In part 1 of this series discussing the food delivery wars, we outlined how Amazon’s (AMZN US) proposed acquisition of Whole Foods Market (WFM US) would also signal its move into the prepared food kits industry well as extend its food delivery offering.
In part 2, we discuss who we believe will be the winners in the food delivery wars or whether the forgone conclusion is already Amazon.
This information does not take into account your personal objectives, financial situation or needs. You should consider if the relevant investment is appropriate having regard to your own objectives, financial situation and needs.
A quick recap on the food delivery industry from Part 1
U.S. consumers spend US$210 billion on take away restaurant food each year, 15% of which is delivered but only 5% is being ordered online. However, online ordering of food delivery is growing at 15% a year according to Morgan Stanley and is being driven by several factors:
- Consumers are increasingly time-poor and turning to take away or prepared meals
- Mobile technology has made ordering more user friendly
- Delivery is getting cheaper
The National Restaurant Association in the U.S. estimates that consumers spend about 50% of their total food spend budget at restaurants, which is double the rate in 1955 when consumers only spent 25% at restaurants.
A large industry, which is growing at healthy rates and with still low penetration rates (there are over 350,000 independent restaurants that offer takeout or food-delivery options to U.S. diners but only about 20% offer delivery through an independent online delivery service) seems ripe for Amazon’s disruption.
The food delivery industry offers a range of investment opportunities through publicly listed companies, which include Grubhub (GRUB US), Just Eat (JE LN) in the U.K., Delivery Hero (DHER GR) in Germany and Takeaway.com (TKWY NA) in the Netherlands. In addition, high profile private companies include DoorDash, Postmates, Caviar (owned by Square), delivery.com and the emergence of UberEats.
Winners and losers
We believe the winner(s) will be the regional leaders that have already built up sufficient scale and have a deeper understanding of local markets, which will allow them to withstand a threat from Amazon.
It is likely that Amazon will focus on the U.S. if it intends to grow its food delivery business. As such, we believe GrubHub will be most vulnerable to rising competition as it seeks to defend its leading position in the U.S. market.
Why do we think GrubHub will be most vulnerable? What other companies do we think will be the losers and who are the winners in the food delivery war? Sign up for the full article exclusive to AtlasTrend members and access more premium curated investing insights.
