Uber CEO Dara Khosrowshahi told CNBC on Friday that the ride-hailing, freight, and delivery giant considered a deal with on-demand food delivery …
Uber CEO Dara Khosrowshahi told CNBC on Friday that the ride-hailing, freight and delivery giant considered a deal with on-demand food delivery service Caviar but decided to pass.
“We took a look at Caviar. It’s a great brand,” Khosrowshahi said in a “Squawk on the Street ” interview, as Uber shares were sinking after disappointing second-quarter results. “It wasn’t the right deal for us.”
Khosrowshahi said Uber’s food delivery service, Uber Eats, will focus on organic growth rather than acquisitions.
On Aug 1, Square announced an agreement to sell Caviar to Uber Eats’ formidable rival DoorDash for $410 million. Square had bought Caviar for just over $44 million in 2014. The Caviar service specializes in premium restaurants.
While declining to comment further on Caviar, Khosrowshahi did say that he sees food delivery as a real battle this year and next. “The Eats market continues to be very competitive.”
Khosrowshahi said that if Uber were to seek any acquisitions, he’s not worried. “We’re Uber, everyone wants to talk to us.”
After the Wall Street close Thursday, Uber posted a much wider-than-expected second-quarter loss of $4.72 per share. Revenue of $3.17 billion was also missed analyst estimates.
Uber’s core ride-hailing business saw better-than-expected gross bookings for the quarter, while the newer Uber Eats unit’s gross bookings fell short of forecasts.
“So with rides, I say the competitive environment is stable and getting better,” Khosrowshahi said during Friday’s CNBC interview. “We see a lot of competition with Eats,” he reiterated.
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DoorDash is moving into high-end dining by purchasing Caviar, a service “which first launched in San Francisco in 2013, aimed to offer a more …
Programs
Costco Goes Digital
Costco memberships are no longer bound to a plastic card. “Instead of flashing a plastic membership card when entering the wholesale club and at checkout, members can now pull up a digital membership card on the Costco app. The retailer known for selling super-sized products like giant lobster claws and 27-pound tubs of macaroni and cheese has updated its Apple and Android apps to allow members a digital version of the card.”
Customer Experience
Amazon Is Disabling Its Dash Buttons
Dash Buttons, which enabled Prime members to reorder items with the push of a button, will soon be disabled. “Amazon had announced in February it was ceasing sales of the gadgets, but had since then continued to support those already in use.”
DoorDash Buys Food Delivery App Caviar from Square
DoorDash is moving into high-end dining by purchasing Caviar, a service “which first launched in San Francisco in 2013, aimed to offer a more premium experience than other food delivery platforms at the time, such as Grubhub and Seamless. Instead of typical delivery fare such as fast food, pizza, or Chinese, Caviar targeted upscale restaurants that didn’t normally offer delivery.”
Hyatt Relaunches Mobile App for Loyalty Members
The brand has relaunched its app to enhance its customer experience for members. “The new and expanded features allow loyalty members to request items to be sent to guest rooms, to access the schedule of meetings and events happening at the hotel during a member’s stay, to access and stream personal content directly to an in-room TV through Chromecast without the need to enter additional credentials, to unlock guest rooms and public spaces via Hyatt Mobile Entry, and to make requests directly to the hotel and receive feedback in real time via a new chat option.”
Chick-fil-A Named America’s Favorite Fast Food Restaurant
For the first time, the chicken-focused QSR has been recognized as the one American’s are most loyal to. “A recent report by Market Force, published by Food & Wine, polled 7,600 consumers about their satisfaction level with various chains, and Chick-fil-A ranked the highest, with a 79 percent ‘loyalty rating.’”
Uber, for instance, is doubling down on food delivery, as CEO DaraKhosrowshahi called it a “toss-up” as to whether Uber Eats generates more profit …
Food delivery platform DoorDash agreed to acquire delivery competitor Caviar for $410 million in the form of cash and stock. Caviar has been owned by payments company Square since 2014.
Business Insider Intelligence
DoorDash’s acquisition is likely in response to the moves being made in the global delivery market, where competitors are racing to scale operations. Uber, for instance, is doubling down on food delivery, as CEO Dara Khosrowshahi called it a “toss-up” as to whether Uber Eats generates more profit than its core ride-hailing segment in the long term.
In March 2019, Uber purchased Careem — a Middle East-based mobility platform with food delivery services — for $3.1 billion. And in May 2019, Amazon put the industry on alert when it led a $575 million Series G funding round in Deliveroo, the London-based food delivery startup. And as we reported just last week, two of Europe’s largest food delivery platforms — Just Eat and Takeaway.com — agreed to an $11.1 billion merger.
Here’s how Caviar can help DoorDash scale its operations:
An expanded restaurant portfolio can appeal to new customers. Restaurant partnerships inform the type of customers attracted to a given food delivery platform. Per The New York Times, DoorDash tends to have deliveries in more suburban areas, with food coming from chain restaurants. Caviar, on the other hand, operates in 15 large cities, delivering food from higher-end restaurants. The acquisition could bring customers interested in higher-end food delivery to DoorDash’s service, an area that was not previously emphasized.
A broader user base will create monetization opportunities. By widening the scope of restaurants on its platform, DoorDash can appeal to a broader customer base. This new base will include not only customers wanting fast-casual food and customers wanting premium food, but also those who may jump between the two segments. Housing these segments creates a unique marketing opportunity, as the new audience could be upsold more premium options, for instance, or offered a deal for a fast-casual “cheat day” meal.
Scaling operations is of the utmost importance in the food delivery market, as it creates a competitive advantage in a crowded market. Achieving scale enables a virtuous cycle: Scaling leads to more efficient operations, which lowers operating costs, which creates a competitive advantage, which can then lead to further scaling.
So, for instance, while DoorDash and Amazon-owned Deliveroo have no overlapping operations at present, neither company would be satisfied to cease expanding, which makes head-on competition a matter of “when” not “if.”
The bigger picture: The food delivery industry will be won in a war of attrition, which means competitors need to ensure that they allocate capital in the most effective manner.
Making a smart acquisition is more important than making a splashy one. To maximize the benefits of an acquisition, there should be minimal overlap in existing operations and consumer bases. So for instance, while DoorDash and Caviar both have most of their operations in the US, they serve different customer bases.
Another acquisition strategy sees companies add platforms with tangential services, such as ride hailing or parcel delivery, which can introduce users into their broader ecosystem. Regardless of the particular strategy, we expect the consolidation process to continue as food delivery companies fear being left behind.
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