What’s cooking in the food industry? Mergers, with or without a side of fries. And a new $7.3 billion combo meal deal means take-out and delivery must be on the menu to stay. We’re referring to the June 2020 deal Netherlands-based Just Eat Takeaway made to gobble up U.S.-based Grubhub. Together, the two handled 593 million restaurant orders last year. They served about 70 million users worldwide. Those numbers make the newly merged business the largest restaurant delivery company outside China. They also gave the Dutch gastronomical support service financial confidence to invest that astronomical amount!
Just how did food delivery become such big business? The idea may not be as novel as you think. The first recorded take-out was cold noodle soup in Korea in 1768. Pizza delivery in stacked metal boxes goes back to 1800s Naples, Italy.
Today, food delivery often involves an online order-and-delivery service not employed by a single restaurant. Instead, these businesses connect hungry eaters with numerous local restaurants. Then they deliver the chow straight to customers’ doors.
Waiter.com first offered ordering and delivery from 60 California restaurants in 1995. Since then, companies keep lining up for the great food delivery race. They include Deliveroo, DoorDash, Grubhub, Just Eat Takeaway, and Uber Eats.
This year’s coronavirus pandemic boosted food delivery sales. With restaurant dining rooms closed, more people stayed home. Some cooked. (See “No Place Like Home, Cooking” at teen.wng.org/node/6062.) But many turned to take-out. Grubhub’s orders grew 28% over 2019; Just Eat Takeaway’s orders grew 41%.
A full menu of options means customers jump easily between services: Uber Eats today, DoorDash tomorrow. Plentiful choices make steady sales difficult. Companies offer deep discounts and spend big money on marketing to attract new users. Those tactics eat into profits.
As a result, many companies embrace the adage “If you can’t beat ’em, join ’em”—literally. Mergers (a combining of two companies into one) among former competitors have become common. Not only can companies remove rivals, but they can also share technology and marketing costs. And bigger often is better. Combined companies can gain savings from increased volume and greater efficiency. This is called creating “economies of scale.”
Just Eat Takeaway provides deliveries in Europe, Australia, Israel, New Zealand, Canada, Mexico, and Brazil. Grubhub operates in 4,000 U.S. cities and holds almost a third of the U.S. food delivery market. The combined venture may position the merged company to become the Amazon of food.