The past few weeks for Uber have been more than a decision dance. Now, the tech may be about to buy GrubHub – a direct competitor in the US for home delivery.
The results of the technology, published in its last call to investors, already demonstrated the ravages of the pandemic in the transport of people sector. From Uber they assume an 80% drop in activity since the arrival of COVID-19. Only the home delivery division has operated during confinement – despite recording losses. According to their figures, UberEats would have increased the deals by 54%.
Now, the announcement that The Wall Street Journal has advanced has all the lines of becoming the strategy for the next times within Uber. Even with few details on the table, the first indications would indicate that the GrubHub purchase agreement is about to close. In fact, its announcement is expected this May.
Regarding the amount of the purchase at the moment has not transcended anything beyond the intentions of GrubHub. The Chicago-based company, valued at $ 4.5 billion, would be seeking 2.15 Uber shares for each of its own.
The agreement, as they have advanced, would be on the table since January – which places this strategy at a prepademic moment. But it fits with the new panorama that is presented for Uber. As they already explained in the presentation of results, the company is aware that the cultural change caused by the coronavirus will leave a trace. And this will have lasting consequences.
With the obligation of maintaining the safety distance, the limitations in restaurants and the promotion of telework within the framework of this new normality, the truth is that it is time for home delivery. And there Uber wants to rule them all.
This new business approach, in addition, would put a dam of containment to the complicated situation of the company due to the fall of its main business. The poor results of the first quarter, and the slowdown in the search for profitability, add to the adjustments they have had to make these months. To the layoffs at the beginning of the year, Uber adds those of 14% of the workforce –3,700 workers– and the inactivity of its driver fleets.
Dances in the sector
A few days ago, Uber announced the entry into the capital of Lime in a financing round of 170 million. The small print of the operation also pointed out that Lime absorbed the Jump business – Uber’s scooters – around the world. It was a way to get rid, without losing presence, of a business that had long been unprofitable.
This new operation, to be closed in the coming days, has another clear intention. GrubHub controls 28% of the market share in the United States. Uber only 20%. And its direct competitor DoorDash would be managing 42%. The purchase would place Uber at the head of the sector in one of the most traditional delivery countries in the world.
Likewise, this operation would go hand in hand with the dance that the sector has been experiencing in recent months. Where the integration of the big players has been the general trend with the aim of accumulating more market share.
In this way, the United Kingdom approved the merger of Just Eat and TakeAway – creating a giant in Europe -, along with the approval of Amazon’s investment in Deliveroo. An operation that gives Bezos entry into the prepared food sector in Europe.
In fact, Uber has already taken over the Cornershop business in Latin America under the idea of holding the first or second position in all the markets it manages.
GrubHub in the past
With a sales increase of 1,600 million during the first quarter of 2020 – compared to 1,500 in 2019–, GrubHub proves that it lives its golden moment during the coronavirus pandemic.
Founded in 2004, although it has been in recent years when the company has begun to emerge in the United States delivey market – where it has been listed since 2014 -. Where it controls 3,200 cities in 50 states.
GrubHub has also grown throughout its history through the acquisition of competitors
They were born with the idea of finding an alternative model to paper menus. In fact, his first steps in the sector pointed to phone orders. Then the Internet and mobile applications took the lead and fully entered that sector. A service similar to that of Just Eat in Europe, offering a delivery system managed by the restaurants themselves or, if they do not have one, provided by the company.
With rounds of financing behind him, achieving more than 280 million dollars, GrubHub has also grown throughout its history through acquisitions of competitors. More or less what UberEats plans to do right now.
In total, 12 purchases from local United States competitors between 2011 and 2018 to grow in specific markets. And which also includes payment solution platforms (LevelUp, 2018) with the idea of expanding their digital options.
Despite everything, GrubHub has not been without controversy and in this case it has come by the clear anti-Trump position that Matt Maloney –founder of the company– He has held since the election of the president in 2016. In fact, the businessman even invited employees who were not on his side to leave.