The online restaurant delivery market is moving into an era of consolidation, as businesses discover that we may have hit a saturation point with the amount of third-party delivery companies in operation. Two trends are beginning to emerge in an effort to deal with the increased competition: merging with competitors and developing delivery-only restaurants.
In 2017, acquisitions by restaurant delivery companies increased 37.5% from the previous year, according to Food Institute data. Many companies, both in the U.S. and abroad, bought smaller or competing businesses in order to quickly boost their customer base and/or acquire new technology.
This consolidation is likely driven by the fact that most consumers tend to use only one restaurant delivery app, leaving space in the market for only a few major companies, reported Reuters (Jan. 22).
Uber Eats is making moves in both categories, both with its efforts to create virtual restaurants that have no storefront, but also with its most recent acquisition. Uber Eats acquired delivery startup Ando, a delivery-only restaurant concept founded by restaurateur David Chang. Ando shut down its service in New York City, as it begins to integrate with Uber Eats.
Ando was started to create food that would be better suited to delivery, rather than just adding delivery to an existing restaurant. It developed dishes based on this premise, as well as favorites from Chang’s other restaurants, such as bibimbap, cheesesteaks and fried chicken. The company raised $7 million in funding with investors including Box Group and Forerunner, as well as from celebrities such as Jimmy Fallon and Aziz Ansari, reported TechCrunch (Jan. 22).
Other U.S. third-party delivery companies are focused on expansion, adding more areas to their delivery map. Grubhub, which did acquire two delivery companies in 2017, recently expanded its capabilities in Tacoma, WA, Greensboro, NC, Greenville, SC and Des Moines, IA. It also began a partnership with White Castle to offer delivery nationwide in markets where both brands operate.
Internationally, these consolidation and delivery-only restaurant trends are present as well. UK-based Deliveroo invested in the virtual restaurant idea, with plans to open kitchens in five cities in early 2018, adding to its portfolio of 105 locations. The kitchens help eateries handle overflow delivery orders and serve customers in areas normally outside of their range, reported Bloomberg (Jan. 15).
In addition, Netherlands-based Takeaway.com suggested a merger with Germany-based Delivery Hero is possible. However, while the CEO of Delivery Hero expects consolidation to eventually hit the German delivery industry, the company finds it unlikely in the short term, reported Reuters.
China is a popular destination for restaurant delivery as well, as its online food delivery market hit $31.9 billion in 2017, 23% more than the previous year, according to a report by Meituan Waimai, reported China Daily (Jan. 22). One of the growth points for food delivery came from smaller cities, which have seen faster expansion in orders compared with major cities.
It's certainly not over, but farmers and food producers may receive a few months' respite as tariffs in the Sino-U.S. trade war will not escalate for 90 days. Additionally, they can at least look forward to a new normal as the United States-Mexico-Canada Agreement (USMCA) moves forward to full ratification.read more
Jennette has been with The Food Institute since 2013. As Marketing Director, she is responsible for promoting all Food Institute books, seminars and webinars, as well as writing and editing the Food Institute’s annual publications, such as Food Business Mergers & Acquisitions, The Food Industry Review and The Almanac of the Canning, Freezing, Preserving Industries. Additionally, she writes for and edits the daily news update, Today in Food, and contributes to the weekly Food Institute Report. She has a background in non-profit and environmental marketing, programming and writing, and graduated from Rowan University in 2012 with a degree in Communication Studies.
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