Uber Snags Postmates in Food Delivery Arms Race
After whiffing on a deal for Grubhub, Uber reached an agreement to acquire Postmates in a $2.65 billion all stock deal. Postmates is the #4 player in the food delivery business, behind DoorDash, Uber Eats, and Grubhub. Wedbush analyst Dan Ives says the move is the "right acquisition at the right time."
“Postmates has swayed back and forth on a potential IPO and ultimately now is the time for Uber to go after this deal with consolidation in order to pick up some material market share. In our opinion, Uber finds itself with its back against the wall on the consolidation theme as the Grubhub deal fell apart on anti-trust concerns, and now must quickly look to acquire market share and added scale which makes the Postmates deal a smart strategic fit.”
Food delivery land grab: While demand for online food delivery continues to accelerate, the commoditized and competitive nature of the business has put pressure on the top players to scramble for market share by way of acquisitions. The combined entity of Postmates and Uber Eats would have a 37 percent share of food delivery sales in the U.S., according to Edison Trends. Meanwhile, DoorDash would hold onto the top spot with 45 percent, and Grubhub would have 17 percent.
Missing out on Grubhub: Just Eat Takeaway.com acquired Grubhub for $7.3 billion following a failed attempt by Uber to purchase the U.S. food delivery company. Go deeper into the deal here.
Tough path to profitability remains: Market conditions created by the pandemic have likely delayed profitability timelines for online food delivery operators, which have “both deferred or waived fees to restaurants and have increased discounts, loyalty rewards, and free/discounted delivery fees to battle for the acceleration in diner growth and order volume,” according to Ives. Despite the challenges, Ives sees Uber as best positioned to be a consolidator in the space due to its ability to leverage Eats across the Rides platform.
