Which company is winning the food delivery war?

Delivering America’s meals has become a big, and increasingly competitive, business. Sales across the industry grew 41 percent year-over-year in 2019, and DoorDash boasted the strongest growth of all. It surpassed Grubhub’s U.S. sales last May and has worn the market-share crown ever since. Now there are reports that Grubhub is considering a sale (though the company has denied this), and speculation continues about when DoorDash and Postmates might go public.

DoorDash and its subsidiaries earned 37 percent of U.S. consumers’ meal delivery sales in December, while Grubhub and its subsidiaries, which include Seamless and Eat24, took in 31 percent. (Purchases made through Tapingo and LevelUp, which Grubhub acquired in late 2018, are not included in our analysis.)  

Our data indicates Uber Eats earned 21 percent of U.S. meal delivery spending in December. However, Uber Eats’ actual sales and market share are likely higher than this analysis shows. Some Uber Eats transactions are indistinguishable from Uber Rides transactions, and this issue was especially pronounced from May 2019 to mid-August 2019. And, Uber Eats’ sales don’t include purchases made using Uber Cash.

Meal delivery has long been a crowded field in the United States, and 2019 proved there’s not enough room for everyone. Amazon Restaurants, which had around half a percent of U.S. market share in May, announced in June that it was shutting its doors for good. And Caviar earned just 3 percent of U.S. sales in July, its final month before DoorDash announced acquisition plans.

Another of the industry’s smaller services, Waitr, installed a new CEO this month after receiving warning that Nasdaq may delist it because its share price has remained below $1 for 30 consecutive business days. Waitr, which earned 2 percent of national sales in December, faces a June 2020 deadline to increase its share price.

One of meal delivery’s bigger players, Postmates, confidentially filed for an IPO last winter and raised $225 million last fall. But CEO Bastian Lehmann recently declined to say when the company would move forward with its IPO, citing “choppy” market conditions. Postmates earned 10 percent of the U.S. meal delivery market in December.

Market share fluxuates, but all companies are expanding

Sales across this industry are growing, but DoorDash’s growth stands out. The company saw an unparalleled 97-percent year-over-year jump in December, and there’s much speculation about whether the company will IPO or even do a direct listing in 2020.

In December, sales for the industry as a whole rose 31 percent year-over-year, as more Americans realize how much they like eating restaurant meals at home. In fact, by the end of 2019, 26 percent of American consumers had ever ordered from one of the services in our analysis, up from 20 percent a year ago.

Grubhub and DoorDash control different parts of the country

The top two food delivery services may be close in U.S. market share, but their strongholds are in different regions. Grubhub is the most popular service in many Northeastern metro areas, including New York, Boston, and Philadelphia. DoorDash rakes in more than half the sales in the two biggest Texas metros, Dallas-Fort Worth and Houston, and it’s approaching two-thirds of the market share in its Bay-Area home turf.

Subscription meals have appeal

As meal delivery services look for new ways to grow in cities big and small, one emerging answer is subscriptions. In 2016, Postmates launched Postmates Unlimited, which grants members free delivery for a membership fee of $9.99 a month or $99.99 a year. DoorDash followed suit in 2018 with DashPass, and, this month, it partnered with Chase to give free memberships to millions of credit card holders. Uber is reportedly testing a combined subscription plan for food, rides, bikes, and scooters.

In December, 16 percent of Postmates customers were subscribers, a proportion that’s held relatively steady for the past year. DashPass attracted 13 percent of DoorDash’s customers.

Restaurant delivery partnerships pay off (for the restaurants)

Another very popular growth strategy for meal delivery companies has been forming partnerships with the nation’s top chain restaurants. This month, DoorDash teamed up with Little Caesars Pizza, a brand that has never previously offered delivery. DoorDash has other deals with Wendy’s, Chick-fil-A, and McDonald’s, the biggest fast food chain in the country, which also offers delivery with Uber Eats.

Starbucks has a contract with Uber Eats, Popeyes with Postmates, and Taco Bell and KFC with Grubhub. Yet, As Uber Eats and Grubhub public filings show, partnerships don’t always lead to revenue. Often, partners pay the delivery services lower fees, decreasing their take rates or even causing them to lose money. But the partners often have huge customer pools, many thousand locations and impressive advertising reach, all of which have delivery services betting that joining forces will pay off in the long term.

The partnerships are paying off for many of the restaurants. The Cheesecake Factory and Chipotle have publicly credited DoorDash with boosting their revenue. In December 2019, Second Measure data shows 8 percent of The Cheesecake Factory’s sales came through DoorDash (before subtracting DoorDash’s cut or the delivery tip). The delivery service accounted for 5 percent of December sales at Buffalo Wild Wings, and 6 percent at Chipotle.

Fewer customers are loyal to a single service

Despite overall industry growth, the battle for customers is getting more intense because fewer of today’s diners are loyal to just one service. (Grubhub’s CEO has cited “promiscuous customers” as hindrance to his company’s growth.) In the fourth quarter of 2017, 78 percent of Grubhub’s customers didn’t use other meal delivery services. Two years later, it’s fallen to 59 percent, as competing services woo customers with different restaurant offerings and promotional prices.

Postmates has the lowest percentage of exclusive customers (43 percent). DoorDash, Grubhub and Waitr all saw about 59 percent of customers use them exclusively in the fourth quarter, and for Uber Eats, it was 54 percent. Nearly all the services in our analysis have a lower percentage of exclusive customers than they did two years ago.

Not surprisingly, the biggest meal delivery services are also the most likely to share customers. More than a quarter of each company’s diners also ordered food from top competitor DoorDash in the fourth quarter of 2019.

As more restaurants form exclusive delivery partnerships, more diners are going to have to hop between apps to cover all their favorite takeout spots. The least loyal customers, it seems, will also be the most well fed.

Check back monthly for the latest updates in the meal delivery wars, or request a product demo to see the data for yourself.

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