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The Spoon

Daily news and analysis about the food tech revolution

Uber Eats

Uber Q2: Eats Generates More Revenue than Rides

There are two stories coming out of Uber’s Q2 earnings report today. The first is the straight ahead numbers: The company did $2.18 billion in revenue for the quarter, which was down 29 percent year-over-year, but beat analyst expectations. Uber’s net losses were $1.8 billion, narrower than the $2.94 billion in Q1.

Of course, much of this was due to the fact that the COVID-19 pandemic has hit the company’s mobility business. Uber’s mobility division had gross bookings of $3.046 billion for the quarter, which was a decline of 73 percent year-over-year. With people on lockdown, they had no need to hail a ride.

But while the coronavirus kept people from catching an Uber across town, it also pushed them to ordering more food delivery while they stayed home, which leads us to the other story.

Gross bookings for Uber’s delivery business (Uber Eats) hit $6.96 billion in Q2, which was up 113 percent year-over-year and up 54 percent over Q1 2020. That’s a lot of french fries delivered to people’s front doors.

In addition to getting a pandemic push, Uber Eats also streamlined some of its costs in Q2. The company ceased Uber Eats operations in eight different markets around the world where it wasn’t in a leading position.

In the Q2 earnings release, Uber also said that it now has more than 500,000 partnered restaurants on the platform, a 50 percent jump year-over-year.

With Q2 in the books, it’s time to look ahead to Q3 which will include the $2.65 billion all-stock purchase of rival food delivery service, Postmates, as well as the expansion into grocery delivery here in the U.S.

Uber Eats’ New Pilot Offers Commission-Free Orders for Restaurants, with a Catch

Today, Uber Eats launched a pilot program that lets its restaurant parters accept pickup and delivery orders directly through their own websites with no added commission fee for the rest of 2020. 

The program seems to be a bid on Uber Eats’ part to keep restaurant partners entrenched in the third-party delivery service’s ecosystem by offering them the option to process orders via their own digital properties. The catch (because there’s always a catch) is that Uber Eats still powers those orders. The Uber Eats site clearly states that with this new program, restaurants will “leverage best-in-class Uber Eats feature and powerful technology to fulfill orders.”

That brings up a whole host of questions around customer data, which we’ll get it shortly.

First, it is worth noting that Uber Eats is waiving commission fees on delivery and pickup orders placed through one of these sites through the end of 2020 (restaurant still pay a 2.5 percent processing fee). The exorbitant commission fees third-party delivery services charge restaurants — as high as 30 percent per transaction in some cases — has been by far the biggest grief restaurants and restaurant advocates have voiced over the last year. The pandemic cranked the volume on that conversation up so high that many cities have introduced mandatory caps on these fees for the time being. The general argument is that restaurants are getting decimated by coronavirus restrictions, and asking an indie restaurant barely surviving to pay 30 percent of each order to a delivery company is a spoonful of salt in an already pretty grievous wound. 

In the short term, a program like Uber Eats’ could give restaurants a much-needed boost when it comes to building out an off-premises strategy that won’t financially gut them at the same time. 

The cost, however, looks to be data. As noted above, Uber Eats is still powering these transactions, which means it ultimately controls access to the data on customers. In fact, a fine-print note buried at the bottom of the new program’s site states that a “restaurant can access customer data subject to opt-in from customer during checkout.” What’s unclear is if that opt-in will be an easy-to-see feature on the consumer-facing app — and if customers would actually use it. We have reached out to Uber to get clarification on this.

Uber Eats sort of addressed this by also announcing today the release of its mobile app for restaurant managers and customer engagement tools. Per the blog post, both of those things helps restaurant managers track sales, respond to customer feedback, and get other insights about customer behavior. 

Like I said before, all of these things could very well help struggling restaurants right now, many of whom never offered off-premises before the pandemic and are now having to learn as they go when it comes to running a delivery and takeout business.

Longer term, however, getting locked into Uber’s ecosystem so thoroughly will limit the amount of control restaurants have over their own data and ultimately their customer relationships. 

Uber to Acquire Postmates for $2.65B

Uber has agreed to acquire Postmates in a roughly $2.65 billion all-stock transaction, according to a press release from Uber. The deal is expected to close in the first quarter of 2021.

Uber first made the offer to buy Postmates at the very end of June, after a failed attempt to snap up Grubhub. According to sources close to the matter that spoke to Bloomberg, the two companies have actually been in talks on and off for about four years. 

The boards of both Uber and Postmates have approved the transaction, which is still subject to the approval of Postmates shareholders and also any regulatory approvals. Uber said in the press release today that it will keep the consumer-facing side of the Postmates app running separately from its Eats app, “supported by a more efficient, combined merchant and delivery network.” 

Acquiring Postmates would give Uber a larger presence in certain key markets, like Los Angeles, where Postmates is the leading third-party delivery app. In the past, Uber has said it will pull out of markets where it is not the number one or number two player.

Today’s deal is another piece of evidence that third-party delivery is consolidating fast. Grubhub itself was acquired by the newly formed Just Eat Takeaway.com in June. Elsewhere, Delivery Hero recently bought South Korean service Woowa Bros. for $4 billion and Brazil-based iFood announced a merger with Colombian delivery heavyweight Domicillios.com.

Notably, DoorDash, which is still the U.S. leader in terms of marketshare for third-party delivery, has not come up in this M&A flurry. At last check, the company secured an additional $400 million in funding. It filed to go public in February and still plans on a listing for 2020.

Uber Just Made an Offer to Buy Postmates

Just weeks after it lost the chance to acquire Grubhub, Uber has made an offer to buy Postmates, according to the New York Times. 

Three sources “familiar with the matter” and speaking anonymously told the NYT that Uber could potentially buy its third-party delivery rival Postmates for $2.6 billion and that the deal was in talks right now — though it could also fall apart.

It wouldn’t be the first time a deal fell through for Uber. Only weeks ago, the company looked to be buying Grubhub to bolster its Eats business. Those plans went awry after Dutch food delivery service Just Eat Takeaway.com swooped in and made its own deal with Grubhub for $7.3 billion. 

Antitrust concerns were one of the main issues with an Uber-Grubhub deal. Had the two companies combined, the new entity would have created a delivery service with as much marketshare as DoorDash currently holds (45 percent of the U.S. market) and rendered the on-demand food delivery arena much less competitive.

A Postmates deal would raise fewer regulatory flags, since the Bay Area-based service, last valued at $2.4 billion, is a much smaller player than Grubhub.

Even so, consolidation is in full swing in the food delivery world. Besides Just Eat Takeaway.com’s deal with Grubhub, Delivery Hero recently bought South Korean service Woowa Bros. for $4 billion and Brazil-based iFood announced a merger with Colombian delivery heavyweight Domicillios.com.

Uber has said Eats will only operate in markets where it is the number one or number two player. In the U.S., that feat that would have been easy to accomplish with a Grubhub acquisition. Were a Postmates deal to go through, it’s less certain how dominant Uber Eats would be across the country, since Postmates holds considerably less market share than the other major players.

U.K. Regulators Grant Provisional Clearance to Amazon’s Highly Scrutinized Deliveroo Investment

The U.K.’s Competition and Markets Authority (CMA) has provisionally cleared Amazon’s 16 percent investment in Deliveroo on the basis that the deal would not likely “damage competition in either restaurant delivery or online convenience grocery delivery,” according to a statement from the CMA.

Amazon was set to be the largest contributor to a $575 million investment announced in May 2019. By July of the same year, British regulators were scrutinizing the deal, claiming there were “reasonable grounds” to suspect that Amazon and Deliveroo would “cease to be distinct” were it to go through. Many months and a pandemic later, the CMA provisionally approved the deal in April 2020. Grounds for approval were that, thanks to the pandemic decimating the restaurant industry, Deliveroo would have had to exit the food delivery market without Amazon’s investment.

Though it seems the stakes are actually less dire for Deliveroo. The CMA said today that it has revised its provisional findings from April and found that “Deliveroo would no longer be likely to exit the market in the absence of this transaction.”

Even so, a lot has changed in the third-party since Amazon first announced its plans to invest in Deliveroo. The biggest development (besides COVID-19) has been Takeaway.com’s acquisition of Just Eat that was approved in April and created one of the largest food delivery companies in the world. That deal alone makes the U.K. food delivery market more competitive, and renders Amazon (a little) less of a behemoth come to gobble up marketshare. Uber Eats also operates in the U.K., as do a handful of smaller players. 

Another concern of the CMA’s was that through its investment, Amazon would cease to be competitive with Deliveroo. Thanks in large part to the Just Eat-Takeaway.com deal, that appears to no longer be the case.

“Looking closely at the size of the shareholding and how it will affect Amazon’s incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we’ve found that the investment should not have a negative impact on customers,” Stuart McIntosh, Inquiry Chair for the CMA, said in a statement.

The CMA will now ask for views on the new findings by July 10. From there, it will make its final decision, which is due by August 6, 2020.

Panda Express Launches Its Own Delivery Service. Other Restaurants Could Follow

Panda Express has, in its own words, “cut out the middleman” as far as restaurant delivery is concerned. This week, the QSR chain announced it has launched its own delivery service, and also said was planning for 30,000 new hires, according to a press release sent to The Spoon.

The chain, which is owned by Panda Restaurant Group, had actually been planning to launch its own delivery service in a year’s time, according to the press announcement. The pandemic accelerated this timeline. Even with dining rooms reopening, they’re doing so at reduced capacity, and many would rather order takeout or delivery and eat in the comfort of their own home. But fees for using third-party delivery services a la Uber Eats or Grubhub can stack up quickly. For consumers dealing with job uncertainty or unemployment — two widespread things right now, thanks to he pandemic — ordering delivery with any amount of regularly just isn’t financially possible right now.

Panda Express noted the exorbitant fees in its announcement, and said with this new delivery service, guests “will not incur additional fees typically found on third party sites.”

However, a Panda Express spokesperson confirmed to The Spoon that Panda Express will still be available on third-party delivery services, “such as Uber Eats and Postmates.” So this new delivery service could be the start of a slow transition towards bringing off-premises operations back in house.

Which is definitely a post-pandemic trend to watch. Not that we’re post-pandemic yet, one of the many flaws in our food system the COVID-19 crisis put a spotlight on is the relationship between third-party delivery services and restaurants. Sky-high customer fees, even higher commission fees for businesses, shady business practices, and tipping policies for workers are all griefs the restaurant industry has voiced in the past year. To offset some of the high costs of doing delivery, restaurants have to raise their prices for customers. 

Restaurants are being urged by many in the industry to try and pull some of their off-premises strategies back in house in an effort to regain some control over their operations and, more importantly, their customer data and relationships. One analyst recently went as far as to say that “In the longer-term, many restaurants are going to see the value of investing in an in-house system for delivery orders.”

That won’t happen immediately. For many businesses, in-house delivery is actually more expensive than using a service like Uber Eats. But it could well be that the pandemic, the subsequent restaurant industry meltdown, mass unemployment, and a recession spur more restaurant into action in terms of finding ways to take more control back of their off-premises operations. If nothing else, this will definitely be a trend to watch in the latter half of 2020.

As far as the 30,000 new hires, Panda Express told Nation’s Restaurant News that new positions will exist to “execute the new health and safety operations and procedures, such as contactless service, curbside assistance, drive-thru assistance, expediters for to-go and online ordering, as well as new cleanliness protocols.”

Working From Home is Adding to Some Restaurants’ Struggles

The uptick in telecommuting could be contributing to a decline in foot traffic for some restaurants as the industry slowly enterers a recovery phase. Jack Li, founder of research firm Datassential, said at NRN’s recent Restaurants Rise conference that the effectiveness of remote work for many companies could lead to a dramatic shift in foot traffic for restaurants located in commercial areas. Think lower traffic volume at lunchtimes and some sales at breakfast.

“If you pull consumers out of an area because they’re not going to offices to work, you make it very challenging for restaurants,” he said.  “That will have a very large impact on what recovery looks like,” Li said.

He also cited some telling restaurant industry stats during the talk. Right now, 11.5 percent of U.S. restaurants are not open. Of those, 3.3 percent are permanently closed and 8.2 percent are temporarily closed. Li said some of those temporary closures could turn into permanent closures.

While those figures aren’t completely the result of more folks working from home, telecommuting has at least some impact. As NRN noted: “This will be especially harmful to restaurants where office workers outpace residents. And, it also explains the high rate of temporary closures in urban areas where restaurants rely on office or commuter traffic.”

One thing that could help is the rise of a new kind of corporate catering. Today, Uber Eats announced Vouchers, an extension of its corporate meal program that lets companies customize meal plans for both individual workers and large-scale events. Those meal plans rely on restaurants to provide the food.

For some businesses, that could add incremental revenue at a time when dining rooms are open at reduced capacity. But that depends on where the restaurant is located. Those in more residential areas stand to benefit from the mass telecommuting happening now. For those in financial districts or areas where office workers outpace residents, closures may remain longer and recovery will come slower. 

Uber Eats’ New Vouchers Let You Buy Remote Lunches for Those on Your Virtual Sales Meeting

Uber for Business announced today the launch of Vouchers for Uber Eats, which lets businesses customize their meal plans for employees and customers to meet any scale, whether it’s an individual’s lunch or a 1,000-person virtual event. The program is an expansion of Uber’s corporate meal program, which launched earlier this year, according to a press release sent to The Spoon.

Uber fast-tracked the expansion of Uber Eats for corporate meals earlier this year, shortly after the pandemic forced shelter-in-place orders and many employees started working from home. That program allows companies to customize meal options for remote employees via the Uber Eats app. Through a dashboard, company admin can set rules around when their workers can order meals and how much they can spend.

Vouchers expands on this, allowing companies to get even more granular about how they manage corporate spending on meals. Today’s press release outlines a few uses for Vouchers, including providing meals for attendees of large-scale virtual events, treating potential clients to lunch at virtual sales meetings, and virtual lunch gatherings for remote employees.

Via the aforementioned dashboard, companies can set controls on the start and end dates of a voucher, set limits on the number of orders, as well as use existing features like ordering times and spending limits. 

They’re not the only third-party food delivery service to be eyeing the corporate catering space as a way of diversifying. DoorDash offers a similar program that includes corporate versions of the DashPass, the service’s monthly subscription service. Grubhub Corporate also offers individual and group orders for companies. 

For many, working from home is here to stay, even with states’ economies slowly reopening. That makes the concept of corporate food delivery a lucrative business to be in right now for these third-party services. And with the U.S. now officially in a recession, tools like Vouchers let companies spend as much or as little as they want to on corporate meals, allowing them to offer aspects of catering without expensive, long-term commitments.

This customizable approach to corporate catering could also be an important asset to offer long into the future. There’s no knowing yet how many workers will actually return to the office and whether traditional catering will even have a place in that setting. Scores of employees all hovering over the same buffet table doesn’t exactly sound appetizing in the sage of social distancing, and it’s possible companies won’t even have the in-person numbers to justify huge orders like they used to. A sliding-scale option with a focus on virtual get-togethers could become the norm going forward.

Grubhub Could Soon Be the Center of a Third-Party Delivery Bidding War

Third-party food delivery service Grubhub has two potential European acquirers, according to an article from CNBC. Just Eat Takeaway and Delivery Hero have both expressed interest in merging with Grubhub, according to CNBC sources. 

The news comes shortly after Uber made an offer to buy Grubhub in May. At the time, we wrote that the combined forces of Uber Eats and Grubhub would potentially knock DoorDash out of the top spot in terms of marketshare in the U.S.

However, according to the CNBC article, that deal has been overshadowed by antitrust concerns, which would make getting regulatory approval on a deal much more difficult. A deal with a European company would likely get less scrutiny from regulators.

Just Eat was itself the center of a bidding war in 2019 between Takeaway.com and Naspers-backed tech firm Prosus. Takeaway.com won that battle. Prosus has a 22 percent stake in Delivery Hero, so if a bidding war breaks out over Grubhub, in a sense, those two companies will be going toe-to-toe once again.

CNBC’s sources said Grubhub is weighing its options and “mulling the right deal structure with potential buyers given market conditions and regulatory risks.”

For both Just Eat Takeaway and Delivery Hero, a deal with Grubhub would allow them to enter the U.S. market, where Grubhub is one of the main players along with Uber Eats, DoorDash, and Postmates. Grubhub has an especially large presence in markets like NYC and Chicago, which would give either of these European suitors automatic access to those audiences.

Meanwhile, all this is further evidence that consolidation for the third-party delivery market is here. Besides the Just Eat-Takeaway.com deal, 2019 also saw Delivery Hero buying South Korean service Woowa Bros. for $4 billion and Brazil-based iFood announcing a merger with Colombian delivery heavyweight Domicillios.com. 

Third-Party Delivery Suspends Services to Comply With Curfews

Minneapolis, Los Angeles, Nashville, Philly, Atlanta . . . the list of cities under curfew goes on, and if you live in one of those places and were counting on some food delivery for your supper, you’ll have to look elsewhere. DoorDash recently told The Verge it is “pausing” operations to comply with those local curfew orders. 

From The Verge:

DoorDash, which has seen an increase in orders as restaurants have been forced to suspend eat-in dining during the pandemic, told The Verge it is pausing operations to abide by curfews. Its spokesperson did not provide details about which cities were affected as of Monday.

Uber has also suspended service in some cities, which extends to its Eats food delivery business. An Uber spokesperson told Business Insider that customers should use the app to learn more about these suspensions, and that they should use Uber/Uber Eats “for emergency purposes only during this time.”

Postmates, which is the biggest service in Los Angeles, is also abiding by local curfews. Grubhub said it is “pausing operations when needed.”

Delivery companies aren’t being specific about which cities have suspended which services. Even in places where an order goes through, they are then cancelling orders. For ones that actually go through, some drivers are having trouble actually getting the food to customers:

How long these suspensions and changes to service last will, most likely depend on when the unrest subsides. To find out if food delivery is a realistic prospect in your city, best to check for updates directly in these services’ apps.

Amazon Launches a Restaurant Food Delivery Service in India

Amazon today announced the launch of its own restaurant food delivery service in India, according to TechCrunch. Dubbed Amazon Food, the service launched in select postal index codes of Bangalore before expanding to other cities in the future.

“Customers have been telling us for some time that they would like to order prepared meals on Amazon in addition to shopping for all other essentials,” an Amazon spokesperson said. The company will launch with a handful of restaurant and ghost kitchen partners from which customers can order meals.

Amazon’s starting a food delivery service in India was actually meant to happen in 2019 but got pushed to March of this year, just as the COVID-19 pandemic started to take the entire world in its grip. India’s nationwide stay-at-home order further delayed the Amazon Food service’s debut until now.

Amazon Food arrives in India at a time of upheaval for food delivery in that country. Uber Eats recently exited the Indian market, selling its business in that country to local delivery service Zomato for $206 million. But Zomato, along with its chief rival Swiggy, are currently struggling under the negative impact the pandemic has had on India. Both companies have cut jobs, and Swiggy is also scaling back its ghost kitchen division as a way to cut more costs and keep its operations “nimble.”

Amazon’s entry into the market could exasperate the challenges these local players already face. Even without a pandemic keeping India’s 1.3 billion people on lockdown, neither Swiggy nor Zomato is profitable yet — a common theme for third-party food delivery companies worldwide.

Amazon, meanwhile, has invested heavily into the Indian market and already operates Amazon Fresh and Amazon PrimeNow platforms in that country.  

DoorDash Will Use Location Data to Make Pickup Orders Speedier and More Socially Distanced

DoorDash announced a new feature today that’s meant to speed up the process for pickup orders and make it more appropriate for these socially distanced times. One catch: the new feature needs your location data in order to do that.

Customers can opt in and share their location data with the DoorDash app, so that as they approach the restaurant, that restaurant can receive an alert and have their order ready to go. The idea is to cut down on the amount of people crowding into a restaurant lobby as they wait for their takeout orders to be ready. In theory, at least, a restaurant could have a designated area of the lobby for pickup orders and place the food there when the app notifies them of a customer’s arrival. 

Of course in order for that to work, people have to be okay with DoorDash having access to their location data while the app is running. I doubt this will be an issue for most customers, given the times. Recent survey data sent to The Spoon by Dragontail found that 73 percent of consumers getting takeout/delivery said they would be “more inclined to order for carry out over delivery if given the option for a contactless experience.” 

The new feature is also a way for DoorDash to originate more takeout orders through its own platform. Third-party delivery has taken much heat (understatement) lately over the amount they charge restaurants in commission fees for delivery orders. More than ever, customers are encouraged to order takeout directly from the restaurant itself so that the revenue from each transaction goes directly to businesses, which need all the help they can get right now. The idea of ordering takeout direct from local restaurants has even been translated into a weekly event on social media.

DoorDash is clearly trying to grab back some of the orders from takeout, and it wouldn’t be alone. At the end of last week, Postmates launched a curbside pickup feature. Grubhub has had a feature for pickup orders in place for some time, too.

Nor is sharing one’s location to make food pickup more efficient just the territory of third-party delivery services. My colleague Chris Albrecht highlighted its benefits in the grocery sector this week when he wrote about his experience with Walmart’s geofencing technology that enables contactless curbside pickup. Geofencing, and location data in general, will “take on more importance as restaurants and grocers look to efficiently maximize their revenues while reducing human-to-human contact.” 

Back in the restaurant world, DoorDash still leads in terms of market share for third-party delivery companies, according to the latest numbers from Edison Trends. That number one spot could be upset, though, if the rumored Grubhub-Uber Eats deal goes through. Edison Trends noted that the combined Grubhub-Uber Eats entity would gobble up 45 percent of the market share — the exact same percentage DoorDash currently holds. The latter’s push to win more takeout orders is no doubt also a move to retain some of that market share in the face of the impending deal.