The global food delivery market is about to get considerably smaller.
Uber has agreed to acquire rival Delivery Hero in a $14.8 billion deal, which would make it the largest food delivery operator by revenue in the world outside China. It would significantly expand Uber’s food delivery operations across Asia, the Middle East, and Europe, giving it a presence in almost all major food delivery regions.
The deal, which is considerably larger than Uber’s initial $11.6 billion offer for the group, represents a 34 percent premium over Delivery Hero’s average share price during the past three months, according to Reuters.
For Uber, it is a major investment at a time when the company is also aggressively building out its self-driving platform and working with operators Nuro and Lucid in Japan, WeRide in the Middle East, and Wayve in the United Kingdom.
Global consolidation in the food delivery market
Uber Eats still generates a large share of its revenue from the US market, but that market is maturing, with rival DoorDash in the lead. Amazon is also investing heavily in grocery delivery, adding another major competitor.
At the same time, DoorDash has increased its investment in Europe through its Wolt brand and its acquisition of the UK food-delivery operator Deliveroo last year.
The acquisition of Delivery Hero should help counter that expansion by giving Uber several important brands in Europe, including Glovo, which is popular in Spain and Italy, Foodora in Central Europe, and Efood in Greece. It would also give Uber greater access to Asian markets, particularly Pakistan and Bangladesh, which are fast-growing quick commerce and food delivery markets.
Uber has not said which markets it intends to remain in or leave. In some regions, such as South America and the Nordics, Uber Eats is ahead of Delivery Hero-owned brands, making consolidation between the services likely. It may also shut down operations in markets with low profitability or limited potential for market share growth, as it previously did with Uber Eats in Southeast Asia and Eastern Europe.
More must-read AI coverage
- SS&C Intralinks DealCentre AI vs. Datasite: Which platform is built for the future of dealmaking?
- SS&C Intralinks FundCentre AI vs. Juniper Square: Which platform better supports modern private markets fund managers?
- Why Data, Not Models, Determines AI Success
- The Rise of the AI-Native Factory: How Physical AI Is Transforming Manufacturing
From the many to the few
The food delivery market has gone through several waves of consolidation. In the mid-2010s, there were seven national food delivery operators in the United States, four of which have since been acquired or shut down. Similar consolidation has taken place across Europe.
There are now three major international food delivery operators: DoorDash, Uber Eats, and Prosus. Prosus owns Just Eat, Takeaway.com, and iFood. China and India are separate cases where domestic companies dominate the market: Meituan and Alibaba in China; Zomato and Swiggy in India.
Quick commerce appeared set to become the next major battleground for food delivery operators and startups during the coronavirus pandemic, but the market quickly fizzled out in many countries as supermarkets and convenience stores reopened.
For consumers, particularly in Europe, Uber’s acquisition of Delivery Hero could mean fewer delivery apps to choose from and less competition over fees, discounts, and promotions.
Also read: China is moving closer to SpaceX after successfully recovering an orbital rocket booster, a milestone that could lower launch costs and accelerate its commercial space ambitions.