Uber has suffered more than most in the pandemic, with ride-hailing revenues severely dented by social distancing rules. But at the same time, rising demand for takeaways has led to unprecedented profits for Uber’s Eats division.
In a bid to expand its focus on deliveries, Uber has signed a $2.65bn deal to acquire Postmates – the company that lets customers order almost anything they want to their door. The deal, which is expected to complete in the first quarter of 2021, will give Uber control over delivery hotspots including Los Angeles, Las Vegas, and other major US cities, helping the company gain ground against market leader DoorDash.
Uber is interested in more than just geographic expansion, however, and as chief executive Dara Khosrowshahi told investors, the deal will support the transition of Uber Eats to an “everyday service” that can compete with the likes of Amazon by delivering multiple products.
“Uber and Postmates have long shared a belief that platforms like ours can power much more than just food delivery – they can be a hugely important part of local commerce and communities, all the more important during crises like COVID-19.” said Uber CEO Dara Khosrowshahi in a statement.
Despite still being unprofitable, Q2 bookings on Uber Eats are up more than 100 percent year on year, making it Uber’s most successful division. By building a broader delivery platform on this relative success, Uber hopes to finally turn a profit in 2021.
Along with the Postmates acquisition, Uber has made several other deals to support its mission. These include the recent purchase of a controlling interest in the Latin American grocery delivery service Cornershop, and several partnerships with supermarkets including Carrefour and Asda.
With these allies, Uber can achieve the economies of scale necessary to make a profit in the tight-margin delivery business. But the same efficiencies are also being pursued by competitors as a wave of consolidation sweeps across the food delivery industry. Uber’s bolstered delivery division will compete with several recently combined companies, including Just Eat Takeaway, which was formed in a merger last year and recently boosted by the acquisition of Grubhub.
Andy Lister, Partner at Acuity Advisors comments:
“Having missed out on Grubhub, Uber has moved quickly to grab a $2.7bn consolation prize in the form of Postmates. The message for shareholders considering an exit in any sector is clear – be alert to waves of consolidation in your industry: they happen quickly and valuations subside once the wave has passed.”
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