App-based food delivery is experiencing explosive growth, with just four companies — DoorDash, Uber Eats, Grubhub, and Postmates — controlling 98 percent of all restaurant food delivery sales.
Uber has agreed to buy food delivery app Postmates, hoping that the $2.65 billion all-stock takeover will help boost its delivery business against privately-held market leader DoorDash.
The Uber Eats-DoorDash acquisition could allow Uber to control about 37 percent of the national market.
Coronavirus shutdowns led to people being locked down and out of restaurants. Uber Eats’ annual revenues were up more than 100 percent in May, helping offset an 80 percent drop in ride-sharing at the height of coronavirus disruption.
Postmates, which was founded in 2011, was one of the first tech companies to let U.S. customers order meal delivery using a mobile app. It launched three years before Uber Eats but despite being an early mover, lost market share to “deeper-pocketed competitors,” Financial Times reported. In June, Postmates had a market share of around 8 percent and fell was in fourth place in the U.S.
DoorDash, by comparison, leads with 45 percent of the market, according to data from Edison Trends. So far, Grubhub is the only company that has turned a profit, despite unprecedented demand during the pandemic, Civil Eats reported.
Under the agreement, Postmates CEO Bastian Lehmann and his team will continue to manage Postmates as a separate service. Uber Eats head Pierre-Dimitri Gore-Coty is expected to continue running Uber’s combined delivery business.
Postmates is still strong in Los Angeles and the Southwest U.S., which could both be valuable to Uber Eats.
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Uber tried unsuccessfully to buy publicly traded GrubHub Inc. Instead, Europe’s Just Eat Takeaway.com NV bought GrubHub for $7.3 billion.
“(Postmates) would be both a defensive and offensive acquisition in the food delivery space for Uber at a time with its core ride-sharing business seeing massive headwinds in this Covid-19 pandemic,” said Dan Ives, analyst at Wedbush, according to Financial Times.
Postmates will boost Uber’s efforts to expand its delivery capabilities beyond prepared meals into more groceries and other items. Uber is finalizing majority ownership in Cornershop, a leading across Latin America grocery delivery provider that recently expanded into Miami and Dallas.