Nando's chicken hits the road as delivery apps take flight

Restaurants that ignore delivery platforms like Deliveroo and Uber Eats do so at their peril

PNEXM7 Deliveroo drivers on mopeds in Dubai, UAE. Alamy


That is the word that sums up the overriding trend in the food and beverage sector right now.

According to Nando’s UAE’s managing director George Kunnappally, while the majority of the casual dining chain’s customers eat their chicken at its 22 restaurants in the country, a growing number are feeding their “peri peri obsession” through ordering via mobile apps for deliveries.

Indeed, sales growth has been driven in part by motor bike: Nando’s joined Deliveroo’s app in the fourth quarter, says Mr Kunnappally, and it is helping his business.

Nando’s like-for-like sales are up 18 per cent in the first quarter of 2019 compared to a year earlier. While last year 18 per cent of total sales were via delivery orders, in the first three months of this year, the proportion has grown to 22 per cent.

In the last year, the scale of the mobile app delivery business has grown considerably in the UAE, becoming a key part of the food and beverage sector.

This doesn’t just apply to Nando’s. The number of food delivery technology platforms that aggregate available restaurants has mushroomed to include Uber Eats, Zomato Gold, Talabat and Carriage, as well as Deliveroo.

According to research it has commissioned, Deliveroo generates Dh339 million in incremental revenue for the UAE’s restaurant sector, of which Dh286m is to chains.

“That’s the power and convenience of aggregators and it’s a phenomenon that’s only going to grow with consolidation in the sector,” says Mr Kunnappally.

Deliveroo forecasts that if it continues to grow at its current rate, by next year in the UAE it could support about 12,000 jobs and Dh727m of overall economic output.

The growth in demand for delivery comes as the food and beverage industry in the country faces an oversupply of restaurants and cafes after a decade of expansion across malls, hotels and other retail centres. Added to this is more cautious consumer spending as economic growth has slowed. The combination has resulted in a challenging environment for operators.

While Nando’s top 10 restaurants in the UAE have had sales growth every year, not all of its outlets have been able to grow at a similar pace, according to Mr Kunnappally.

“We have to accept the ground reality that the restaurant business today is largely driven by discounts and promotions in these trying times. We believe that the future of restaurants is a combination of dine-in and take away with delivery playing a significant role,” he says.

Ignoring delivery platforms would be ignoring customers’ growing appetite for convenience and being able to consume whatever food they want, wherever and whenever they want it, says Mr Kunnappally, who took on the managing director role last year to lead growth for Nando’s in the Emirates.

A handout photo of Nando's at World Trade Center Mall, Abu Dhabi (Courtesy: Nando's)

Internationally, the South African chain had a good 2018 financial year with global sales up 14 per cent to £969 million (Dh4.56bn), even as its pre-tax losses widened because of its investments in expanding its footprint. Nando’s UAE is the brand’s sole operator in the country and a privately owned company.

Deliveroo’s GM in the UAE, Anis Harb says that its growth “helps fuel the corresponding growth of our restaurant partners”.

“Restaurants who partner with Deliveroo see their revenue increase by up to 30 per cent on average, helping them and their suppliers grow and expand, creating thousands of jobs in the restaurant sector,” he says.

Deliveroo currently sub-contracts 1,500 riders - what it calls its delivery service people - across the UAE.

“This number has increased significantly over the last year, with more and more people signing up to become Deliveroo riders,” Mr Harb says.

However, Nando’s is not just reliant on the growth of these apps. It has 50 drivers of its own and a call centre to manage deliveries direct. It is also encouraging more people to dine-in and has tied up with The Entertainer to offer discounts.

“You have to strike a balance,” says Mr Kunnappally.

Ideally, he says, deliveries will not exceed 30 per cent of total sales, as customers continue to seek out the experience of eating at its restaurants.

However, Mr Kunnappally forecasts that by the end of this year, deliveries could account for up to 27 per cent of Nando’s sales.

Also, during the summer, deliveries will naturally increase thanks to the weather and the pull of Netflix and a night in.

These newer consumer habits have done as much as anything to impact the food and beverage sector.

At one of Nando’s outlets, at Shams Boutik Mall on Reem Island in Abu Dhabi, it is not unusual for customers to order deliveries up to eight times a month. For eating-in, a regular customer would typically be someone who dines once every four weeks, Mr Kunnappally says.

Deliveroo currently operates in 200 cities in 12 countries including the UK and Singapore and says its growth is good for the markets it operates in.

Its research shows it supports 67,000 jobs in total – not including its 130,000 drivers – and generates £2.1 billion additional revenue for the restaurants in those markets. By next year, it could be as many as 200,000 jobs and a £4bn contribution to the global economy.

Uber, which operates its Eats service in 19 countries, estimates the overall opportunity for delivery, takeaway and drive-through to be $795bn, out of $2.8 trillion spending worldwide on food and beverage in 2017. In its IPO filing, Uber said that the growth of delivery – at 77 per cent year-on-year since 2013 – is far outstripping the consumer food service market, which grew 5 per cent over the same period.

“We expect that the home delivery market will continue to grow as a result of the convenience that it provides consumers,” Uber said.

To Uber, the whole pie is up for grabs, which is a potential concern for the restaurants currently seeing such platforms as complimentary rather than competitive.

“We also believe that home delivery can address a portion of the $2.0 trillion eat-in restaurant spend, as more consumers choose to have prepared meals from restaurants delivered,” it said.