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It’s an unprecedented time for many reasons, the rise of food delivery among them. As restaurants have been forced to close, delivery and takeout has been the only life line, meaning restaurants are leaning heavily on services like Seamless, DoorDash, Grubhub, Postmates and other delivery platforms to make sales.
One of those delivery platforms, Uber Eats, has been pulling out of markets as Uber struggles to expand its restaurant service. Now, Uber is in talks to be acquiring Grubhub in a move to consolidate the food delivery industry, which competes over the same limited inventory – restaurants – in the same markets, trying to reach the same customers with little ways to differentiate. The deal could still fall through. In a statement, GrubHub said that consolidation could make sense for the industry. Grubhub shares rose upon the news, with the company now valued at $5.6 billion. Uber, meanwhile, has a market value of $56 billion.
With Grubhub, Uber would acquire an existing infrastructure for deliveries and an existing restaurant partnership network. Uber’s own food delivery business has weighed on its profit margins as the business has proven expensive to build. With Uber, Grubhub would have a built-in network of customers and delivery couriers to work with. Together, this could help push the company past competitors like DoorDash. More consolidation could be coming, but as Uber Eats sputters, an acquisition right now makes sense. This will turn out to be a pivotal moment for food delivery as it helps keep restaurants afloat during social distancing, but if these companies can’t turn a profit, no one wins.