I really didn’t notice until someone pointed it out. But there has been precious little news about food delivery services recently. Whatever the reasons – and there are many – the Delivery Sector appears to be in the midst of a shake-out…
All smiles: Food Delivery Service advertising photo in happier times.
It appears the boom-bust industry is undergoing a shakeout…
Food delivery services will probably always been with us in urban areas where folks on bikes can squirrel their way through gnarled auto traffic and cut down alleys where bigger vehicles can’t go to rush your food to you hot and tasty. But it appears the services aren’t doing so well overall…
Another perfect storm?
If you peel the lid off the food delivery service sector and peek in, you’ll find an industry in turmoil. With a growing list of challenges to meet.
First there have been increases in delivery rider/rider wages this last year. It’s a response to protests and other job action by delivery ‘fulfillers’ who see their jobs as permanent, rather than stop-gap, and are demanding a living wage.
Some angry deliverers even formed unofficial ‘associations’ to fight for higher, guaranteed pay. A few even started holding customer orders for ‘ransom’ unless the recip-ients agreed to pay ‘decent’ tips.
That’s right in line with the wave of demands from Fast Food workers across the US for the same raises the year before. That protest resulted in many jurisdictions raising the minimum wage to $20 or more for Fast Food workers. Which plunged that industry into turmoil. (But that’s a separate, albeit parallel, story.)
Slamming down scams
Witness actions in some jurisdictions to ban superfluous ‘fees’ and ‘charges’ on delivery service tabs. Such fees have been creeping onto the totals consumers are being asked to pay for all types of food service. This past year, it finally got to the point where folks were complaining openly about them. And lawmakers started demanding investigations and even bans.
Bogus ‘fees’ and ‘tipping culture’ scams are just additional attempts by foodservice operators to generate additional revenues to help make ends meet in the face of their own economic ‘perfect storm’.
Consumers fed up
There will always be consumers for whom the price of a delivered meal is no object. And the allure of the convenience and instant gratification offered by the system remains irresistible. The initial hold delivery had on folks – during its formative years in the depths of the COVID Crisis – was contactless service. Folks were willing to pay more for ‘insurance’ against picking up the dreaded, deadly disease. Then the convenience angle took hold.
But just as COVID began to fade, delivery services started to mature. All participants began to see the industry as a permanent part of the culture. And they all wanted a bigger slice of the pie.
Thus have circumstances conspired against delivery service users to make the ‘habit’ increasingly unsustainable.
Market consolidation
The delivery service sector has finally settled down, and found it’s own natural, sustainable level of activity. And that’s triggered a brutal shakeout in which many fringe players, late-comers and poorly managed larger operators been forced to admit they can’t compete with the giants in their industry. Many have quietly closed or merged.
And the latest such startling – dare I suggest, shocking? – example of food delivery service failure is the sale, announced last week, of the once mighty Grub Hub by it’s owner, Just Eat Takeaway – at a humongous loss.
Who?
Little known to delivery service users, holding companies have have started to ‘unite’ more-visible brands under global conglomerate that specialize in ‘connecting consumers and partners (actual services) through world-wide networks.
Just Eat’s slogan is, ‘Empowering Everyday Convenience’. The organization describes itself as, “a leading global online food delivery marketplace, connecting consumers with over 699,000 ‘partners’ in 19 countries.” Among their ‘brands’ are Skip the Dishes, Just Eat, Takeaway.com. And until last week, Grub Hub. The Just Eat network’s reach extends across North America and Europe to Southeast Asia and Australia. In theory, you could order a meal for a friend in Sydney or Berlin with a simple a smart phone call placed in Vancouver…
What about Grub Hub?
Just Eat acquired Grub Hub via merger back in 2021. The price was (US)$7.3 billion, the result of a bidding war with UBER. But since then, Grub Hub has suffered a series of blows to its business which resulted in service reductions and massive layoffs in some markets. Now the Hub has been sold for just (US)$550 million.
A Bloomberg survey earlier this year revealed that Grub Hub enjoyed only an 8 percent share of global food delivery business. At the same time, (surprise?) Door Dash had almost three times the sales of nearest competitor (and more-familiar household name) UBER.
Grub Hub was purchased from Just Eat by another background conglomerate called Wonder Group, which specializes in ghost kitchen order fulfillment as well as higher-end food from classier sit-down restaurants. Wonder is also into food kits, via ownership of Blue Apron.
My take
No one should be surprised by what’s happening in the food delivery service sector. Boom-bust, ‘trendy’ product and service launches often exhibit a ‘heartbeat’-shaped financial performance his-tory. There’s a big upsurge in popularity, then an equally abrupt dip, followed by a modest recovery. After which the overall industry shows sustained, modest growth over the medium to long term.
It’s clear to anyone familiar with the industry that the Food Delivery Service sector is currently in its ‘post-boom recovery’ phase. And where it will land remains to be seen..
~ Maggie J.