied away from buying a Happy Meal at their local shopping mall in the lead-up to Christmas, they had fewer qualms about ordering by app, judging by the number of times the Mr D and Uber Eats apps have been downloaded.

Since its launch in November 2016, the Uber Eats app has been downloaded more than 1-million times in SA, and the company has partnered with just over 2,500 restaurants. Naspers-owned Mr D’s app has been downloaded 2.5-million times, and is serving 3,500 restaurants.

Sinclair says there has been a clear acceleration in the take-up of online delivery: it took two years to get Mr D’s app to the 1-million downloads mark, and just six months to increase that by a further 1.5-million. The number of regular users has increased from 250,000 in December to 375,000. And the number of drivers contracted to the company has grown threefold to 3,000 in the past year.

The importance — and growth — of online orders to fast-food operators’ bottom line is also evident in the fact that, for example, McDonald’s now operates a fleet of delivery scooters in addition to using the services of Mr D and Uber Eats.

The online food revolution in SA has brought with it behavioural change. Where early adopters tended to place orders on Friday nights, customers now order food at lunchtime too.

And on Valentine’s Day, 3,500 new customers signed up and transacted through the app. Sinclair suspects this was a case of couples ordering in and watching Netflix.

Rodrigo Arévalo, head of Uber Eats for Europe, Middle East & Africa, is encouraged by what he’s seeing in SA. "We are barely scratching the surface," he says. "SA is one of our most exciting markets."

Arévalo sees Uber replicating in the food delivery market what it did for ride-hailing. Where, for many people, taking a taxi was previously a once-in-a-while occurrence, Uber has brought down the price and ease of using the taxi service to the point where they use it every day.

The company has similar ambitions for food delivery. "We can become an everyday option," Arévalo says. "People eat about 21 meals a week. And the fact that they rely on food delivery two to three times means there’s 18 times they are cooking something for themselves."

Uber wants to increase the proportion of meals people order each week — but this will mean offering a spread of different types of meals at different price points.

The way Arévalo sees it, the delivery option allows restaurants to rethink their business models. One of the key drivers of a restaurant’s success is its location — and that may carry a substantial cost burden. If restaurants move towards online ordering, location is less relevant to the consumer, and quality becomes the deciding factor.

What it means

SA’s online food delivery market is expected to reach $453m in 2019, growing and grow to $726m by 2023

Online delivery also allows restaurants to make better use of their kitchen facilities. He says several restaurants with excess kitchen capacity have opened virtual or ghost restaurants — restaurants that only exist online.

One such establishment, The Kind Kitchen in Cape Town, started out as a ghost restaurant and later transformed itself into a sit-down establishment.

And then there are the outfits that incorporate online delivery into their business model from the get-go.

Lexi’s Healthy Eatery was established in Sandton just eight months ago. Co-owner Lexi Monzeglio says the original intention was for online orders to comprise 20% of the restaurant’s business. It has mostly met this target — and it has had people frequent the restaurant after discovering it through ordering online.

Sinclair and Arévalo say this is a knock-on benefit of online delivery. Mr D, says Sinclair, charges customers a delivery fee and takes a percentage of the total value sold, but it’s also advertising restaurants on its app.

Uber Eats makes money by charging a delivery fee and taking a cut from the sale of meals.

The percentage is steep. Lexi’s Healthy Eatery, for example, pays Uber Eats about 31% of the value of each meal.

This has meant several restaurants have increased prices on their online menus to offset the percentage they pay to delivery firms.

Pricing is not the only testy issue the delivery firms have to negotiate. There’s also the question of who carries liability for their drivers, who are all contract workers. It’s become a talking point, with delivery services coming under pressure to cover costs such as insurance and medical cover.

Mr D leaves this responsibility to its contract drivers and driver franchisers. As of August, Uber Eats offers insurance through Chubb Insurance.