Uber May Acquire Grubhub to Dominate Food Delivery Market
Uber may be making a major acquisition by month’s end; the ridesharing giant is in talks to purchase food-delivery firm Grubhub. With Grubhub currently valued at $4.5 billion, the two companies are reportedly negotiating the purchase price, as well as how much of the acquisition would be fueled with stock or cash.
The move could be quite accretive for Uber. Even before the pandemic, Uber Eats had been one of Uber’s fastest growing divisions. While the coronavirus crisis has decimated Uber’s main line of business — CEO Dara Khosrowshahi reports ridesharing trips are down 80% — food delivery has been a rare bright spot: Uber Eats saw an 89 percent increase in year-over-year gross bookings in April. Now, as ridesharing requests continue to plummet, Uber is focusing on what growth opportunities remain.
Looking at indexed monthly U.S. sales in the meal delivery space for March 2020, DoorDash stood out as the market leader, with 42 percent of market share. Uber Eats had 20 percent of the market and Grubhub had 28 percent, so when combined, the two companies would be able to overtake DoorDash, offering an opportunity to raise prices in a notoriously thin-margin business. Postmates, with only 9 percent of the market, doesn’t appear to be much of a threat.
There are some geographic reasons for this tie-up as well. While DoorDash is the dominating force in the meal delivery market overall, its biggest markets are Dallas-Fort Worth, Houston, and the Bay Area. Grubhub’s strongest regions are Northeastern markets like NYC and Boston. Given how badly the pandemic has impacted cities in the Northeast, that could mean even more growth opportunities for food delivery services in those locales.
Hot off the heels of Uber’s complex Lime and Jump scooter deal, it looks like the TNC heavyweight is doing everything it can to come out of this crisis in pole position.