With the help of bush pilots, residents of remote Alaskan villages are increasingly using DoorDash, Uber Eats and other food-delivery services.
A package of legislation from the City Council will set minimum pay and working conditions, placing New York at the forefront of regulating a multibillion-dollar industry.
When people talk about “online food delivery” services, chances are that they’ll think of the Uber Eats, Instacarts and Getirs of this world. But today a startup that’s tackling a different aspect of the market — addressing the supply chain that subsequently turns the wheels of the bigger food distribution machine — is announcing a big round of funding as it continues to grow.
GrubMarket, which provides software and services that help link up and manage relationships between food suppliers and their customers — which can include wholesalers and other distributors, markets and supermarkets, delivery startups, restaurants, and consumers — has picked up $120 million in a Series E round of funding.
The funding is coming from a wide mix of investors. Liberty Street Funds, Walleye Capital, Japan Post Capital, Joseph Stone Capital, Pegasus Tech Ventures, Tech Pioneers Fund are among the new backers, who are being joined by existing investors Celtic House Asia Partners, INP Capital, Reimagined Ventures, Moringa Capital Management, and others, along with other unnamed participants
Mike Xu, GrubMarket’s founder and CEO (pictured, above), tells me that the company is currently profitable in a big way. It’s now at a $1 billion annualized run-rate, having grown revenues 300% over last year, with some markets like New York growing even more (it went from less than $10 million ARR to $100 million+).
With operations currently in Arizona, California, Connecticut, Georgia, Michigan, New York, New Jersey, Missouri, Massachusetts, Oregon, Pennsylvania, Texas, and Washington, and some 40 warehouses nationwide. GrubMarket had a pre-money valuation of over $1 billion, and now it will be looking to grow even more, both in terms of territory and in terms of tech, moving ahead in a market that is largely absent from competitors.
“We are still the first mover in this space,” Xu said when I asked him in an interview about rivals. “No one else is doing consolidation on the supply chain side as we are. We are trying to consolidate the American food supply chain through software technologies, while also trying to find the best solutions in this space.”
(And for some context, the $1 billion+ valuation is more than double GrubMarket’s valuation in October 2020, when it raised $60 million at a $500 million post-money valuation.)
Longer term, the plan will be to look at an IPO provisionally filing the paperwork by summer 2022, Xu added.
GrubMarket got its start several years ago as one of many companies looking to provide a more efficient farm-to-table service. Tapping into a growing consumer interest in higher quality, and more traceable food, it saw an opportunity to build a platform to link up producers to the consumers, restaurants and grocery stores that were buying their products. (Grocery stores, incidentally, might be independent operations, or something much bigger: one of GrubMarket’s biggest customers is Whole Foods, which uses GrubMarket for produce supply in certain regions of the U.S. It is currently is the company’s biggest customer.)
As we wrote last year, GrubMarket — like many other grocery delivery services — found that the pandemic initially provided a big fillip, and a big rush of demand, from that consumer side of the business, as more people turned to internet-based ordering and delivery services to offset the fact that many stores were closed, or they simply wanted to curtail the amount of shopping they were doing in-person to slow the spread of Covid-19.
But fast forward to today, while the startup still serves consumers, this is currently not the primary part of its business. Instead, it’s B2B2C, serving companies that in turn serve consumers. Xu says that overall, demand from consumers has dropped off considerably compared to a year ago.
“We think that restaurant re-openings have meant more people are dining out again and spending less time at home,” Xu said, ” and also they can go back to physical grocery stores, so they are not as interested as they were before in buying raw ingredients online. I don’t want to offend other food tech companies, but I think many of them will be seeing the same. I think B2C is really going to slow down going forward.”
The opening for GrubMarket has been not just positioning itself as a middleman between producers and buyers, but to do so by way of technology and consolidating what has been a very regionalized and fragmented market up to now.
GrubMarket has snapped up no less than 40 companies in the last three years. While some of these have been to help it expand geographically (it made 10 acquisitions in the Los Angeles area alone), many have also been made to double down on technology.
These have included the likes of Farmigo, once a Disrupt Battlefield contender that pivoted into becoming a software provider to CSAs (an area that GrubMarket sees a lot of opportunity), as well as software to help farms manage their business staffing, insurance and more: Pacific Farm Management is an example of the latter.
GrubMarket’s own in-house software, WholesaleWare, a cloud-based service for farmers and other food producers, saw its sales grow 3,500% over the last year, and it is now managing more than $4 billion in wholesale and retail activity across the U.S. and Canada.
There will be obvious ways to extend what GrubHub does deeper into the needs of its customers on the purchasing end, but this is in many ways also a very crowded market. (And not just crowded, but crowded with big companies. Just today, Toast, the company that builds software for restaurants, filed for a $717 million IPO at potentially a $16.5 billion valuation.) So instead, GrubHub will continue to focus on what has been a more overlooked aspect, that of the suppliers.
“I am focused on the food supply chain,” Xu said. “Operators in the food supply chain business most of the time don’t have any access to software and e-commerce technology. But we are not just a lightweight online ordering system. We do a lot of heavyweight lifting around inventory management, pricing and customer relations, and even HR management for wholesales and distributors.” That will also mean, longer term, that GrubMarket will likely also start to explore connected hardware to help those customers, too: robotics for picking and moving items are on that agenda, Xu said.
“GrubMarket has built a profitable, high-growth business underpinned by its best-in-class technology platform that’s reinventing how businesses access healthy, fresh foods,” said Jack Litowitz, director of strategic investments at Reimagined Ventures, in a statement. “We’re proud to support GrubMarket as it continues to expand into new regions and grow its WholesaleWare 2.0 software platform. At Reimagined Ventures, we always seek to invest in businesses that are disrupting inefficient industries in innovative ways. Mike Xu and the GrubMarket team have built one of these businesses. We’re excited to back their vision and work in making the food supply chain more efficient.”
“GrubMarket is transforming the trillion-dollar food distribution industry with unprecedented speed by implementing advanced digital solutions and operational discipline. The company’s scale, growth, and profitability are extraordinarily impressive. Pegasus is delighted and honored to be part of GrubMarket’s exciting journey ahead,” added Bill Reichert, partner at Pegasus Tech Ventures.
Grubhub, Uber Eats and Door Dash have characterized a 15 percent cap on fees charged to restaurants as an unconstitutional measure that will hurt consumers.
Food ordering and delivery platforms DoorDash, Caviar, Grubhub, Seamless, Postmates and Uber Eats have banded together to sue the City of New York over a law that would permanently limit the amount of commissions the apps can charge restaurants to use their services.
The Wall Street Journal first reported the news that the companies filed suit in federal court on Thursday evening and are seeking an injunction that would prevent the city from enforcing the legislation, unspecified monetary damages and a jury trial.
Last year, the city council introduced temporary legislation that would prohibit third-party food delivery services from charging restaurants more than 15% per delivery order and more than 5% for marketing and other nondelivery fees in an effort to help ease the strain on an industry struggling from pandemic lockdowns. The companies filing suit against the city claim the limit on fees, which was made permanent last month under a bill sponsored in June by Queens Councilman Francisco Moya, has already cost them hundreds of millions of dollars.
“Throughout the COVID-19 pandemic, third-party platforms like Plaintiffs have been instrumental in keeping restaurants afloat and food industry workers employed, including by investing millions of dollars in COVID-relief efforts specifically for local restaurants,” the lawsuit reads. “Yet, the City of New York has taken the extraordinary measure of imposing permanent price controls on a private and highly competitive industry—the facilitation of food ordering and delivery through third-party platforms. Those permanent price controls will harm not only Plaintiffs, but also the revitalization of the very local restaurants that the City claims to serve.”
Other cities also instituted similar caps during the pandemic, but most have fizzled out as the pandemic has eased and restaurants have been able to open their dining rooms. San Francisco is among of handful of cities that has also decided to enact a permanent 15% cap, and the app-based companies are suing there, as well. They argue that extending the limits on fees, which can be as high as 30% per order, “bears no relationship to any public-health emergency,” and are unconstitutional because they interfere with negotiated contracts and dictate “the economic terms on which a dynamic industry operates.”
As with the temporary law, any violators of the permanent cap would face up to $1,000 per day in fines per restaurant. The companies said the new law would not only cause them to have to rewrite their contracts with restaurants, but also raise fees for consumers and hurt delivery workers’ ability to make money.
The companies also argue that if the city wants to improve profitability of local restaurants, it could provide tax breaks or grants out of its own pocket instead of hurting the commissions of the delivery services.
“But rather than exercise one of those lawful options, the City chose instead to adopt an irrational law, driven by naked animosity towards third-party platforms,” the companies said, citing a tweet from Moya after he introduced a 10% commission cap bill that said, “NYC local restaurants needed a 10% cap on delivery fees from third party services like GrubHub long before #COVID19 hit us. They damn sure need it now.”
This legislation also comes amid increasing scrutiny over app-based delivery companies that have a reputation for harming both restaurants and gig workers in an effort to keep costs low for consumers. Recently, a California superior court ruled Proposition 22, which would allow these companies to continue classifying its workers as independent contractors, rather than employees, as unconstitutional. This ruling prompted DoorDash workers to protest last week outside the home of CEO Tony Xu demanding better pay and more tip transparency. Meanwhile in Massachusetts, a similar law to Prop 22 has just gotten the green light to go ahead on the November 2022 ballot.
“Restaurants pay app-based delivery companies for a variety of services through commissions, one of these being delivery services,” said an unnamed courier in the lawsuit against the city. “Capping these commissions means less earnings for people like me. A commission cap could also mean delivery services get more expensive for the customers I deliver to, which ultimately means less orders for me.”
Uber’s second quarter earnings revealed greater than expected losses, in large part due to the company’s massive $250 million stimulus package launched in April to incentivize drivers back onto the app after a pandemic-induced shortage.
The company reported a loss of $509 million before EBITDA. For comparison, Lyft reported a positive adjusted EBITDA in the quarter at $23.8 million the day before. Uber’s losses point to a larger problem facing the app-based ride-hailing industry: The triple threat of lagging driver supply, the cost of attracting them, and the Covid-19 Delta variant looming in the periphery.
“Drivers increasingly want to get back on the road,” said CEO Dara Khosrowshahi during the earnings call on Wednesday. “In June, 60% of inactive drivers told us they intended to start driving again within a month. That’s up from 40% in April. And 90% of drivers told us they expect to come back by September. We’re also beginning to see marketplace metrics revert to normalcy in several markets with surge levels and wait times back to nearly normal in Miami, Atlanta, Dallas, Houston and Phoenix. But in major cities like New York, San Francisco and LA, demand continues to outpace supply and prices in late times remain above our comfort levels.”
Khosrowshahi said Uber is expecting the driver momentum that has been picking up over the last few months to continue, even as Uber tapers off its “post-pandemic” incentives for drivers. But the thing is, the pandemic is far from over. Only 50% of the U.S. population is fully vaccinated, and the CDC has said the highly contagious Delta variant has caused between 80% and 87% of all U.S. Covid-19 cases in the last two weeks of July. Many computer models predict case counts will peak sometime between mid-August and early September, bringing as many as 450,000 daily cases.
Lockdowns haven’t been the only things causing driver shortages: Drivers don’t want to risk their lives during a pandemic for what is often argued to be meager pay. Uber’s losses and attempts to attract more drivers also come as the company is back on stage as a potential threat to gig workers’ labor rights. Uber is part of a coalition of app-based ride-hailing and on-demand delivery companies that filed a petition this week to introduce a ballot measure in Massachusetts that would define drivers as independent contractors, not employees – similar to what happened last year in California with Proposition 22.
“I took the incentives that they used to get people back, and I think most drivers that have any brains did the same,” an Uber driver called Jay who’s been driving since 2013 told TechCrunch. “And once the incentives ran out, I stopped driving, because I’m losing money when I drive for them now. They have cut the rates so low that it doesn’t make any sense anymore to work for them, and that’s why people are having such a hard time getting an Uber. You have these disgustingly out of touch billionaires running this company into the ground.”
Despite these setbacks, Khosrowshahi – presumably one of the “out of touch billionaires” Jay references – went on to assure investors that Uber expects to achieve total company EBITDA profitability by the end of the year. Uber is hoping its investments in what it calls the “earner experience” will help retain workers.
“From doubling down on our app quality to targeted and personalized reengagement campaigns, to completely redesigning our onboarding flow to make it easier and faster than ever to earn safely, to rolling out unique programs like free language learning from Rosetta Stone, or free tuition with ASU, our earner Super App is unique in the depth and breadth of earnings opportunities we can offer drivers and couriers globally,” he said.
If mobility continues to take a hit, as it has recently in cities like Sydney, Australia due to persistent lockdowns, Khosrowshahi says Uber can fall back on its other businesses, like freight, Uber Eats and courier service. Khosrowshahi said there’s been a trend of Uber Eats and courier orders increasing as rides decrease.
Last November, Uber acquired online food delivery app Postmates, which the company says has resulted in nearly 5 million additional consumers, 160,000 couriers and over 25,000 merchants migrating from Postmates to Uber Eats, as well as helping Uber establish itself as a category leader in Los Angeles and New York City.
Uber has also expanded into new verticals recently like grocery, convenience and alcohol delivery, with U.S. gross bookings in June nearly tripling from December 2020 levels and doubling in the U.K. and France.
“The differentiator that we have is the audience and the Uber platform,” said Khosrowshahi. “We were actually one of the latest players to build up a delivery business, and we built it based on the Uber brand, the marketplace-matching technology that we have, the pricing technology, routing, etc[…] We’ve got bigger datasets than anyone else. We’re able to train our algorithms over much larger global data points versus our competitors, which allow us to build a matching, routing, incentives, marketing engine that is more personalized and just has greater capabilities than anyone else.”
Khosrowshahi also noted that the company has ops teams on the ground in every market so it can understand the right inventory per marketplace.
“It all translates into: Lower cost of customer acquisition, higher lifetime value, lower overheads and greater tech capabilities. That’s the differentiator.”
Aside from hitting its EBITDA goals by Q4, Khosrowshahi said Uber expects total company gross bookings to be between $22 and $24 billion, and total company adjusted EBITDA to be better than a loss of $100 million for Q3.
Deliveroo announced today that it is considering leaving the Spanish market, citing limited market share and a long road of investment with “highly uncertain long-term potential returns” on the horizon.
The company, an on-demand outfit based in the U.K., went public earlier in 2021. Its shares initially sagged, drawing concern about both the value of on-demand companies and tech concerns listing in London more broadly. However, shares of Deliveroo have since recovered, and the company’s second-quarter earnings report saw it raise its expected gross order volume growth expectations “from between 30% to 40% to between 50% to 60%.”
Given its rising growth expectations and improving public-market valuation, you may be surprised that Deliveroo is willing to leave any of the 12 markets in which it currently operates. In the case of Spain, it appears that Deliveroo is concerned that changes to local labor laws will make its operations more expensive in the country, which, given its modest market share, is not palatable.
Recall that Spain adopted a law in May — a law generally agreed to in March — requiring on-demand companies to hire their couriers. This is the sort of arrangement that on-demand companies in food delivery and ride-hailing have long fought; many on-demand companies are unprofitable without hiring couriers, and doing so could raise their costs. The possibility of worsened economics makes such changes to labor laws in any market a worry for startups and public companies alike that lean on freelance delivery workers.
Let’s parse the Deliveroo statement to better understand the company’s perspective. Here’s the introductory paragraph:
Deliveroo today announces that it proposes to consult on ending its operations in Spain. Deliveroo currently operates across 12 markets worldwide, with the vast majority of the Company’s gross transaction value (GTV) coming from markets where Deliveroo holds a #1 or #2 market position.
Translation: We’re probably leaving Spain. Most of our order volume comes from markets where we are in a leading position (the company competes with Uber Eats, Glovo and Just Eat in different markets). We are not in a leading position in Spain.
Spain represents less than 2% of Deliveroo’s GTV in H1 2021. The Company has determined that achieving and sustaining a top-tier market position in Spain would require a disproportionate level of investment with highly uncertain long-term potential returns that could impact the economic viability of the market for the Company.
Translation: Spain is a very small market for Deliveroo. To gain lots of market share in Spain would be very costly, and the company isn’t sure about the long-term profitability of the country’s business. This is where labor issues like this come into play — investing to gain market share in a country where your business is less profitable is hard to pencil out.
And according to El Pais, the decision by Deliveroo comes as it was up against a deadline regarding worker reclassification. That may have contributed to the timing of the announcement.
From this juncture, Deliveroo spends three paragraphs discussing how it will support workers in case it does leave the Spanish market. It closes with the following:
This proposal does not impact previously communicated full-year guidance on Group annual GTV growth and gross profit margin.
On-demand companies have made arguments over the years that changes to labor laws that would push more costs onto their plates in the form of hiring couriers — or simply paying them more — would make certain markets uneconomic and drive them away. Here, Deliveroo can follow through with an exit at essentially no cost, given how small its order volume is compared to its other 11 markets.
As in-person dining returns, home delivery is holding up. For restaurants, services like DoorDash and Uber Eats could become a permanent part of their business.
Uber is launching more than a half-dozen new features, including one that will let users book vaccine appointments at Walgreens and reserve a ride to get their jab, as the company homes in on a business model that will finally deliver profitability.
The features, announced Wednesday, fall under what Uber is describing as its “go get” strategy. It’s also meant to mark a return to more “normal” business operations following 14 months of shutdowns caused by the COVID-19 pandemic. The numerous features that include vaccine booking, a valet service that will drop off a rental car, reserved rides at airports that off up a an hour of wait time and options to pick up food during a rideshare route are all centered around Uber’s core services of delivery and ride-hailing.
In early 2020, Uber looked like a different business with a web of pursuits that covered air taxis and self-driving cars, delivery, ridesharing, a freight booking platform and shared ebike and scooter rentals. In the past year, Uber has dumped shared micromobility unit Jump, offloaded its autonomous air taxi business Uber Elevate, sold off its Uber ATG self-driving unit and a stake in its logistics arm, Uber Freight. (Uber has maintained equity in all of these businesses).
This wasn’t just about riding itself of businesses. During this same period, Uber also doubled down on rideshare and delivery — acquiring Postmates and Drizly in the process — in a bet that these two areas would be the best path to profitability. Uner’s Go Get initiative is a continuation of that strategy. Meanwhile, COVID-19 decimated its rideshare — along with competitors — business as delivery exploded.
“Over the last year, the company has evolved into a platform where we’re doing two things with incredible focus and incredible intensity,” Uber CPO Sundeep Jain said in a recent interview. “And those are helping users ‘go’ and helping users ‘get.’ We really have evolved this platform where you can go anywhere, get anything.”
For Uber, this means building products that let people “go” somewhere using a variety of different modes from cars and scooters to buses and other forms of public transit or “get” anything such as prepared food from restaurants and more recently expanding into groceries, prescriptions and alcohol. This “go” and “get” directive is influencing the company’s product development and even acquisition strategy. With Uber’s acquisition of Postmates, the company even deliver iPhones, Jain noted as one example.
Among the new features is Uber Rent with Valet, which lets users in the U.S. rent a car directly in the Uber app. The vehicle is then delivered to the user, whether it’s at their home or airport. The company’s Uber Reserve feature is now being rolled out across the U.S. as well, and includes flight tracking, 60 minutes of wait time and curbside pickup.
On the “get” front of this strategy, Uber has launched “Pick Up and Go” which lets a rideshare user place an order for pickup and add a stop to pick up the order while en route to their final destination. Uber also rolled out a new ‘schedule’ button that includes an option to order from merchants, even when they’re closed. There’s also new capability to add on items from a second merchant at check out for no additional delivery fee.
Uber has also added a savings hub that will highlight every eligible offer, deal and discount available to users, a new feature that gives delivery reminders via in-app notifications and an extension of its Eats Pass membership.
The company expanded other existing programs such as the ability you obtain a car with a driver for multiple hours instead of just a single trip. “That’s less prevalent in the U.S. but very popular in Asia, in Latin America,” Jain said.
All of this, is of course, aimed at the holy “profitability” grail. And it appears to be closer than it was a year ago. Earlier this month, Uber released a SEC filing that maintained it still expects quarterly Adjusted EBITDA profitability in 2021. Uber also reported its gross bookings in March reached the highest monthly level in the company’s nearly 12-year history. The company’s mobility business posted its best month since March 2020, crossing a $30 billion annualized Gross Bookings run-rate, with average daily Gross Bookings up 9% month-over-month. The company’s delivery business set another all-time record, crossing a $52 billion annualized Gross Bookings run-rate in March, growing more than 150% year-over-year, the filing said.
The upshot: March was Uber’s best in its history in terms of gross sales on its platform. However, as TechCrunch’s Alex Wilhelm noted recently, while Uber’s delivery business has scaled, it is still less profitable than its main rideshare business. The company has reached a new total platform spend record, but it’s made up of less profitable revenue than before.
This Go Get program appears to be aimed finding new ways to build out its ridehailing business — which in previous quarters generated the superior result, generating positive adjusted EBITDA — while expanding delivery without adding costs. It also reflects a change in consumer behavior prompted by the COVID-19 pandemic.
“We’ve seen users gravitate towards advanced reservation products which wasn’t as popular reuse case before, before it was mostly on demand,” Jain said, “And so we meaningfully invested to improve the user experience with upfront driver assignment, higher levels of, reliability and assurances, so that is why we’re making a larger announcement around reservations that has really become a more popular use case.”
Earth Day may have come and gone, but with apps like #8meals from the non-profit Habits of Waste, anyone can try and do their part to help reduce deforestation and rising greenhouse gas emissions by cutting meat out of their diets for just 8 meals a week.
The app, which was created by Habits of Waste founder Sheila Morovati along with the development shop Digital Pomegranate, gives users a way to schedule which meals of theirs will be meatless and offers recipe suggestions for what to eat to help them stick to their goals.
For Morovati, the #8meals app is only the latest in a series of initiatives that are meant to cut down on waste and consumption. Morovati’s journey to environmental advocacy began with a program to redistribute used crayons from restaurants to schools in the Southern California region.
That program, called Crayon Collection, has redirected over 20 million crayons from landfills, but Morovati’s non-profit push to reduce waste didn’t end there.
The Habits of Waste organization also launched the #cutoutcutlery campaign, which convinced Uber Eats, Postmates, Grubhub and DoorDash to change their default settings to make customers opt-in to receive plastic cutlery. It’s a way to reduce the nearly 40 billion plastic utensils that are thrown away each year, according to the Habits of Waste website.
“We decided to create a whole new arm which is cut out cutlery and eight meals. Trying to shift societal mindset is my goal,” said Morovati.
Meanwhile, the number of meat replacements available to consumers continues to expand. Everyone from Post Cereal to Anheuser Busch is trying to make a play for replacements to proteins sourced from animals. That’s not to mention the billions raised by companies like Impossible Foods and Beyond Meat to sell replacements direct to consumers.
Going meatless, even for a few meals a week, can make a huge difference for planetary health (and human health). That’s because animal agriculture is responsible for more than 18% of greenhouse gas emissions worldwide — and it contributes to deforestation.
“I always think about this fake person that I’ve created in my mind and I call him Mr. Joe Barbecue,” Morovati said during a YouTube interview with self-described superfood guru, Darien Olien, earlier this year. “How can we get Mr. Joe Barbecue to be on board? Is it possible to tell him to go fully vegan? I don’t think so. Not yet. But I think if we introduce it with eight meals a week, maybe even Mr. Joe Barbecue will be willing to go there and understand it and try it and open up the door a crack to invite people in who may not be willing to do this.”
The FoodTech industry is effectively now going into fast food. Sweetgreen in the US is a ‘fast-casual’ restaurant chain that serves healthy “bowl food”. It’s raised $478.6M. A similar firm is Sweetfin. Both employ a lot of tech in their back-end to improve efficiencies.
Into this area has come European startup Poke House, which is effectively industrializing the production of “poke bowls” for food delivery platforms. Poke House specializes in bowl food that often includes marinated fish that’s cubed and layered up with sticky rice, pickles, noodles, etc.
The company has now raised €20 million ($24m) in a Series B funding round led by Eulero Capital, with the backing of FG2 Capital and reinvestment from Milan Investment Partners SGR. It using tech and data to optimize the production and delivery of its product via all the major food delivery platforms such as Uber East etc. The Italy-born food tech startup claims to have built a “€100M+ company” inside two years.
Founded by Matteo Pichi and Vittoria Zanetti, Poke House has opened 30+ stores in Italy, Portugal and Spain, and now has 400 employees. It’s claiming an expected turnover of €40M+ in 2021.
With the funding, the startup will start opening new stores in existing markets, enter France and start in expansion in the UK.
Poke House says it uses a lot of tech on its back-end, tracking every element of the supply chain to optimize the business. It also analyzes data from third-party delivery platforms (ie. Deliveroo, Glovo, UberEats) to deliver a sub-10 mins food preparation time, and a delivery time under 25 mins.
Matteo Pichi, Co-Founder of Poke House said: “The pandemic has challenged our food sector, and we see technology as the way forward to innovate and digitalize the traditional restaurant experience. We are seeing a shift in people’s desires in fast but healthy food. Poke bowls fit this new need and it promotes a more balanced, active and sustainable lifestyle with quick and healthy food options available nearby.”
Speaking to TechCrunch, Pichi added: “Our competitors are the fast-growing healthy concepts such as Sweetgreen or Sweetfin in the US. But in the same time, we think we are lucky because we really are one of the first brands built 100% from food delivery experts or former employees. Our next competitors are gonna be full native virtual brands extremely strong in data analysis and digital brand building. We use food delivery platforms as media platforms and we invest heavier than competitors in the channel.”
Gianfranco Burei, Founding Partner of Eulero Capital said: “Poke House business model rides some of the main trends in the food sector (food-tech, healthy food, delivery, customization) and has all the characteristics and talents to position the company among the top players at European level. We are thrilled to be a partner of Poke House in an innovative and forward-looking project, in line with our investment strategy which is based on the search for companies included in the macro-trends that will characterize the economic, technological and social evolution of the coming years.”
Tyltgo wants to make it easier for restaurants and small businesses to compete with same-day delivery services offered by the likes of Amazon and HelloFresh. The Canadian company, which recently raised CAD $2.3 million (USD $1.8 million) in a seed round, is akin to a white label Uber Eats, providing businesses an on-demand delivery platform under their own branding that connects them to gig economy couriers.
“I think about us as a post-purchase experience company,” co-founder and CEO Jaden Pereira told TechCrunch. “The recipient goes directly onto the merchant’s platform and places orders through them, so it feels like they’re interacting with the brand they purchased from throughout the entire experience. Our messages, notifications, tracking pages and delivery are all customized under the merchant’s brand name, but it’s powered by Tyltgo.”
The necessity of having products delivered during the pandemic’s shelter-in-place orders combined with the massive reach of e-commerce giants like Amazon has created a society that expects same-day deliveries. Tyltgo recognized the exclusionary nature of that reality on smaller businesses with less time and fewer resources, and contrived to remedy the situation with some innovative tech and gig economy couriers.
In July 2018, Pereira, 22, co-founded the company with fellow student and developer Aaron Paul while studying at the University of Waterloo. Pereira originally did deliveries himself as a side hustle, while building up a consumer-facing service on Shopify. In October 2019, Pereira and Paul shifted focus to B2B, identifying the real problem as merchants struggling to offer quality same-day delivery at an affordable price.
From December 2019 to December 2020, Tyltgo’s revenue grew 2000%, says Pereira. The company started 2020 with two staff members and ended with nine, including former head of Uber Eats Canada’s marketplace operations, Joe Rhew, and former director of engineering at Goldman Sachs-acquired fintech company Financeit, Adnan Ali.
Aided by funding from VC firm TI Platform Management, Y Combinator and angel investor Charles Songhurst, Tyltgo projects another 1500% revenue growth for 2021. The company’s goal is to expand its team, develop an API and app-based platform, and add 100 more merchants across Ontario.
Pereira said Tyltgo originally focused on florists, and occasionally pharmacies, but demand from the restaurant industry led to the company’s new target — meal kit deliveries.
Meal kit services that provide the culinarily challenged with perfectly portioned ingredients and cooking instructions were already gaining popularity in the before times. When the pandemic hit, services like HelloFresh and Blue Apron saw even more growth. As restaurants struggled to keep their businesses open, many started to get in on the action, delivering restaurant-quality meals with instructions for heating and serving.
The global meal kit delivery services market is expected to reach almost $20 billion by 2027, with heat-and-eat options taking a large share of that market. Tyltgo is counting on the success of this industry. It has already secured partnerships with restaurants like General Assembly Pizza and Crafty Ramen, as well as with more traditional meal kit delivery services from grocery stores and organic farms.
Pereira said working in the “quasi-perishable space” of flowers and meal kits is both a challenge and a differentiator for the company. Depending on the contents of the delivery, Tyltgo will determine its perishability window and make sure to match that window with a driver. It’s also got an advanced fleet management platform that assigns a number of deliveries to suit the size of a courier’s vehicle.
“In the earlier days, the hardest part was being able to match those perishability windows without causing damage to the products,” said Pereira. “We all know that in logistics, you have to account for traffic, weather conditions, all these other things, but you have an eight hour delivery window to get out 35 deliveries.”
Another challenge is ensuring the top quality service Tyltgo advertises while working in the gig economy. Selecting for reliable couriers has slowed the company down at points, but Tyltgo aims to grow capacity only if it can simultaneously maintain a low error threshold.
“We won’t bring on a merchant if we don’t think we have the capacity to handle their deliveries and meet those expectations,” said Pereira.
Whether or not Tyltgo’s meal kit focus will end up driving scalability in the long run, the platform itself has legs. Pereira’s goal is to see Tyltgo become a part of every post-purchase customer experience for all retail trade categories, and that includes expanding into customer service, branding and transactions on top of delivery.
“The main reason why we’re doing this is because a lot of these smaller, brick-and-mortar retailers don’t have the time and resources to be able to compete with the Amazons of the world,” said Pereira. “We want to be able to put that power in their hands.”
There’s an “uber for everything” these days and now there are “Ubers for personal chefs”. Just take a look at PopTop or 100 Pleats for instance. Now in London, there is Yhangry (which brands itself as the appropriately shouty YHANGRY). This is a “private chef parties at home” website, and no doubt an app at some point. The startup has now raised a $1.5 million Seed round from a number of notable UK angels which also includes a few UK VCs for good measure, as well as ‘Made In Chelsea’ TV star Ollie Locke.
Founders Heinin Zhang and Siddhi Mittal created the startup before the pandemic, which lets people order a made-to-measure dinner party online. Although it trundled along until Covid, it had to pivot into virtual chef classes during lockdowns last year and this. The company is now poised to take advantage of London’s unlocking, which will see legal outdoor and indoor dining return.
The startup also speaks to the decentralization of experiences going on in the wake of the pandemic. In 2019 we were working out in gyms and going to restaurants. In 2021 we are working out at home and bringing the restaurant to us.
Normally booking private dinner parties involves a lot of hassle. The idea here is that Yhangry makes the whole affair as easy to order as an Uber Eats or Deliveroo.
Investors in the Seed round include Carmen Rico (Blossom Capital), Eileen Burbidge (Passion Capital), Orson Stadler (Antler) and Martin Mignot (Index Ventures), Made In Chelsea star Ollie Locke, plus fellow tech founders including Jack Tang (Urban), Adnan Ebrahim (MindLabs), Alex Fitzgerald (Cuckoo Internet), Georgina Kirby (Vinehealth) and Deepali Nangia (Alma Angels). Yhangry’s statement said all the investors are also keen customers. I bet they are.
Co-founder Mittal said in a statement: “By making private chef experiences more accessible and affordable, our customers regularly tell us they are finally able to catch up with friends at home… 70% of our customers have never had a private chef before and for them, the freedom and flexibility to curate their own evening is priceless.”
Yhangry now has 130 chefs on its books. Chefs have to pass a cooking trial and adhere to Covid rules. The funding will be used to double the size of the startup’s team.
The menus start at £17pp for six people. The price of the booking covers everything, including the cost of the fresh ingredients, but customers can add extras, such as wine etc. Since its launch in December 2019, the firm says it has served more than 7,000 Londoners.
Yhangry says it will enter key European markets, such as Paris, Berlin, Lisbon and Barcelona.
How will Yhangry survive post-Covid, with restaurants/bars opening up again?
Mittal said: “When restaurants were open between our launch and March 2020, we saw demand because people want to be able to spend time with their friends in a relaxed setting, and aren’t limited to the two-hour slot you get in a restaurant. Once places start to open up again, we believe Yhangry will follow this trend of at-home dining and socializing – not to mention for people who are not ready yet to go out to a busy pub or restaurant.”
A DoorDash driver named Jeffrey Fang was returning to his minivan in San Francisco after completing a delivery last week when he noticed a stranger in his car. After a struggle, he told a local news outlet, another person, an accomplice, got behind the wheel and drove away. Fang’s children, 4 and 1, were still buckled inside.
Four hours later, after a frantic search by neighbors and law enforcement, the minivan was found in another San Francisco neighborhood, with the children safe and unhurt inside.
Faced with the challenge of promoting products in a difficult time, some companies referenced the nation’s struggles in their marketing messages, while others went for nostalgia.
Liz Meyerdirk made a name for herself at Uber as the Senior Director & Global Head of Business Development for the company’s Uber Eats business and she’s now turning her attention to women’s health as the new chief executive of The Pill Club.
The move comes at a perilous time for the remote delivery of women’s healthcare as the Supreme Court has taken steps to limit the provision of sexual healthcare to women in recent months.
“Women’s health care has never been more tested than right now,” Meyerdirk noted in a blog post announcing her new role. “COVID-19 has upended access to care; dozens of states have—and continue—to try and limit women’s choice; and last year, the Supreme Court voted to uphold the rollback of the ACA contraceptive mandate decision, a stunning move that could end up impacting as many as 126,000 women who previously received covered contraception through employer-based health insurance.”
A seasoned corporate executive, Meyerdirk is hoping to navigate The Pill Club through these treacherous times. “These events have shown that reliable, safe, and affordable access to women’s health and birth control is
just one more vulnerability in our health care system,” Meyerdirk wrote.
As it faces an uncertain legal environment on some fronts, the company couldn’t be in a better position financially.
The Pill Club, which is profitable and now has a $100 million run rate, is now ready for its closeup with Meyerdirk at the helm.
The company has managed to make its mark in the crowded world of online prescriptions and refill fulfillment by focusing specifically on women’s health and ensuring that those services are available to as many potential patients as possible.
“We’re now serving hundreds of thousands of women nationwide with 20% on Medicaid,” says Meyerdirk. “We prescribe in 43 states and the District of Columbia.”
For Meyerdirk, the background she had in logistics and fulfillment from her time at Uber Eats made the transition to the pill prescription and delivery service natural.
“There is a heavy logistics element to it,” said Meyerdirk.
As Meyerdirk takes the reins of the company, she said there’s a few areas that The Pill Club will expand into beyond its focus on birth control and contraception. “There are areas that our customers are asking for,” Meyerdirk said.
These areas include, initially, dermatology. Last year the company launched a delivery service for contraceptives and women’s hygiene products like pads and tampons.
As it continues to expand its product suite, it’s also growing its executive staff. The company not only added Meyerdirk, but also David Hsu as chief financial officer and Jeremy Downs as senior vice president of growth. Hsu joins the company from Honey, where led the $4 billion acquisition negotiations with PayPal, and Downs comes from Uber Eats, where he spent five years leading growth.
“We need sustained, long-term access to women’s health care, not just a bridge while the pandemic persists; and we need coverage for essential health services like birth control and prenatal care, regardless of whether or not you’re insured,” Meyerdirk wrote. “Reproductive care has and continues to be an essential part of our business, but there are countless opportunities to serve women in all of their life stages from puberty to menopause.”
The layoffs include most of the executive team at Postmates, the food delivery app that Uber bought last year.
Uber built a business on the backs of drivers and, now, restaurants. But the company’s chief Dara Khosrowshahi says it’s not part of the ‘menace economy.’
High fees are cutting already thin margins to the bone.
This morning, DoorDash filed a new S-1 document, this time updating the market about the price it expects to command during its public offering. The food-delivery giant gave a range of $75 to $85 per share, which would revalue the company sharply higher than its final private price, set during a June Series H that valued DoorDash at $16 billion.
The company intends to sell 33 million shares, raising between $2.475 billion and $2.805 billion in the process. Notably, there are no shares set aside for its underwriting banks to buy at its IPO price.
After the public offering, DoorDash expects to have 317,656,521 shares outstanding across various classes, giving it a valuation of between $23.8 billion and $27 billion at the two extremes of its IPO range, not counting shares that have not yet vested or are set aside for future employee compensation. CNBC calculates that the company could be worth up to $30 billion on a fully-diluted basis.
What matters more than the raw dollar amounts, however, is what we can learn from them. Let’s get into the guts of the valuation range and find out if it’s bullish or if we should anticipate DoorDash to raise its range before it goes public.
The new DoorDash S-1/A filing, it doesn’t appear to contain new financial information, so we can keep our prior notes on the company’s health and performance in mind. Recall that we were generally impressed by DoorDash’s growth and its improving profitability.
Other on-demand food services are doing well: HungryPanda just raised $70 million, and on the back of Uber Eats’ growth — and optimism that its ride-hailing business will return with the market-readiness of strong COVID-19 vaccines — shares of Uber are at all-time highs.
So you can taste the optimism that DoorDash is riding as it looks to list. Given our take, you would be forgiven for presuming that DoorDash is targeting an aggressive price.
Delivery drivers have been essential to feeding New York, while boosting sales for companies like DoorDash and Uber. But they say work conditions have gotten worse.
“We’re building a decentralized ghost kitchen,” is a sentence that could launch a thousand investor calls, and Alex Canter, the chief executive officer behind Ordermark, knows it.
The 29 year-old CEO has, indeed, built a decentralized ghost kitchen — and managed to convince Softbank’s latest Vision Fund to invest in a $120 million round for that the company announced today.
“We have uncovered an opportunity to help drive more orders into restaurants through this offering we have called Nextbite,” Canter said. “Nextbite is a portfolio of delivery-only restaurant brands that exist only on UberEats, DoorDash, and Postmates.”
After hearing about Nextbite, Softbank actually didn’t take much convincing.
Investors from the latest Vision Fund first reached out to Canter shortly after the company announced its last round of funding in 2019. Canter had just begun experimenting with Nextbite at the time, but now the business is driving a huge chunk of the company’s revenues and could account for a large percentage of the company’s total business in the coming year.
“We believe Ordermark’s leading technology platform and innovative virtual restaurant concepts are transforming the restaurant industry,” said Jeff Housenbold, Managing Partner at SoftBank Investment Advisers, in a statement. “Alex and the Ordermark team have a deep understanding of the challenges that independent restaurants face. We are excited to support their mission to help independent restaurants optimize online ordering and generate incremental revenue from under-utilized kitchens.”
It’s an interesting pivot for a company that began as a centralized hub for restaurants to manage all of the online delivery orders coming in through various delivery services like GrubHub, Postmates and Uber Eats .
Canter is no stranger to the restaurant business. His family owns one of Los Angeles’ most famous delicatessens, the eponymous Canters, and Ordermark apocryphally started as a way to manage the restaurant’s own back-of-the-house chaos caused by a profusion of delivery service orders.
Now, instead of becoming the proprietor of one restaurant brand, Canter is running 15 of them. Unlike Cloud Kitchens, Kitchen United or Reef, Ordermark isn’t building or operating new kitchens. Instead, the company relies on the unused kitchen capacity of restaurants that the company has vetted to act as its quasi-franchisees.
While most of the restaurant concepts have been developed internally, Ordermark isn’t above the occasional celebrity sponsorship. Its Nextbite service has partnered with Wiz Khalifa on a delivery-only restaurant called HotBox by Wiz, featuring “stoner-friendly munchies”.
The first brand Canter launched was The Grilled Cheese Society, which took advantage of unused kitchens at places like a Los Angeles nightclub and mom-and-pop restaurants across the East Coast to build out a footprint that now covers 100 locations nationwide.
It’s perhaps the growth of the HotBox brand that shows what kind of growth Nextbite could promote. Since the brand’s launch in early October, it has grown to a footprint that will reach 50 cities by the end of the month, according to Canter.
In some ways, Nextbite couldn’t exist without Ordermark’s delivery aggregation technology. “The way that Ordermark’s technology is designed, not only can we aggregate online orders into the device, but we can aggregate multiple brands into the device.”
For restaurants that sign up to be fulfillment partners for the Nextbite brands, there are few additional upfront costs and a fair bit of upside, according to Canter. Restaurants are making 30% margin on every order they take for one of Ordermark’s brands, Canter said.
To become a part of Nextbite’s network of restaurants the business has to be vetted by Ordermark. The company takes cues on what kinds of restaurants are performing well in different regions and develops a menu that is suited to match those trends. For instance, Nextbite recently launched a hot chicken sandwich brand after seeing the item rise in popularity on different digital delivery services.
Restaurants are chosen that can match the menu style of the delivery-only brand that Ordermark’s Nextbite business creates.
Behind those menus is Guy Simsiman, a Denver-based chef who is in charge of developing new menus for the company.
“We’re building things that we know can scale and we do a lot of upfront vetting to find the right types of fulfillment partners,” said Canter. “When a restaurant signs up to become a fulfillment partner, we’re vetting them and training them on what they need to do to … We’re guiding them to become fulfillment partners for these concepts. There’s a whole bunch of training that happens. Then there’s secret shopping and review monitoring to monitor quality.”
While Nextbite may be the future of Ordermark’s business, its overall health looks solid. The company is about to cross $1 billion worth of orders processed through its system.
“We are laser focused right now on helping our restaurants survive COVID and the best way we can do that is by doubling down on the incremental revenues of the Nextbite business,” said Canter when asked where the company’s emphasis would be going forward.
Nextbite is something we’ve been developing for a while now. We took it to market at the end of last year prior to COVID. When COVID kicked in every restaurant in America needed to be more creative. People were looking for alternative ways to supplement the loss in foot traffic,” he said. Nextbite provided an answer.
Gig workers deserve the dignity of fair compensation.
Modeled after food delivery services in Seoul, a tiny Koreatown business keeps neighborhood restaurants running through the pandemic.
The companies, under legal pressure to reclassify their drivers as employees, said they would halt rides unless an appeals court gives them permission to continue.
Uber reported its second-quarter earnings Thursday and buried in the blizzard of less-than-rosy numbers is a stunning figure that illustrates how much the company has changed during the COVID-19 pandemic.
Uber’s delivery business — better known as Uber Eats — is now bigger than its original and core ride-hailing division, based on adjusted net revenue. Now, adjusted net revenue tells only a piece of this evolving Uber story. Income, or losses in the case of Uber’s delivery business, are also important.
Still, looking at the change of the past year, and specifically in the past two quarters, it’s clear that Uber’s strategy has shifted. And all eyes are on delivery.
Before digging deeper, let’s run a quick recap.
Uber’s reported net loss was $1.78 billion in the second quarter of 2020, down from a year-ago net loss of $5.24 billion. The company went public last year, resulting in various one-time, non-cash costs. The company’s net loss worked out to a loss of $1.02 per share. That was enough to beat analysts’ expectations of a $0.86 per-share deficit.
Uber missed on profitability in the quarter, but did surpass expectations on top line, posting more revenue than the $2.18 billion figure investors expected.
The shift to delivery
There are three key ways to weigh the company’s various businesses, of which only two are of material scale to the Uber’s operating results, namely Mobility (ride-hailing), and Delivery (Uber Eats). Here’s how the pair stacked up in Q2 2020:
- Delivery gross bookings: $6.96 billion
- Mobility gross bookings: $3.05 billion
Here’s how those gross bookings results turned into adjusted net revenue:
- Delivery adjusted net revenue: $885 million
- Mobility adjusted net revenue: $793 million
And how those revenue results turned into adjusted profit, and adjusted losses:
- Delivery adjusted EBITDA: -$232 million
- Mobility adjusted EBITDA: $50 million
As you can see, Uber’s food delivery business is doing far more gross dollars in transaction volume. However, as Uber has a better take-rate (the portion of gross spend it gets to keep as revenue) with ride-hailing than Uber Eats, the two had far closer adjusted net revenue numbers. Here, again, Delivery beat Mobility.
When it came down to adjusted profit, Uber’s traditionally-core business of ride-hailing generated the superior result, generating positive adjusted EBITDA, while delivery lost money using the same profit calculation method.
In Q1 2020, Mobility generated more gross bookings, adjusted net revenue, and adjusted EBITDA than Delivery. In Q2, due to COVID-19 and its resulting economic impacts, two of the three numbers flipped. How fast the figures could change in the future if the market for ride-hailing recovers further, is not clear. Today’s earnings call made it clear that Uber is more about bringing you food than taking you to the airport, and that’s a big change for the American company.
To be clear, ride-hailing isn’t going anywhere. It’s the dual focus of delivery and ride-hailing that Uber is counting on to get it through this rough patch of COVID-19 pandemic as well as fortify its revenue earning potential in more stable times.
“It’s become clear that we have a hugely valuable hedge across our two core businesses that is a critical advantage in any recovery scenario,” Uber CEO Dara Khosrowshahi said Thursday. “When travel restrictions lift we know the mobility trips rebound. If restrictions continue or need to be re-imposed our delivery business will compensate.”
For fun, here are the pertinent sections of Uber’s Q2 investor slides.
Here’s the company’s Mobility numbers:
And, here are its Delivery results:
Happy number crunching!
Uber said revenue fell 29 percent in the second quarter because people traveled less, but food deliveries soared.
Like other travel- and transportation-related businesses, Uber’s ride-hailing segment has been negatively impacted by the COVID-19 pandemic, due to shelter-in-place orders throughout the United States. On-demand delivery, however, has grown, with people relying on services like Uber Eats to get food without leaving their homes. According to its last earnings report, Uber’s ride-hailing gross bookings dropped, but its food delivery service saw gross sales growth of 54% during its first fiscal quarter.
According to previous reports, Uber made an offer to buy Grubhub, another on-demand delivery service, earlier this year, but after that deal fell through, it approached Postmates. Bloomberg reports that Uber and Postmates have actually talked on and off for about four years, but negotiations became more intense about a week ago.
Grubhub ended up being acquired by Just Eat Takeway in a deal worth $7.3 billion after its negotiations with Uber stalled.
If the deal goes through, the main competitors in the American food delivery market would be Uber Eats/Postmates versus Grubhub/Takeaway versus DoorDash.
In other countries, companies like Grab have also begun building out their on-demand delivery services to make up for losses from fewer ride-hailing bookings. For example, Grab responded to stay-at-home orders in Indonesia (its main market) and other Southeast Asian countries by re-deploying ride-hailing drivers to on-demand deliveries for food and essential items.
The ride-hailing company’s core business has struggled in the pandemic, and it is betting on growth of its Uber Eats division.
The streaming company will shift some of its $5 billion in cash to financial institutions that focus on black communities.
According to the Times, the talks are still ongoing and the deal could fall through.
For those that have been paying attention to Uber, this appetite is not new, albeit consistent. A little over a month ago, the ride-hailing company was reportedly pursuing an acquisition of Grubhub, another food delivery company. Grubhub was ultimately acquired by Just Eat Takeaway in a $7.3 billion deal, but only after the deal with Uber fell through over a variety of concerns.
Food delivery market has set to benefit largely from the COVID-19 pandemic, as stores remain shuttered or switch operations to takeout only. Latest earnings from the public ride-hailing company show that its ride-hailing business is slowing while its food delivery service is growing like hell. Gross bookings for Uber Eats last quarter were $4.68 billion.
So even though Uber still loses a ton of money ($2.94 billion including all costs), its Uber Eats growth is staggering. And the green shoots might be fueling some of this interest in other competitors.
If regulatory concerns were an issue, Postmates may make a better fit.
With a valuation of $2.4 billion, Postmates is significantly smaller than Grubhub. And while the company filed to go public nearly 16 months ago, it held off eventually citing “choppy market” conditions.
So if Uber Eats and Postmates combined, the result would still be smaller than Doordash’s market hold, but would be competitive nonetheless. DoorDash, last valued at $13 billion, confidentially filed for an IPO nearly four months ago.
Also, Postmates delivers more than just food.
Postmates declined to comment on rumors or speculation. Uber did not immediately respond to a request for comment.
The ride-hailing company has been trying to expand its food-delivery business to compensate for the collapse of its main business.
The Dutch food delivery company beat out Uber to buy Grubhub, whose chief executive will oversee operations in North America.
While the apps say they are saving them in the pandemic, many restaurateurs say the opposite.
When Luke Edwards opened OH Pizza & Brew in 2014, the Columbus, Ohio, restaurateur thought delivery apps could help his business. His chicken wings and specialty pizzas—the most popular and appropriately named “Bypass,” topped with pepperoni, sausage, ham, salami, bacon, and extra cheese—needed an audience. And he says working with apps such as DoorDash, Grubhub, Postmates, and Canada’s SkipTheDishes helped him build a loyal following, allowing him to open two more OH Pizza & Brews, with another location on the way.
But by January 2019, Edwards had had enough. For one, he didn’t think the services were helping his bottom line. “Even though we were bringing in more money, after paying out the commission rates, we were seeing a decrease in net profits,” he says. The drivers were inconsistent, he reports, and sometimes lacked equipment like insulated food bags to keep deliveries warm. Edwards also found it harder to get in touch with customer service reps for the apps, who would sometimes refund customers at the eatery’s expense for deliveries he believed had gone well.
“Quickly, I realized [the apps] were good at the search and optimization thing,” he adds. “They were terrible at delivery.” Today, OH Pizza & Brew pays its own contracted drivers to deliver, which Edwards believes saves him money.
Earlier today news broke that Uber is pursuing an acquisition of Grubhub. The global ride-hailing giant is worth a multiple of the American food delivery service, making the tie-up financially feasible, provided that a palatable price can be found for both parties.
The deal could shake up the large, if generally unprofitable American food delivery market, a space contested by Uber’s Uber Eats service, Grubhub, DoorDash and Postmates. The combination could create the largest food delivery entity in terms of sales, changing leadership in its market and perhaps reducing competition.
Let’s unpack the deal in terms of its cost, why Uber has to pay in stock, how large a combined Uber Eats/Grubhub entity would be compared to its competition and why adjusted EBITDA helps us understand how this acquisition could give Uber’s bottom line a shot in the arm.
An all-stock purchase?
In normal times, this deal would likely be a mix of cash and stock. However, in 2020, with Uber’s market position being what it is, it’s likely that this would be an all-equity transaction. Why? Because Uber needs to conserve cash at nearly all costs. Its only historically profitable division (ride-hailing generates heavily adjusted profits) is in the tank, with ride volumes down as far as 80% in April, compared to its year-ago period.
A deal would unite two large players in food delivery as more people order in meals during the pandemic.
Lyft, Uber and Airbnb depend on travel, vacations and gatherings. That’s a problem when much of the world is staying home.
Uber Eats is introducing a new feature that lets customers send food to friends, family or coworkers and share details to make it easier track the deliveries.
Uber Eats customers have been able to order and send food to friend. But in the past, it required the sender to track the delivery and provide updates to the receiver. The new feature lets the person receiving the food track the delivery on their phone.
The feature is Uber’s latest effort to tap into the growing demand for delivered food during the COVID-19 pandemic, even as it has experienced huge drops in its ride-hailing business. Last month, Uber for Business, a platform designed for corporate customers, expanded its Eats product to more than 20 countries this year, in response to the surge in demand stemming from more employees working from home.
Despite demand, the Eats division has suffered losses. The on-demand food service division said May 4 it was pulling out of the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine. It also announced plans to transfer its Uber Eats business operations in the United Arab Emirates (UAE) to Careem, its wholly owned ride-hailing subsidiary that’s mostly focused on the Middle East. Just a day later, Careem said it was cutting its workforce by 31%.
Uber Eats is pulling out of a clutch of markets — shuttering its on-demand food offering in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine.
“Consumers and restaurants using the Uber Eats app in the UAE will be transitioned to the Careem platform in the coming weeks, after which the Uber Eats app will no longer be available,” it writes in a regulatory filing detailing the operational shifts.
“These decisions were made as part of the Company’s ongoing strategy to be in first or second position in all Eats markets by leaning into investment in some countries while exiting others,” the filing adds.
An Uber spokesman said the changes are not related to the coronavirus pandemic but rather related to an ongoing “strategy of record” for the company to hold a first or second position in all Eats markets — which means it’s leaning into investment in some countries while exiting others.
Earlier this year, for example, Uber pulled the plug on its Eats offer in India — selling to local rival Zomato. Zomato and Swiggy hold the top two slots in the market. (As part of that deal Uber took a 9.99% stake in Zomato.)
Uber Eats rival, Glovo, also announced a series of exits at the start of this year — as part of its own competitive reconfiguration in a drive to cut losses and shoot for profitability. It too says its goal is to be the first or second platform in all markets where it operates.
The category is facing major questions about profitability — with now the added challenge of the coronavirus crisis. (Related: Another player in the space, Uk-based Deliveroo, confirmed a major round of layoffs last week.) tl;dr, on-demand unit economics don’t stack up unless you can command large enough marketshare so it looks like the competitive pack is thinning as it becomes clearer who’s winning where.
In a statement on the latest round of Eats exits, Uber said: “We have made the decision to discontinue Uber Eats in Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Ukraine, and Uruguay, and to wind down the Eats app and transition operations to Careem in U.A.E. This continues our strategy of focusing our energy and resources on our top Eats markets around the world.”
The discontinued and transferred markets represented 1% of Eats’ Gross Bookings and 4% of Eats Adjusted EBITDA losses in Q1 2020, per Uber’s filing.
“Consistent with our stated strategy, we will look to reinvest these savings in priority markets where we expect a better return on investment,” the filing adds.
The Uber Eats spokesman told us that the exits do not sum to any change to the ‘more than 6,000 cities’ figure for the unit’s market footprint — which Uber reported earlier this year.
Asked which markets the company considers to be priorities going forward the spokesman did not respond. It’s also not clear whether or not Uber sought buyers for the shuttered units.
Per Uber’s filing, Eats operations will be fully discontinue in the Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine by June 4, 2020.
Uber Rides operations are not affected, it adds.
A source familiar with Uber also said the changes will allow the company to focus resources on new business lines — such as grocery and delivery.
The coronavirus pandemic has disrupted the on-demand food delivery business as usual in many markets — with convenience-loving customers locked down at home so likely to be cooking more, and large numbers of restaurants closed (at least temporarily), putting a dent in the provider side of these platforms too.
At the same time there is a demand upside story in the groceries category. And last month Uber announced a tie-up with a major French supermarket, Carrefour, to expand its delivery offering nationwide. It also inked other grocery-related partnerships in Spain and Brazil.
Grocery delivery has been seeing a massive uptick as consumers look for ways to replenish their food cupboards while limiting infection risk.
While other types of deliveries — from pharmaceuticals to personal protective equipment — also potentially offer growth opportunities for on-demand logistics businesses, which is how many major food delivery platforms prefer to describe themselves.
Swiggy is cutting about 1,000 jobs, most from its cloud kitchen division, as India’s top food delivery startup scales back some of its businesses in response to the coronavirus pandemic that has drastically affected millions of firms.
In a statement, the Bangalore-based startup said it was “evaluating various means to stay nimble and focus on growth and profitability across our kitchens.”
“This will, unfortunately, have an impact on a certain number of kitchen staff who will be fully supported during this transition,” said the startup, which, according to an analysis on LinkedIn, employs about 12,000 people.
Swiggy did not reveal the number of people it was letting go, but a source familiar with the matter told TechCrunch that about 1,000 jobs were being cut. Indian news outlet Entrackr first reported the layoffs.
As the firm cuts its headcount, it is also looking to reduce its monthly burn rate to about $5 million, down from about $20 million it spends in winning customers currently, the source said, requesting anonymity as some of these matters remain private.
Swiggy — which has raised $1.42 billion to date, including $156 million as part of an ongoing Series I round this year — competes with Ant Financial-backed Zomato, which is also in talks to raise about $500 million by mid-May, Deepinder Goyal, the co-founder and chief executive of the Gurgaon-based startup, told TechCrunch last week.
Both the startups spend nearly the same amount of money in discounts and other incentives to sustain their customers and win new patrons. India’s food delivery market, valued at $4 billion (by research firm RedSeer), has become a duopoly as FoodPanda, owned by Ola, made a major strategic shift in recent years and Uber sold its Indian Uber Eats business to Zomato.
Swiggy and Zomato have, however, struggled to cut costs in fear that they might lose customers. And those fears are well founded.
Anand Lunia, a VC at India Quotient, said that the food delivery firms have little choice but to keep subsidizing the cost of food items on their platform, as otherwise most of their customers can’t afford them.
The lockdown that New Delhi ordered last month has created new challenges for both Swiggy and Zomato. Both the startups are now seeing fewer than a million orders placed on their platforms, down from nearly 3 million they were handling before the outbreak.
In the last year, both the startups have attempted to expand into new categories in search of additional revenue sources. Swiggy has expanded and doubled down on cloud kitchens, which allows its restaurant partners to launch in more locations with not as much investment.
Late last year, Swiggy executives said they had established 1,000 cloud kitchens for its restaurant partners in the country — more than any of its local rivals. The startup said it had invested in more than a million square feet of real estate space across 14 cities in the country in the last two years.
In the wake of pandemic, both Swiggy and Zomato have also started delivering grocery items to customers.
Uber Eats customers have given $3 million in direct contributions to restaurants using a new feature on the app designed in response to the COVID-19 pandemic.
The milestone caps off a related campaign by Uber Eats to match up to $3 million in contributions made by customers. Uber Eats is sending its $3 million in matched funds to the National Restaurant Association’s Restaurant Employee Relief Fund. The company had previously donated $2 million to RERF.
The matching campaign has ended. However, the restaurant contribution feature, which was first rolled out in New York and is now in 20 countries, will continue.
The restaurant contribution feature was developed by a team of engineers in a flurry of activity over about seven days, according to Therese Lim, who leads the restaurant product management team for Uber Eats.
“There was no executive who said ‘oh we need to build this feature, you all go build this now,” Lim said, adding that this was a grassroots effort prompted by the wave of restaurants that were forced to close regular dine-in eating due to the spread of COVID-19. Lim said Uber Eats users started reaching out to employees via LinkedIn, email and other means to ask how they could help restaurants.
“We started to see restaurants get impacted severely by this,” Lim said. “This was particularly true as the various states started implementing shelter-in-place or stay-at-home orders.”
The team had two primary concerns — beyond the basic backend operations — about the feature. They didn’t want it to cannibalize the amount of tips that users gave delivery workers, nor did they want it to cause customers to buy less from restaurants.
The team started to roll out the feature in a small area within New York City on April 1 to make sure tipping of delivery workers wasn’t impacted. The feature launched April 3 across the entire city and then expanded over the next week to the rest of the United States. The contribution feature is now live on the Uber Eats in 20 countries.
“We didn’t want to introduce anything that actually hurts restaurants,” Lim said. “It was important to make sure we weren’t introducing friction into the experience that would cause a user to become impatient or displeased with the outcomes and maybe not actually finish their order.”
Those concerns didn’t bear out, according to data compiled since the app feature launched. Customers not only tipped more, they were also frequent users of Uber Eats.
Users who made restaurant contributions tipped their couriers 30% to 50% more than orders without a contribution, according to Uber. About 15% of Uber Eats customers in the U.S. who made a restaurant contribution were repeat contributors.
Data also shows that early dinner time, around 6 p.m., was the most generous time period, according to Lim. Dinner time, between 5 p.m. to 11 p.m., was the most popular for contributions, making up 60% of contribution dollars.
And certain foods, namely international cuisine, encouraged more contributions from users. French, Ethiopian, Argentinian and Thai restaurants had the highest contribution rates, according to Uber.
Some states were more generous than others. The top five most generous states, by percentage of active Uber Eats users who made at least one contribution, were Washington, Vermont, Montana, Connecticut, and South Carolina.