Deliveroo collapses: Food delivery giant suddenly goes into administration - here's what it means for customers

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Deliveroo may be named after an iconic Australian marsupial, but the food delivery giant will no longer be hopping meals across its streets.

The company on Wednesday afternoon suddenly announced it had gone into voluntary administration and would shut down all operations in Australia. 

Deliveroo told customers in an email that they would no longer be able to place orders on the app in Australia.

Customers will still be able to access their accounts and download their customer orders and information for six months.

Opening the app, where a list of restaurants would usually appear, is just an error telling customers 'there's a problem' and to try again later. 

Deliveroo suddenly announced it had gone into voluntary administration and would shut down all operations in Australia

Financial documents show the firm was put into administration on Wednesday with KordaMentha Restructuring appointed to take over.

Administrators Craig Shephard, Michael Korda, and Andrew Knight will either sell Deliveroo to a new owner, or liquidate it and sell it for parts.

How much debt Deliveroo's Australian arm is in, and who stood to lose money they were owned, was not immediately known.

Deliveroo told customers pulling out of Australia was a 'difficult decision' but it was 'doing business in challenging economic conditions'.

'We always aim to deliver the best possible service for our consumers wherever we operate, and if we cannot do that we will be prepared to review our position,' it said. 

'In Australia, we have concluded that achieving a sustainable position of leadership in the market is not possible without a disproportionate level of investment which would have highly uncertain returns.'

Deliveroo at the end of last year had just 11.7 per cent of the Australian food delivery market, behind dominant market leader UberEats on 52.9 per cent and MenuLog with 19 per cent, according to IBISWorld data

A separate announcement to investors explained that Deliveroo was simply too far behind that market leaders and it would cost too much to catch up.

'The company has determined that it cannot reach a sustainable and profitable scale in Australia without considerable financial investment,' it said.

'The expected return on such investment is not commensurate with Deliveroo's risk/reward thresholds.

Deliveroo at the end of last year had just 11.7 per cent of the Australian food delivery market, behind dominant market leader UberEats on 52.9 per cent and MenuLog with 19 per cent, according to IBISWorld data.

'In Australia, the market is highly competitive with four global players, and Deliveroo does not hold a broad base of strong local positions,' Deliveroo said.

Opening the app, where a list of restaurants would usually appear, is just an error telling customers 'there's a problem' and to try again later

The global company, headquartered in the UK, said its Australian business was just three per cent of its total revenue and was a drag on its profit.

'[Australia] negatively impacted the company's adjusted EBITDA margin (as a percentage of gross transaction value) by approximately 30 basis points,' it said.

Deliveroo has about 6,500 employees and drivers in Australia and would provide 'guaranteed enhanced severance payments for employees as well as compensation for riders and for certain restaurant partners'.

Business boomed for all players in the market during the pandemic when Australians were stuck inside during lockdown and restaurants could only provide delivery and takeaway.

Many liked the convenience and seven million kept using the service after dine-in reopened, according to Roy Morgan.

A survey found 33.4 per cent of the country used one in an average month in August, up from 16.9 per cent in early 2020.

Use of delivery companies skewed massively younger, and the percentage of Australians using one actually increased this year beyond the pandemic.