For Uber and Amazon, 2020 Offers Promising Food Delivery Acquisitions

(Bloomberg Businessweek) -- A year ago, the billions of dollars that venture capitalists had poured into food delivery startups mostly looked like a waste. Profits seemed to be a fantasy, and the weakest and least capitalized—companies with names such as SpoonRocket, Maple, Sprig, and Munchery—fell hard and shut down. But in 2019 the dozen or so survivors matured, raised more money, and in some cases started buying sprees to further consolidate the field.

More tieups seem likely in 2020, says Sucharita Kodali, an analyst at Forrester Research Inc. “The space is saturated with too many companies, none of which has a path to profitability,” she says. Perhaps more important, companies including Uber and Amazon, convinced their scale and adjacent businesses can boost margins, are eager to expand their food footprints. Here’s an early ranking of the players in next year’s food fight. 

1.Uber

For the beleaguered ride-­hailing company, delivering food as well as people seems a promising way to make more money from its 91 million monthly users. Its Uber Eats division is a critical part of Chief Executive Officer Dara Khosrowshahi’s vision for the company. And with more than $11 billion in cash, Uber Technologies Inc. can make meaningful acquisitions while still developing its own programs.

2. DoorDash

America’s leading food delivery app by market share is valued at more than $12 billion by investors. It raised $600 million from SoftBank Group Inc. and others in May and quickly put the money to work by buying upscale deliverer Caviar, expanding its reach to include lovers of poke bowls as well as McDonald’s. In 2020, DoorDash Inc. is expected to explore expansion abroad while it battles to stay No. 1 at home.

3. Amazon

If there’s anyone who could afford to buy DoorDash and lead the U.S. overnight, it’s Jeff Bezos. Amazon.com Inc. desperately wants in on food delivery but has failed so far. It shuttered its own service in 2019 after four unsuccessful years. The company may be slower to make splashy acquisition attempts as long as President Trump keeps railing against Bezos, but 2020 could change the balance of power in Washington, too.

4. Just Eat

This summer, London’s Just Eat Plc and Amsterdam’s Takeaway.com NV agreed to merge in a $10 billion deal to create Europe’s first supersize food delivery app. The combined company has a major presence in 11 countries and will likely spend 2020 merging its existing operations and rebuffing acquisition offers.

5. Deliveroo

London’s other delivery app has rejected buyouts from both Uber and Amazon. Instead, it raised $575 million from Amazon and other investors and purchased Scottish software startup Cultivate in August. Deliveroo still has much of its $1.5 billion in total venture funding on hand, enough to maintain its independence for a while, but a highball buyout offer north of $4 billion might be enough to change minds at its corporate parent, Roofoods Ltd.

6. Grubhub

Even after acquiring Eat24, Foodler, OrderUp, and Seamless, Grubhub trails DoorDash in U.S. market share. It has arrangements with roughly half the restaurants of Uber Eats and a market cap of $5 billion, a little less than double its value at the time of its 2014 initial public offering. Grubhub Holdings Inc.’s smaller size makes it a possible acquisition target.

7. Delivery Hero

Since beginning operations in 2011, the Berlin-based startup has purchased more than 20 companies and now operates in more than 40 countries. After selling its German business to Takeaway in 2018 for $1 billion, Delivery Hero SE has focused on less developed markets. It purchased food delivery startups or their operations in Sweden, Cyprus, and the United Arab Emirates this year and seems unlikely to slow down. It’s also an investor in Rappi Inc., Latin America’s largest food delivery company.

8. Postmates

Food is just one of dozens of items you can get delivered by Postmates Inc., but it’s the most popular. In 2019 the San Francisco startup confidentially filed to go public, but executives have indicated they could sell the company outright if they’re given a high enough offer. It’s likely that price has come down recently, given the dismal IPO environment and intensifying competition. Investors last valued Postmates at $1.2 billion in 2018, making it a relative bargain for previously interested buyers, including Uber and DoorDash.

9. Lyft

The other principal U.S. ride-­hailing company says it’s not exploring food delivery as a means of narrowing its losses. Investors frustrated by a roughly 50% drop in the company’s value post-IPO may demand that Lyft Inc. try.

To contact the editor responsible for this story: Jeff Muskus at jmuskus@bloomberg.net

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