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Let the Food Delivery War Begin

Written by Monica Savaglia
Posted August 13, 2019

This past weekend was really relaxing for me. I chose to stay home rather than doing my usual errand runs or making any social plans. I stayed in and read a book, and then I watched a couple movies I hadn’t seen in a while.

Those kinds of weekends are crucial for me. Those weekends recharge me for the workweek ahead. I’m sure you don’t mind having a relaxing weekend once in a while, if your schedule allows it. 

While I was sitting home this past Saturday night, I was getting hungry. I didn’t eat dinner yet, but the idea of going out of my apartment to go get something to eat seemed like too much work. I admit it — I was very lazy. I was lazy, and I was also getting really hungry, so I picked up my phone and opened up the Uber Eats app. 

The last time I used the app, I realized that it conveniently lists the restaurants that don’t have a delivery fee. If you’ve used food delivery apps before, you know the delivery fee is sometimes make or break. Trying to justify the $4.99 delivery for food that's going to cost less than $10 is usually my deciding factor. 

I remembered that Uber Eats offered this option on its platform, so I opened up the app and began swiping to choose my dinner. It took about a minute for me to complete my order — it took longer to decide what I wanted.

Within 30 minutes, the food was delivered to my apartment, and the only work I had to do was choose the food I wanted and walk down to the front door. 

Technology that makes your life easier or at least a little more convenient usually does well as a business model. And it seems to be something that catches on with consumers. That's probably why we’ve seen the emergence of companies focused on business models that give instant gratification to their users — businesses that bring the product to the user, instead of getting the user to the product. 

In the U.S., online food delivery is worth $22,073 million in 2019, and that amount is expected to grow at a rate of 6.5%, which could result in $28,398 million by the end of 2023. There is a lot of room for growth in this sector, and that’s why a lot of companies are either dedicating their business to food delivery or dabbling in it. 

Let the Food Delivery War Begin

Uber (NYSE: UBER) has a sector of its business dedicated to food delivery. Uber Eats was originally known as UberFresh when it was launched in 2014. It delivers to over 200 cities in 20 countries. This sector of Uber’s business has taken off, and it’s been a big part of Uber’s total revenue.

Another company focused on delivering food to consumers is Grubhub (NYSE: GRUB). Grubhub hails from Chicago and provides its services to more than 2,200 cities in the U.S. 

Then there’s DoorDash, based in San Francisco and established in 2013. It was founded by Stanley Tang, Tony Xu, and Andy Fang. It serves about 80% of the U.S. and has partnered with chains like the Cheesecake Factory, Chipotle, and Denny’s. 

More than 5 billion people have smartphones, and there around 7.7 billion people in the entire world. That means 65% of the global population are always on their phones, or at least have one handy. That means the market for companies like Uber, Grubhub, and DoorDash is very lucrative.

Is DoorDash Getting Ready to Go Public?

DoorDash could be joining its rivals in the public market. Earlier this year, DoorDash announced that it raised another $400 million in a Series F funding round. With that cash, DoorDash’s total capital came in around $1.4 billion. Its total valuation at this time was worth about $7.1 billion.

Investors' appetite for food delivery companies is growing. In an interview with Forbes, Xu said:

We were always on pace to become the leader in the industry and this allows us to get there faster. We always had ambitions to go beyond restaurants, and this allows us to get there sooner.

DoorDash aims to expand its business past food and go into other outlets. The company has been investing heavily in non-restaurant delivery. It recently partnered with Walmart.

This is a smart move from the company. It opens up its business to new areas, keeping the company ahead of its competition. Back in May, the company took Grubhub’s spot at the top. In May, DoorDash made more in U.S. monthly sales than Grubhub did. DoorDash has also surpassed Grubhub in market share.

With that being said, DoorDash still has a few things it wants to accomplish before going public.

Last week Thursday, chief executive Tony Xu announced in a blog post that the company will be acquiring Caviar. It will be purchasing Caviar for $410 million. Xu said that the company decided to make this deal happen because of Caviar’s position in the on-demand food-delivery market, in addition to the company’s business philosophy. In the announcement, Xu said: 

Like DoorDash, Caviar is a merchant-first company. Adding these merchants to our platform will complement DoorDash’s merchant selection, ensuring we can cater to everyone and every occasion. 

The company is acquiring companies like Caviar to grow its business. And because DoorDash is focused on growing its businesses, it's gaining the attention of more investors. Before going public, DoorDash plans to build out its team, which would mean hiring more senior management. When asked about going public, Xu says that DoorDash will continue to expand until it reaches “every nook and cranny.”

Getting food delivered in major cities is nothing new, but living outside these major cities greatly reduces the options that are available, and Xu wants DoorDash to be the company that bridges the difference between major cities and rural areas.

DoorDash gets closer and closer every day to its initial public offering (IPO). When it goes public, it will be operating in a highly competitive sector with companies that have been on the market for a few years.

The food delivery war has begun. Where will you be? What company could you see yourself investing in?

To stay up to date about DoorDash's potential IPO and other big IPOs coming to the market, click here.

Until next time,

Monica Savaglia Signature Park Avenue Digest

Monica Savaglia

Monica Savaglia is Wealth Daily’s IPO specialist. With passion and knowledge, she wants to open up the world of IPOs and their long-term potential to everyday investors. She does this through her newsletter IPO Authority, a one-stop resource for everything IPO. She also contributes regularly to the Wealth Daily e-letter. To learn more about Monica, click here.

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