Deliveroo PLC

LSE:ROO

Earnings Call Transcript 2021-Q4

[William Shu, Founder, CEO & Director]

Hello, everyone. Good morning. I'm Will, I'm the Founder and CEO of Deliveroo.

[Adam Miller, CFO & Director]

And I'm Adam, I'm the CFO here at Deliveroo.

[William Shu, Founder, CEO & Director]

Thank you all for joining today for this morning's presentation of our Q4 trading update. We'll keep this morning session brief. We'll be updating on orders and GTV numbers for Q4 and the full year, and then we'll quickly move into Q&A. As a reminder, we're presenting our full year results on March 17.Just a quick housekeeping note before we get into today's numbers. In Q4, we ended our operations in Spain. In order to provide a better understanding of the ongoing business, all figures in this presentation, which include financial and operational numbers exclude Spain. For completeness, there's a table in the appendix of the slide deck as well as in the RNS, providing numbers, including Spain. So let's get started.Overall, we have finished the year with a really strong fourth quarter, and we have continued to make good progress in executing our strategy. In terms of key takeaways, there are a few. Number one, the strong Q4 performance completes an excellent year of growth for us in '21. We delivered full year GTV growth of 70% year-on-year in constant currency, with orders up 73%. This GTV growth is right at the top end of our guidance for 60% to 70% growth, which you may recall, we upgraded twice during the year. In the fourth quarter, orders in GTV were up 42% and 36%, respectively, year-on-year, which means we saw good sequential growth in Q4, with GTV up 11% and orders up 10%.Looking further down the P&L, we'll be providing that detail at our full year results on the 17th of March, but we are maintaining our gross profit margin guidance range of 7.5% to 7.75%.So let's turn to our marketplace. I want to begin by highlighting our complex 3-sided on-demand marketplace. I know you guys have seen this slide many times, but it's really, really important to me. We think about each side, our riders, restaurants and grocers and end consumers as customers of Deliveroo. We balance the interest of all 3 sides as well as Deliveroo. But ultimately, the strength of our performance is driven by how well our proposition works for each group. And if you look at the left-hand side of this slide, throughout Q4, we've seen continued strong engagement from each side of the marketplace. So our average monthly active consumers have increased from 7.3 million in the third quarter to 8 million in the fourth quarter.Rider satisfaction has remained strong at 85% across our global network of over 180,000 riders. 3 months ago, I said that we were monitoring the labor markets closely, especially in the U.K., but that we were still seeing encouraging application pipelines and rider retention rates, despite a large number of vacancies in other industries. This has not changed. Rider pipelines and retention rates are still strong, which I think is a testament to the strength of our rider proposition and the flexibility of on-demand work.In the fourth quarter, the European Commission put forward initial proposals relating to platform work. We think this is a positive step and a path to providing greater clarity on the definition of a self-employed platform worker, which is good for everyone. What we want to see is that the flexibility that riders value above all else is protected. The EU says they want to end false self-employment, which we agree with completely. And they have actually said that their proposals will confirm that the majority of platform workers are self-employed.Now, to the restaurant side. We further increased our great restaurant selection with more than 148,000 partner sites now live on the platform globally. For grocers, we have continued to rapidly expand our grocery rollout with over 11,000 partner sites now live. This growth has seen on-demand grocery as a percentage of total GTV increased to 8% in the second half. And I want to take this opportunity to thank all of our restaurant and grocer partners for their continued partnership through a difficult time.Now, let's have a look at these numbers in a bit more detail in the next few slides. So let me start by taking you through the consolidated numbers on a full year basis, and then, Adam will take you through the quarterly and the following slides. So let's start with average monthly active consumers.Across all of '21 and we have averaged 7.5 million monthly active consumers. This is up from 4.6 million in the prior year, representing a 64% increase. The split of our consumer base is broadly equal between the 2 geographic segments we report, and the growth has been consistent across both, indicating good strength across our portfolio. We achieved global orders of 301 million. That's up 73% year-on-year, whilst GTV increased to approximately GBP 6.6 billion, up 70% on a constant currency basis. Again, both geographic segments grew at similar rates, contributing fairly evenly to overall group growth. We'll get into these geographic segments in a bit more detail in a few slides' time, but Adam is going to first take us through the quarterly numbers at a group level.

[Adam Miller, CFO & Director]

Thanks, Will, and good morning, everyone. As you've already heard from Will, a strong Q4 has seen us complete an excellent year of growth. Q4 orders grew by 42% year-on-year, while GTV increased to GBP 1.7 billion, up 36% on a constant currency basis. We have continued to show you the 2-year growth numbers as well, given that 2020 was an extraordinary year. We are particularly pleased with the year-on-year growth numbers because the Q4 2020 comps are tough. Q4 in 2020 saw lockdowns across a number of our markets, including the U.K., Ireland, France, Italy and Australia. In 2021, despite the Omicron surge, there were no severe restrictions in the vast majority of our markets. As we look towards 2022, it is worth pointing out that the toughest comps in 2022 will come versus Q1 2021, when many of our markets were in strict lockdowns. As Will noted earlier, we've seen sequential growth in Q4 of 10% in orders and 11% in GTV. Let me now talk a bit about what we've seen in terms of GTV per order trends. As a reminder, March 2020 was where we started to see increases in AOV with the introduction of lockdown restrictions. In Q2 and Q3 2021, year-on-year order growth outpaced GTV growth, as average order values have reverted back towards pre-pandemic levels. This has continued in Q4, with GTV per order decreasing by 5% year-on-year in constant currency. However, we see a different story sequentially. You can see on the chart that the AOV reversion happened in the first half of 2021 before stabilizing in the second half. GTV per order in Q4 increased by 1% in constant currency versus Q3.Let's move on to our consumer metrics. We saw a very healthy increase in average monthly active consumers to 8 million across Q4, representing year-on-year growth of 37%. This increase in monthly active consumers in the platform relative to 2020 continues to be the biggest driver of our 2021 growth. Monthly average order frequency was 3.4x per month in Q4, even as lockdown retentions eased, and we added a material number of new users to the platform.As a reminder from previous presentations, the overall frequency of 3.4x is the blended average of frequency across all consumer cohorts. What is interesting about this is that we see that consumers become more engaged with the platform over time. The more mature the cohort, the higher the monthly order frequency. So it remains very encouraging that average monthly order frequency remains resilient throughout a period when we have added so many new consumers.Let's now move on to our 2 geographic segments, starting with the U.K. and Ireland. The U.K. and Ireland has maintained its growth momentum, with consumer engagement remaining robust. At the half year and at Q3, we said that we had not seen any material impact on consumer engagement post reopening. This remains the case, with order growth up 41% year-on-year and also, sequentially up 13% versus Q3. Alongside order growth, GTV increased by 36% in Q4 year-on-year and was up 12% sequentially. As mentioned earlier, the U.K. and Ireland spent much of Q4 2020 in various stages of lockdown, while that wasn't the case in Q4 2021.I also want to run through some operational highlights from Q4. We continued to gain market share throughout Q4 because of sustained execution on improving our consumer value proposition and then layering on our growth initiatives across expansion, plus additions in grocery. Our geographic expansion has continued. And as of the end of 2021, we're now able to reach 77% of the U.K. population, up from 53% at the end of 2020. This is comfortably above our original year-end target of 67%.Our Plus partnership with Amazon Prime has seen some really impressive traction, with the number of new Plus subscribers ahead of our initial expectations. At the Q3 update, we said that the number of Plus subscribers had increased by 120% compared to August before our offer with Amazon Prime launched. This trend continued through Q4 and at the end of December, the number of Plus subscribers was approximately 3x the number in August.As we said before, the unit economics of Deliveroo Plus are very solid, and this includes the Prime offer. Gross profit per order is a bit lower compared to pay-as-you-go, but order frequency is higher, which drives a higher overall consumer lifetime value. On additions, we added nearly 30 new additions kitchens across London, bringing brands like Dishoom, Five Guys, Shake Shack and Pho to new neighborhoods. We're really excited about our addition proposition, and plan to accelerate our rollout throughout 2022. We now have 3 hop sites live in London and while we're still learning, what we are seeing is really encouraging. We look forward to developing and expanding this initiative in 2022.So overall, continued good momentum in the U.K. and Ireland in Q4. Now, let's move on to look at our international segment.We've continued to see strong year-on-year growth in our International segment, with orders up 43% and GTV up 36% in Q4. Again, this comes against a tough comparative period with France, Italy and Australia, all experiencing lockdowns in Q4 of 2020. We do not see any severe lockdown restrictions in Q4 of 2021 in the vast majority of our markets, with the exception of the Netherlands. Sequentially, GTV grew 10% and orders were up 7%. We mentioned in Q3, our progress in France, particularly taking the playbook we honed in Manchester into Marseille. We're now using the same playbook in additional French cities, including Toulouse, Lille, Lyon, as well as cities in other international markets such as Italy and UAE.Q4 has seen us further enhance our on-demand grocery offering in international markets, with the launch of our Picard partnership in France. Picard is one of the favorite grocery brands in France, and we rolled out nationally with them in November. We've also continued to develop our additions proposition internationally, opening approximately 20 new kitchens across Hong Kong and France in Q4. So overall, we're continuing to see good performance internationally and continuing to develop our CVP to drive future growth.

[William Shu, Founder, CEO & Director]

Thanks, Adam. So to conclude very briefly here, it's been a really strong year for us. We've had full year constant currency GTV growth of 70%. That lands us right at the top end of our twice upgraded guidance range. And as I noted earlier, we're also maintaining our gross profit margin guidance range of 7.5% to 7.75%. In Q4, we saw good year-on-year growth across the business despite tough comps from lockdowns in '20. We will be announcing our full year results on the 17th of March, where we'll talk more about the rest of the P&L and also about our expectations for 2022 in more detail.So thank you all for listening. Looking forward to the Q&A. Operator, over to you. Thanks.

[Operator]

[Operator Instructions] The first question is from the line of Giles Thorne from Jefferies.

[Giles Thorne]

My first question is a fairly high-level question. The market, very broadly, appears to have changed its view on providing growth capital in the past few weeks, a couple of months. I'd just be interested to hear your commentary on that change? And is that driving any changes in how you raise capital and allocate capital over the near term? The second was on the EU platform worker director. Thank you for the comment, Will. If I could invite you to expand on your comments a bit more and give your view on -- in the context of you being able to have a healthy pipeline of applicants and satisfied fleet of riders compared to other markets that are talking about labor constraints. Could you give your thoughts on whether this question of rider classification is actually really an issue of scalability rather than unit economics or business model viability? That was it.

[William Shu, Founder, CEO & Director]

Happy New Year. Give me one second, I'm just writing everything down here. Okay. So your first question is probably the question to your -- certainly, around recent times, which is I assume, you're really just talking about cost of capital with rising interest rates, and how that may influence investment patterns. Is that more or less the question?

[Giles Thorne]

Yes. And to address the elephant in the room, the cost of equity within online food delivery. Certainly, the listed names appears to be going up pretty precipitously at the moment. But yes, that broader kind of change in cost of capital.

[William Shu, Founder, CEO & Director]

Yes. I think -- and obviously, things have moved pretty quickly, as you said, over the last few months. I think, our view is, we are still very early in this opportunity. The penetration rates are really low. We see a giant opportunity in front of us. But at the same time, we also are going to try to make our business more efficient day by day. And I think, that doesn't really change anything for us on that standpoint. Certainly, I think we're quite conscious and aware of what's happening in the markets. But ultimately, our vision is to provide the best value prop for our 3 sides of the marketplace. And we're going to try to do that in a continued disciplined economic way as we've done so far. They want to get better at that day by day, month by month, quarter by quarter. So I don't really think that changes anything for us.On the EU question, I would say -- I think you're really asking something specific on what do I think about the EU proposals? And ultimately, is this an issue of scalability versus unit economics? So let me just comment quickly on high level, about these EU proposals. So as I said in the remarks earlier, these proposals put the EU on a path to providing greater clarity in the definitions of a self-employed platform worker, which is something we absolutely welcome. At a high level, we're positive about the proposals because, first of all, I do think we have shared objectives.There seems to be an assumption from some media commentators that the EU is planning to reclassify all platform workers as employees. But in fact, the EU have actually said the proposals will actually confirm that the majority of platform workers are self-employed. And as currently drafted, we believe the proposals are broadly in line with the way we work and operate with riders. And we have had multiple cohorts put in our favor in our European markets.For example, in France, 6 out of 7 cases have confirmed our riders are self-employed. And really, recently, there's been a really interesting case in Belgium. This is in December, actually the day before the EU proposals were published. A Belgian court confirmed that our riders are self-employed, but the really interesting thing about this case is that the case was judged on similar criteria as these tests proposed by the EU. And in fact, EU Commissioner Schmidt, who is the person leading this platform work for the EU, publicly said this legal judgment was entirely compatible with the EU proposal.So I do think this is an indication of the way we work with riders is legitimate self-employment, and is consistent with current EU proposals. Now, it's also worth pointing out though, alongside that, there's the member of state views, right? And so when we look at governments, such as France, they've openly expressed their support for the self-employment model for platform workers. Actually, this was only yesterday. He was speaking in the European Parliament. President Macron expressed his support for the platform economy. So I think we're aligned with the intention of the proposals. We're confident we're in a strong position across our EU markets.I guess, to your question, which is, is this an issue of scale versus unit economics, I would say, quite broadly, yes, I sort of agree with what you're saying. The biggest reason people sign up to be riders is flexibility, right? So the ability to log in and out whenever you want to accept or reject an order, to work wherever you choose. And I think that is why the application pipelines are so robust. That is why the retention rates are so high in a economy where people can find work basically anywhere else, right? And so we're really proud of that.So the unit economics completely work in a different setup, but I ultimately think that, that's not what riders want. And ultimately, if you don't give riders what they want because they are customers, then it's just more difficult to service an ever-growing demand.

[Operator]

The next question is from the line of Andrew Gwynn from PNB Paribas.

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Two questions then. So the first -- I understand, I appreciate you're not going to give much guidance on 2022. You flagged a difficult base of comparison in the first quarter. But I'm just wondering if there's any sort of further forwards that could help us with our modeling, as we come to pick about those numbers.And then, the second question, I wouldn't ask about consensus, because I don't think you'll comment on that. But on the second question, grocery. Obviously, you gave a bit of detail with the first half, around about GBP 2 of gross profit per order. That was for the U.K. Has that broadly held as we've headed into second half? And is there any sort of thoughts on the international side for the grocery?

[William Shu, Founder, CEO & Director]

Adam, let me just quickly comment on, I think, my remarks about the Q1, but then, we can move on. So I think, what I was saying was if we think about -- and there's been so many sort of different levels of restrictions in different markets that it's hard to get my head around it. But if I think to sort of Q4 last year, so Q4 2020, a number of our markets were in lockdown for quite a period of time. I think, U.K., probably around over half the time. You look at markets like France, I think it was pretty significant. And as we turn to H1 '21, to me, at least in Europe and the U.K., that really seemed like the peak of highly restricted lockdowns. And I'm just basically flagging up that we'll be comping that period.It was really my only point. It was not necessarily a comment on current trading at all. Adam, do you want to maybe answer the other 2?

[Adam Miller, CFO & Director]

Yes. And just maybe, one more quick thing on that. So in Q1 2021. If you recall, in the U.K., we were in lockdown, and there was no dining in restaurants until April of 2021. So basically, all of Q1 2021 was a lockdown quarter, which is different than Q1 2022. So maybe, I guess, just on -- Does that answer your question on how to think about 2022 at this point, given what we said?

[Andrew Philip Gwynn, Senior Food Researcher & Analyst of Food Retail]

Well, sort of the Q1, but it's more a question for the rest of the year and also, on the profit side. I appreciate you're not giving guidance, but further thoughts welcome.

[Adam Miller, CFO & Director]

Yes. So look, I think we're going to publish our full year results for 2021 on the 17th of March. At that point in time, we're also going to provide guidance for 2022. So all we've said beyond 2021 at this point is that we have medium-term kind of GTV growth guidance of 20% to 25%. And gross profit margin guidance in the medium term of 8.5% plus, but we will publish our full year 2021 results, talk about guidance for 2022, and then also, talk about our path to profitability. And I think, all 3 of those things in concert should hopefully give kind of a good picture on our thinking. And similar to the question we got earlier, we want to make sure that we're providing enough context on our business to how people think about that effectively.I guess, on your second question on grocery. So I think you're talking about what we talked about at the H1 results, where we said that gross profit per order in the U.K., on grocery was GBP 2.10 per order versus GBP 2.40 on the restaurant business. So I think, when we gave that number in the U.K. in H1, we talked about that being a one-off disclosure that was illustrative. We wanted to give a sense of the relative unit economics on grocery versus restaurant. Not quite as good as the restaurant economics, given some of the kind of the differences in commission. So what we said back then, with the commission is a bit lower on the grocery business versus the restaurant business, consumer fees are a bit higher. And net-net, you saw that difference.Now, remember that grocery is nearly 100% incremental to our restaurant business. So customers that are ordering groceries, they're doing that on top of their existing restaurant volume, and it also has benefits on the overall kind of density of the network and smoothing out the work for riders across the day. We continue to be really excited about the opportunities for grocery. We have a lot of levers to work on, still very early days on continuing to drive growth there. Which we have been doing, we've grown the share of GTV of grocery, again, half on half up to 8% of our overall business in H2 2021. And ultimately, improving the long-term unit economics across the revenue components that we talked about, to commission, consumer fees and also, other revenue from partnerships with advertisers and FMCG companies. And as you expect, we're working hard on doing that, and we may share some periodic updates on gross profit per order down the road as we're on that journey.

[William Shu, Founder, CEO & Director]

Just to be -- maybe, to answer your question more specifically. So on the sort of pattern we talked about of the average order basket being larger, the consumer fees being higher, and the commissions being lower, that's all broadly held the same.

[Operator]

Okay. The next question is from the line of Rob Joyce from Goldman Sachs.

[Robert Joyce, Equity Analyst]

So a couple from me. Just wondering, if would you first to be able to give us an idea of the exit rates at the end of the quarter, how they were comparing to the rest of the quarter and whether you're seeing food inflation start to come through in the early part of this year, as restaurants maybe update prices at the start of the year, given the food inflation backdrop.And the second one, would you also confirm, just a quick bit of math, it sounds like you're suggesting Plus subscribers are now getting towards the sort of 1.5 million in the U.K. Is that the right number? And are you able to help us understand what percentage of, sort of, order numbers or GTV they're now accounting for?

[William Shu, Founder, CEO & Director]

Thank you, Rob. Adam, you want to take this one? I think, Rob is really asking about just kind of how are -- Rob, I think you're asking like how the quarter trended out. Is that right? Were there differences in different months? That kind of...

[Robert Joyce, Equity Analyst]

Yes, basically how it trended out and how you're sort of exiting December into early Jan?

[Adam Miller, CFO & Director]

Yes. Okay. Yes, happy to. So just so I'm clear, I think there's that question. There's a piece on food inflation and also, the Plus subscribers. So let me just take those in turn. So I think, in Q4, what we typically see is an acceleration towards the tail end of Q3 through Q4, and then really peaking kind of just before Christmas. And that's sort of the typical order pattern that we see. What we saw in Q4 was pretty standard, nothing notable to call out on that normal pattern. So that, I think, has been in line with our expectations and what we've seen in prior years.I think, on the food price inflation, I think this is one that maybe just be worked on picking a bit across different markets. So I think, from what we can tell, it does appear there are different levels of overall inflation in our various markets. So for example, the U.K. and Europe seemed to have different opinions of where inflation is going to end up this year. So there were some news earlier this week in the U.K. that the U.K. has seen inflation rise relative to expectations with food and drink driving a significant portion of that change. And by contrast, the Bank of France noted today -- or noted this week that they think inflation has peaked, not only in France, but also in Europe and expect it to come down from here over the course of 2022.I would say, on the food side specifically, we are seeing some item level inflation as restaurants and grocers, just like other businesses, are setting prices based on their own costs rising, but nothing that I would call that's notably different from -- in Q4 from what we saw in Q3, but continuing to monitor that.

[William Shu, Founder, CEO & Director]

Let me just take the Plus question quickly. Just to give everyone a call a reminder on Plus. This is our membership program. It gives subscribers access to free delivery over a certain minimum order value. And we have 2 versions of Plus. We have Plus Gold, which in the U.K., cost GBP 7.99 a month. You get free delivery over 10. And then, we have Silver, that's GBP 3.49 a month, for delivery, over 15. And in mid-September, we launched a partnership with Amazon allowing Prime members in the U.K. and Ireland to sign up for 12 months for a free subscription Silver.Now, to your question, Rob, how have those sign-ups progress? So we talked about at the Q3 update, we said the number of Plus subscribers had increased by 120% compared to August before the offer launched. And this trend did continue through Q4. At the end of December, the number of Plus subscribers was about 3x the number that we had in August. So hopefully, that's a helpful color.

[Robert Joyce, Equity Analyst]

Yes. Any thoughts on the absolutes on my way off on those estimates or...

[Adam Miller, CFO & Director]

I think it's probably fine.

[Operator]

Next question is from the line of Adrien de Saint Hilaire from BofA.

[Adrien de Saint Hilaire, VP & Head of Media Research]

Yes. First of all, I'm just curious if we were to move to a full employment model in Continental Europe, have you made an estimate around how much it would cost you guys if you assume that you absorb all the incremental costs and don't pass that on to customers?And second question, one of your competitors has talked about increasing their competition in London. Perhaps, can you remind us how significant that market is at the group level, at the U.K. level? And number two, do you want to share some KPIs around perhaps your edge in that market in terms of restaurants or in terms of riders or any KPI that you think is relevant?

[William Shu, Founder, CEO & Director]

Sure. Adam, you want to take the first question, I'll take the second.

[Adam Miller, CFO & Director]

Yes. So sorry, I think, Adrien, the question is, if we were -- or platform companies were to move to full employment, what would that look like on the cost side if we were to absorb all those costs?

[Adrien de Saint Hilaire, VP & Head of Media Research]

Yes.

[Adam Miller, CFO & Director]

Look, I think -- Yes. I think, the way we think about it, so Will talked about the EU process and the EU proposals and then how that plays into member states and also, what's happening in some of the countries where we operate and what we've seen so far. I think, the way we think about it is, it's not entirely clear that it would be more costly if we had to move to full employment because as a reminder now, workers and our riders can choose to work on many different platforms. So they can have multiple apps open at the same time. They may choose to kind of work for part of the hour, or all of the hour, or with different platforms during the time that they want to be doing rides. And so in a world where they were fully self-employed and you could have -- sorry, fully employed, and you could have them work for the entire period of time with us, it's not entirely clear that it would be more costly.I think the thing that would be difficult is, what was Will was mentioning at the very beginning, which is that it's inconsistent with what riders actually want, which is the flexibility to work when and where they want. And so one of the reasons that we're able to have the number of riders coming to work with us on a daily basis that we do have, is that we are providing that flexibility. And so in a world where riders were forced to be employed, and they lost that flexibility, I think the thing that we'd have to figure out and deal with would be, can you get enough rider volume to actually support the demand that we have in the platform. And I think that will be a challenge for everybody, because it's inconsistent as we said, with what riders are actually looking for.

[William Shu, Founder, CEO & Director]

Yes, I think that's right. It's the -- and of course, this is -- if you're talking about an employed model, of course, every country is really different. But I'd say, overall, managing unit economics is less of a challenge versus actually creating enough demand for people wanting to do that job. And again, I'll just reiterate, we're in a period where I think the U.K., for example, where every single warehouse, retailer, or restaurant is looking for people. And we're just seeing those application funnels be as robust as ever. So we're very proud of the work we do. We think we can certainly manage unit economics, but ultimately, it's not what riders want.Just on your question, I think you mentioned a competitor talking about -- I wasn't sure exactly what the term was, but something about investing in London. I guess, I'd make a few points. First, and I know people are surprised to hear it from me, but we honestly don't spend our time obsessing about the competition. We spend our time obsessing about the 3 sides of the marketplace and our value prop. Now, we're obviously in a competitive market, and we keep an eye on that. And the output of that obsession, of course, is market share gains. But let's actually talk specifically for a second on the U.K. because I think that was your question.So if I take a step back and just look at the bigger picture over the last few years. So what do we have here? We've got 2 players that report GTV and order numbers for the U.K. and Ireland market. And you can see, for at least, the last 8 quarters, we have been significantly outgrowing the other player. Now, the consequence of us growing faster for a prolonged period of time is this: In H1, that player's GTV in the UKI was over 2x as large as ours, while for the last quarter of '21, it was 1.5x our size. So it's very clear we're closing that gap.Now, we've also delivered that growth and closed that gap despite coming up against what are hundreds and hundreds of millions of pounds of untargeted free deliveries and discounts in '21 from competitors. So we've accomplished what we've been doing by having, I think, a consistent long-term strategy, planning on that, executing on that, investing in our consumer value prop and in differentiators such as additions, grocery and Plus, and we talked about some of that stuff earlier. And so these results are due to long-term planning by the team and focused execution. So these initiatives and growth levers we talked about today, this is the result of work that we started 4 to 6 quarters ago.And so yes, the U.K. is a competitive market, as are all our markets, but we are making, I think, a huge amount of progress, and we -- we're doing it in a disciplined way, and we're really proud of that. And we expect to continue to do that in '22.

[Adrien de Saint Hilaire, VP & Head of Media Research]

That's great. If I could just squeeze one follow-up, please. I hope it's quick. Do you have any time line around the ECE or EU commission decision?

[William Shu, Founder, CEO & Director]

You mean, like, what is the legal time frame, the next stage is in the process? Yes, I've got some ideas of what that is. So the process I understand is, you've got the EU commission, their proposal will be assessed by the EU Council and the European Parliament. So the commission have said that they want to do this in 12 months, but it could take longer, they also said, and it could take up to 2 years. And then, once the proposal or any sort of a netted version is accepted by the council and the parliament, then that will pass, and then, the member states that have up to 2 years to transpose that into domestic law. So that's my understanding of the timeline.

[Operator]

The next question is from the line of Simon Bowler from Numis.

[Simon Bowler, Analyst]

Thank you. Just 2 topics for myself. First one being, can you give any sense of how much of the U.K. growth is being driven by kind of higher population coverage and where you kind of further operations population coverage may lie. And then secondly, I appreciate the very early days that you're now at kind of 3 Hops. Any kind of early thoughts around the findings there? And any sense of what sort of take, a rollout of that proposition could take?

[William Shu, Founder, CEO & Director]

Yes. I'll take this one. So on the U.K. growth question, I think your question is, kind of, what aspect is population coverage driving that growth. So we've taken our population coverage to 77%, exceeding our '21 target by quite a bit. I would say, the current sort of contribution of those new areas is not very high. At this point, the vast, vast majority of orders in GTV come from areas where we have been in longer than 12 months. So we're really excited about pushing those areas as we move into '22. And I think, if you think about it, we've been sort of expanding for over 18 months now. So some of those earlier cities are seeing -- earlier tenant cities are seeing a lot of growth. But the vast majority is still -- things we've launched 12 months ago or more.Now, on to Hop. So a few, I think, interesting findings on Hop. So we've got 3. They're all with Morrisons right now. We're working on expansion plans, both in the U.K. and internationally. But I think, what we would learn is, really, this. If we think about on the customer side, the frequency and retention of those customers on a weekly basis versus our store pick grocery customers. It is dramatically higher, which I think makes sense, and that's always been our thesis because the -- there's no stock outs and the delivery speeds are faster. That, I don't think is a shock. But I do think, what we managed to do is now, about 75% of our orders are actually picked under 2 minutes, and we have a pick time per item of about 10 seconds. And I think, that sort of operational rigor gives us a lot of confidence that we can scale this and get to a place of high efficiency right away, which we're pretty excited about.In terms of our plans for this, we're getting a huge amount of inbound interest from partners. So a lot of people are asking about, is this something we can take to different areas. And I think, overall, we're quite excited about what we've seen so far. And we're assessing this, right? This is, so far, it's very clear that the customer proposition works really well. It's very clear that the operations works really well. And we're learning more about the financial side as we go on. So you'll certainly see more Hops and you're going to see more partners as well. And once we have, I think, much more conviction, we're happy to kind of share that with you. But overall, it's gone extremely well so far on those vectors.

[Operator]

The next question is from the line of Sarah Simon from Berenberg.

[Sarah Simon, Analyst]

I've just got a couple. So just staying on grocery. Well, you mentioned that H2 GTV grocery was about 8% of total, if I'm not wrong. And I think, the grocery in International is pretty de minimis. So is it realistic to think it's broadly double that 8% in the U.K. in H2?And then, the second question just on contract durations with your grocery partners. I saw Aldis stop their trial and Sainsbury's, I think, there's public information or something out there about the length of the new contract. Is the Sainsbury's contract duration broadly representative of the deals you've got with other supermarkets in the U.K?

[William Shu, Founder, CEO & Director]

So to answer your first question, we -- so I think your point was -- is that 8% number, basically all in the U.K., which I would say definitively not. We've had a huge amount of growth in the international grocery market over the last year. And I would say, in the last 6 months, in particular, we've seen a big, big boost. So I would say that although the U.K. is ahead, that's absolutely true. The international markets are catching up fast and we view this as a big, big growth area for us, and we've had a lot of announcements, I think, with different partners across different markets.In terms of your questions on Sainsbury's, I don't actually have those. I don't really -- I don't think I can comment or even have the knowledge of a specific contract. But generally, our enterprise, grocery and restaurant contracts are multiyear contracts. So I hope that helps.

[Sarah Simon, Analyst]

Okay. Just on the first point, then. Is it reasonable to think you're kind of 65-35 in terms of overall volume of business in grocery between U.K. and International? Or is it more even than that?

[William Shu, Founder, CEO & Director]

I think, at some point, we look forward to giving more disclosure on that breakout. But what I would say is this, the U.K. is -- was definitely ahead, but the international markets are catching up fast and sort of the assumption that it's all in the U.K. is definitely not the case.

[Operator]

The next question is from the line of William Woods from Bernstein.

[William Woods, Analyst]

Two questions for me. Just in terms of the coverage of the U.K., you're now at 77%. Is the rollout broadly complete in terms of coverage? Or are you expecting to grow further? And then secondly, I wondered if you could comment on how your performance is in Australia, and how you see your position within that market, going forward, over the next year?

[William Shu, Founder, CEO & Director]

Sure. So on U.K. coverage, I'm sorry, I think someone did actually ask this before, so I apologize for not answering it. So we're at 77%. I don't think we'll get to 100% of the country, but I think there will be still more expansion to come. I'm not really sure where that upper limit is. Could be 85%, it could be a little higher than that. But if there's prerequisite population density, if we have a decent set of restaurants we think we can service, there's grocers out there, and we think there's demand, we'll go after it. But it's definitely not every kind of small village in the U.K. That, I don't think we would do.On Australia, I think that -- we think the Australian market is great for a few reasons. I think, one, the restaurant culture there is really rich, and people just care a lot about food, and that's obviously really important. I think the willingness to pay in Australia is actually quite high. So we see a group of people that really definitely enjoy food delivery, and it's become part of the mainstream out there. And so overall, I think the overall Australian market, we think, is very interesting. We're going to continue to invest there. Any market where we think we have a reasonable shot of getting to #1 or a strong #2 position, we're going to stay in there and keep executing. So I hope that helps.

[Operator]

The next question is from the line of Marcus Diebel from JPMorgan.

[Marcus Diebel, Research Analyst]

Three questions from my side. The first one is just if you can comment also on Hong Kong. That seems to be a strong market for you, obviously, of [indiscernible] leaving. What's the view on that market? What is currently happening there? And then, the other 2, again, on regulation. And at the IPO, you were talking given quite detailed disclosure on rider cost per order. I think, it was GBP 4.50 that you highlighted at the time. Could you give us this number in Europe? And from your previous comments, do you expect, in a, kind of, like employment model, this number to be stable or to go up by 10%, 20%? Just to get an idea. I mean, you talk about sick pay, you talk about parental leave. Just if we can get an update on what that actually means at the end of the day for your rider cost per order, where you're tracking right now? And then, this third question, I appreciate your comments on the EU development. If in 2 years' time, the EU commission hands this over to France. What is actually the situation? Is there a chance for France to block it, to not implement it? I just follow up on your comments that France is very -- actually, very pro on the freelance model, as you highlighted.

[William Shu, Founder, CEO & Director]

Sure. I'll just sort of answer these in no particular order. So on France, specifically, the government has always been very publicly supportive of the platform economy. We know this from individual conversations with them as well as their public statements. And I think, you can -- I think Google or YouTube Macron's comments yesterday at the floor of the European Parliament, where, again, he stated, I don't have the quote in front of me, but he said that platform work is an important part of every economy and he wants to support that. So -- and I would say that, that's been consistent from France.Now, your question is a technical one around member states. As I understand it, member states can -- these EU directives or something, they can opt into or not, basically. So it's really up to member states to kind of do what they want. But I'm not a technical policy expert on that. That is kind of my understanding. So the EU will offer up something. And then, I think, different states will interpret it in different ways, right, as far as I understand.Now, on the question of -- and just on France for a second. Yes, like I said, they've always been supportive of this, and this has been consistent from the top level government for -- since we've been there. So that's not changed. But I do think Macron publicly stating that yesterday, on the floor of the European Parliament is something, if you want, just take a look.On Hong Kong, I think your question really was around the sort of competitive situation there. So Uber Eats did leave the market. I would say Uber's market share was not -- I don't think it was very significant in Hong Kong. It's really been a 2-player market, where we have a very strong position alongside Food Panda, and we continue to develop the consumer value prop for consumers there. It's going really well. I think Uber leaving is probably a boost for both parties, but ultimately, they weren't a major player there. So I hope that helps.

[Adam Miller, CFO & Director]

Yes. And Marcus, let me just end with the question on rider CPO. So I think first, you were just referring to some stuff we said at the IPO around the rider cost per order being around GBP 4.50, and about 20p of that was tip. So if you exclude that people are paying to riders, which we just pass along to the riders, it's about GBP 4.30. I think today, all we're sharing is the top line performance, both at the group level and also, on a segmental basis. And also, our reconfirmation our maintenance of the gross profit margin guidance for the full year of the 7.5% to 7.75%. And we will talk in more detail about our financials in March at the full year results.

[Marcus Diebel, Research Analyst]

Perfect. Just conceptually, if I look at this number in Europe around 4. Just again, just conceptually to what you said before, you don't expect a fundamental increase in CPO in the event of the employment model being implemented, given that you basically have obviously other initiatives as well, such as sick leave pay and parental leave. Is that fair to think about it? Or did I miss part of this?

[Adam Miller, CFO & Director]

Yes. So I think Marcus...

[William Shu, Founder, CEO & Director]

So Marcus, sorry, it's Will here. If you're asking about a hypothetical on top of a hypothetical, I think it's a difficult thing for us to answer. Happy to follow up with you, individually, to sort of understand your assumptions a bit. And I think, we're happy to chat to you in person on that. Just to -- By the way, just to clarify, and I'll just end on this, just to clarify on my point on member states and EU directives, because I do you want to be a little more specific here. I think, as I understand it, the member states will have to implement a directive, but then they have the opportunity to provide guidance on how to interpret the details, which I think practically means there's a wide breadth of different sort of practical outcomes. So thank you very much.

[Operator]

In the interest of time, we have to stop the Q&A session. If you have any further questions, please reach out to the Deliveroo Investor Relations team. At this point, I will hand back to Will Shu.

[William Shu, Founder, CEO & Director]

I just want to thank everyone for joining this call. And I want to wish everyone a happy New Year. I know, it's actually January 20, so maybe, a little late for that. So everyone, happy New Year. And again, a big thank you to the 3 sides of our marketplace: our riders, our restaurants, grocers and our consumers. And most notably, I'd like to thank our employees here at Deliveroo. We've executed on a great quarter. Really proud of all of you. Keep up the great work. Bye-bye.