Just Eat aims to take a bigger bite of global fast-food market

For a man who has made his fortune from fast food, David Buttress is in surprisingly good shape. The self-styled “chief executive and anti-cooking activist” may be keen to encourage consumers to eat more takeaways but, as befits someone who once played rugby at county level, he is careful not to overdo it himself.

“I’m a once-a-week guy. A lamb madras curry on a Friday evening or occasionally a Thai,” he says.

The 38-year-old Welshman, who took over the reins at Just Eat in May 2013, has had a busy year in the hot seat. Last month, the online takeaway service made a £1.5billion (€1.8 billion) debut on the London Stock Exchange, in what was the biggest technology float on the market for eight years.

In going public, Just Eat became the first company to list on the exchange’s new high-growth segment, which aims to attract small, fast-growing tech firms by allowing them to float a smaller number of shares than would be required for a premium listing – as little as 10 per cent.

Having raised £360 million (€441 million) from its initial public offering (IPO) – £260 million of which went to existing investors including SM Trust, Index Ventures, Vitruvian Partners, Redpoint Ventures, Greylock Partners, executives and staff (including Buttress), former employees and early-stage investors – the company is now in full-on expansion mode as it seeks to grow its market share globally. It has since transferred to a premium listing following a high demand for its shares. Ireland is the third largest market for the company in terms of number of orders (though not necessarily revenue) and is growing rapidly.

Just Eat, which started in Denmark in the early Noughties but moved to London in 2006, is one of the world's leading online takeaway ordering services. More than 36,000 restaurants have signed up to use its platform.

It currently operates in 13 countries – Belgium, Brazil, Canada, Denmark, France, India, Ireland, the Netherlands, Norway, Spain, Sweden, Switzerland and Britain.

In 2013, the group processed more than 40 million orders, generating nearly £700 million in total transaction value for the restaurant industry.

For Buttress, who’s been with the company since 2006 and was its UK managing director until his recent promotion, it’s a relief to have gotten the flotation out of the way.

“We’re delighted to get it done. An IPO is long in the making. There was probably about 18 months of work involved in getting Just Eat public so we’re happy to have done it and now it’s back to work,” he says.

The company reported pre-tax profit of £10.2 million last year, giving it a valuation multiple of almost 150 times profit just after it floated at 260p a share for a market cap of £1.47 billion.

Despite widespread fears over a new tech bubble, Buttress doesn’t think that Just Eat has been overvalued. He’s adamant that investors are right to take a punt on the company.

“I think the valuation is based on a number of factors. One of these is that Just Eat is a hugely successful European technology business that is now 13 years old and has a proven track record. This is a high-growth internet company that is growing in double digits year-on-year and is ahead of expectations, as our latest interim statement for Q1 shows. People can see that, in the future, this company will be a fantastic asset and, in the end, that is what is exciting investors.”

Whether Buttress is right or not remains to be seen – the share price has come back from a post-flotation high of 297p to just under £2 a share this week, giving it a current market cap of about £1.13 billion. But either way it certainly looks like he made a smart decision when he jacked in a well-paid job with Coca-Cola and joined Just Eat when it was starting to expand into the UK in 2006.

After moving from Cardiff to study for an arts degree in law and business at Middlesex University Business School, he quickly concluded that he didn’t fancy a career in the legal sector and so joined Coca-Cola as a graduate. He ended up spending eight years at the company in a number of senior sales roles.

A meeting with Just Eat founder Jesper Buch changed everything though.

“Like all good relationships, it started in a bar. We became friends and Jesper said that we should build the business together in the UK. At that point the company was only operating in Denmark where it had just broken even for the first time. I told him he must be mad if he thought I was going to give up my job and go and work with him in a basement on a start-up.

Biggest market
"But a few months later, I resigned from Coke because I fell in love with the business model. I thought it was something that was fantastic for restaurants and consumers and figured that someone was going to do it anyway, so it might as well be me."

He signed up the first UK client by knocking on the door of his local takeaway in east London.

The UK is now Just Eat’s biggest market, contributing nearly 70 per cent of group revenues in 2013. Ireland has also played a major part in the company’s success, according to Buttress.

“Ireland is a massively successful country for us. It’s our fastest growing mobile market, with over 170,000 downloads of our app since its launch in October, which says a lot about Irish consumers and their willingness to adopt technology quickly,” he says.

Just-Eat.ie launched in Ireland in May 2008 and is now the third biggest market for the group. Last year, there were more than six million visitors to its website, resulting in 1.5 million orders that generated over €20 million in revenue for the takeaway industry. “Ireland is strategically critical to Just Eat. It’s a pretty mature market for us and it’s now profitable, so it’s doing very well,” he adds.

Just Eat currently employs 40 people locally. It has 1,400 restaurants signed up in Ireland, with a further 40 being added every month. With as many as 25 per cent of Irish consumers having a takeaway at least once a week, according to Euromonitor, it’s easy to see why Just Eat might want a slice of a market that was worth an estimated €251 million in 2012 alone.

Buttress says that the reason for its success in Ireland and the other markets in which it operates is largely built around there being plenty of independently-owned restaurants that would find it too expensive to build their own ecommerce offering.

“If you look across most of Just Eat’s markets, you see a similar pattern. There’s fragmentation on the restaurant side with lots of locally-owned businesses and chains aren’t so prevalent.”

He admits that making inroads into markets such as the US, in which big restaurant chains dominate, wouldn’t be easy for the company.

Commission
"We think that where there are major chains, it erodes the value of a marketplace aggregator such as Just Eat. If there's a major chain, they can build their own ecommerce platform whereas smaller restaurants are more likely to want and need the kind of assistance we provide."

The Just Eat business model is relatively straightforward. It charges restaurants £699 (€856) for a physical hardware terminal to process orders that come in from customers via their smartphones, tablets or PCs. It also takes a commission of between 10 to 12 per cent on every order made.

Buttress says the model is one that works well for both customers and restaurants. About half of all customers who make an order through Just Eat do so again, he says, while restaurants gain from getting higher-value orders than from traditional over-the-phone ones.

“Our retention rate among businesses is phenomenal. Unless a restaurant closes down, they’ll pretty much stay with us,” he claims.

That may be true, but with plenty of competition out there, the question is whether those restaurants will go with them as well. While Just Eat doesn’t have much in the way of competition in Ireland outside of Eat City, it’s a different story elsewhere, with a whole raft of rivals such as GrubHub and HungryHouse all out to take market share from the company.

Buttress appears relatively unfazed by this or by the fact that Just Eat owns little in the way of intellectual property.

He admits that Just Eat’s branding and platform is the only real IP the company has, but he believes that its position in the marketplace, and its intention to strengthen its position in terms of technology by offering more to partner restaurants, should safeguard it.

“We’ve built ourselves up as clear leaders in all the markets we operate in, so that gives us a massive strategic advantage in terms of being able to invest further in our products and build the brand,” he says, citing the company’s recent purchase of Meal2Go, a maker of electronic point-of-sale (Epos) technology for the restaurant sector.

“One of the reasons why we acquired Meal2Go was that this will also be good in terms of the customer experience because they care passionately about their food coming on time and being hot. If we can join up the dots between when you order and when it arrives, then that’s an exciting prospect,” he adds.

Buttress is keen to point out that the company’s existing technology is impressive enough.

“Unlike Amazon, we don’t have two or three days to fulfil an order, we have 45 minutes from when the customer says go. If you think about the complexity involved in processing hundreds of thousands of orders involving tens of thousands of restaurants, and all in real-time, then that’s pretty remarkable,” he says.

Another growing threat the company may have to deal with surrounds concerns over unhealthy foods. With obesity now seen as one of the most serious public health problems of the century, companies involved in the fast-food sector are increasingly being called upon to do more to promote healthier lifestyles. Buttress says Just Eat is doing its bit in this regard by working with restaurants to provide more information to customers.

“Food labelling is important to us and we’ve been at the forefront of this, working with the Food Standards Authority and the Department for Environment, Food and Rural Affairs in the UK for several years to consult on industry standards and how to improve them in the independent restaurant sector,” he says.

He isn’t so fond of the idea of a fat tax to discourage unhealthy diets though, as has been suggested by some politicians in response to rising obesity levels.

"My concern is that it is a headline grabbing stunt that hasn't really been thought through . . . I would be cautious about it because I've yet to see any evidence from any market in which it's been implemented to suggest that it works," he says.
CV: David Buttress
Name: David Buttress
Position: Chief executive and "anti-cooking activist" (according to his business card)
Age: 38
Family: Married for nine years, one son aged three.
Hobbies: Buttress says he has little free time outside of leading Just Eat and being a parent, but he retains a keen interest in rugby and is a devoted fan of Wales.
Something you might expect: He admits to being highly competitive and wants to win at whatever he's doing.
Something that might surprise: David has dreamed of owning a rugby club since he was very young and still has a burning desire to make that dream come true.