Uber Technologies CEO Dara Khosrowshahi regards the acquisition of Postmates as ‘not as much about consolidation as it is about growth.’
Photo: David Paul Morris/Bloomberg NewsThe coronavirus has precipitated a playoff-like environment for food delivery players: We’re getting down to a few top teams, and the stakes are especially high. But investors expecting all of the mergers in the industry to lead to more-rational pricing soon may get smoked.
While some seem more acutely focused than others, the endgame for major food delivery players is to turn a sustainable profit. But while Covid-19 continues to surge in many parts of the U.S., that seems unlikely, despite recent consolidation.
There are two factors at play here, both likely to compound pricing pressure temporarily. First, as industry growth booms in the midst of the pandemic, the remaining players have a compelling opportunity to solidify market share in both established and new markets.
In a CNBC interview this week regarding his company’s Postmates deal, Uber Technologies Chief Executive Dara Khosrowshahi said the coronavirus has accelerated two to three years of consumer adoption into a few months. Moreover, he described his company’s acquisition of Postmates as “not as much about consolidation as it is about growth.” Indeed, in a research note, Jefferies analyst Brent Thill said the recent consolidation in food delivery at elevated multiples underscores “the importance of scale and the rush to take market share within an underpenetrated industry.”
Second, the pandemic has pinched both consumers’ pockets and restaurants’ sales, the health of which the food delivery industry relies on to grow. To attract more restaurants to respective platforms and in turn gain consumer share, delivery companies likely have to create incentives including lowered fees and discounts.
Some industry experts estimate that as much as 25% of U.S. restaurants will go out of business as a result of the coronavirus. Jefferies’s Mr. Thill said that a lower total addressable market in terms of restaurants is likely to keep platform pricing under pressure until the virus abates.
Uber, whose rides business is already profitable globally, says it now plans to reach overall profitability—on an adjusted basis—next year. That may still play out as planned, particularly as Grubhub’s acquirer, Just Eat Takeaway, seems committed to its own profitable growth.
As the virus subsides, the industry will no doubt start to reap the much-awaited benefits of consolidation. But in the meantime, investors should be prepared for more aggressive play.
Write to Laura Forman at laura.forman@wsj.com
Copyright ©2020 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
"come" - Google News
July 10, 2020 at 05:00PM
https://ift.tt/2DlobGq
Food Delivery’s Next Meals Won’t Come Cheap - The Wall Street Journal
"come" - Google News
https://ift.tt/2S8UtrZ
Shoes Man Tutorial
Pos News Update
Meme Update
Korean Entertainment News
Japan News Update
Bagikan Berita Ini
0 Response to "Food Delivery’s Next Meals Won’t Come Cheap - The Wall Street Journal"
Post a Comment