Menulog, a key player in Australia’s food delivery sector, has announced it will cease operations in the country in two weeks, marking a significant shift in the industry landscape. The decision comes as the company struggles to compete with rivals like UberEats and DoorDash, which have successfully diversified into grocery deliveries.
The company’s exit will affect approximately 120 employees, who will be offered redundancy packages, and “eligible couriers” will receive a four-week voluntary payment. Menulog advised customers to use any remaining credits or vouchers promptly.
Market Dynamics and Menulog’s Decline
Menulog’s inability to pivot effectively into grocery deliveries, unlike its competitors, has been cited as a major factor in its downfall. Dr. Alex Veen from the University of Sydney’s Business School noted, “Compared to its rivals Uber and DoorDash, who heavily pivoted into grocery deliveries, Menulog did not diversify as drastically.”
Once a dominant force with around 80% market share in 2014, Menulog’s share has dwindled to less than 25%. Dr. Veen explained, “Being profitable as a food delivery platform is a delicate balancing act. The sector has thin margins, relatively little-to-no value add, and has been subject to backlash from restaurants, consumers, and workers.”
“Menulog wanted to do the right thing by its workforce but years of regulatory neglect by Coalition governments has meant that change has come too late.” — Michael Kaine, TWU National Secretary
Impact on the Gig Economy
The Transport Workers’ Union (TWU) has expressed concern for the thousands of food delivery riders who rely on Menulog for income. TWU National Secretary Michael Kaine stated, “This will be a shock to the thousands of food delivery riders who rely on Menulog for income.” The union is advocating for fair exit payments and has praised Menulog for supporting legislation to set standards for the gig economy.
Despite Menulog’s efforts to shift to an employment model, the company faced challenges in implementing changes due to regulatory constraints. The TWU is urging remaining players like UberEats and DoorDash to support these standards to protect gig workers.
Broader Market Trends
Menulog’s closure is part of a broader trend in the food delivery market, where consolidation is occurring. UberEats currently dominates with more than 70% market share. According to market research firm Fonto, Menulog’s market share has been declining since 2022, despite initiatives like waiving delivery fees and supporting community initiatives.
Meanwhile, the Australian share market has been experiencing fluctuations. The ASX 200 closed down 0.2% to 8,799 points, with technology and consumer cyclicals weighing heavily on the markets. However, materials and energy sectors led gains, with Mineral Resources performing strongly due to a significant deal with South Korea’s POSCO.
ASX 200: -0.2% to 8,799 points; Australian dollar: Flat at 65.2 US cents; Wall Street: Dow Jones (+1.2%), S&P 500 (+0.3%), Nasdaq (-0.2%)
Looking Ahead
The departure of Menulog underscores the challenges within the food delivery industry, particularly in maintaining profitability amidst fierce competition and evolving consumer demands. Experts suggest that the market may be heading towards a duopoly or monopoly, with fewer players dominating the space.
The implications for gig workers and the broader market are significant, prompting calls for regulatory intervention to ensure fair practices and protections. As the industry continues to evolve, stakeholders will need to adapt to changing dynamics and consumer preferences.
As Menulog prepares to exit, the focus will shift to how remaining players will navigate the competitive landscape and address the challenges facing the gig economy. The situation highlights the need for strategic diversification and regulatory support to sustain growth and ensure fair treatment of workers.
