On-demand grocery passes £2bn

But who's in charge?

Jul 10, 2024


What are on-demand groceries?

Grocery delivery falls into two categories: scheduled and on-demand.

If you book a delivery for a time-slot next week, tomorrow or even later today that is a scheduled delivery. It will generally be packed in a fulfilment centre and delivered in a branded van by an employee.

If you order groceries to arrive within the next hour then that is ‘on-demand’. It requires a whole different structure of fulfilment.

Isn’t that the model Getir, Gorillas etc tried and failed?

Yes, billions of dollars poured into ‘rapid grocery’ companies between 2019 and 2022. These companies sought to offer delivery from dark stores in as little as 10 minutes. Most of them have proved to be spectacularly unprofitable and many have failed.

So what is happening now?

Well, it turns out that customers actually really like on-demand groceries. The 10-minute fantasy has gone but we estimate that there are now 70-80 million on-demand grocery orders in the UK each year meaning that the market is worth more than £2bn.

Most of these orders are coming from traditional supermarkets selling on ‘aggregators’ (Deliveroo, Uber and Just Eat) but some supermarkets are also successfully selling directly to customers (Tesco Whoosh).

Which apps are people using to buy groceries on-demand?

Deliveroo and Uber dominate the market. Most of these orders are fulfilled by supermarkets, of which Co-op is the busiest.

However there are question marks over the future of these partnerships. Deliveroo also have their own grocery stores (Hop) and a close relationship with Amazon who are also Deliveroo’s largest shareholder. Uber recently launched driver pick & pack which could enable then to cut out supermarkets in the future.

Who is supplying the groceries?

Most grocers list on multiple apps; the exception is Tesco who only sell through their own channel ensuring control of the customer relationship and loyalty.

Our analysis of over 20 million orders gives the following estimated breakdown for Uber and Just Eat.

Deliveroo grocery sales are dominated by Co-op, Sainsburys, Morrisons and Waitrose and Asda.

Is it growing?

Yes, on-demand groceries continue to show strong growth. This has been very important for the platforms who have generally seen declines in restaurant orders.

The chart below shows the growth in grocery orders on Deliveroo. Without grocery orders Deliveroo’s order volume would have fallen by 9% since 2022.