Published on: October 26, 2018by Kevin Coupe
There is an Eye-Opening piece in the Wall Street Journal about how investors are gravitating to the restaurant and food delivery segment, noting that “venture-capital firms have invested $3.5 billion in food and grocery delivery services so far this year, more than triple the amount they invested in all of 2017.”
You can read it here.
As these companies position themselves for IPOs or new rounds of fund raising, the numbers are staggering. Instacart says it has a $7.6 billion valuation (and we all know how I feel about Instacart … or at least about the companies hitching themselves to its flawed business model). Postmates is valued at around $1.2 billion. DoorDash - $4 billion. “UberEats, the food-delivery unit of Uber Technologies Inc., is credited with what bankers estimate will be $20 billion of Uber’s proposed $120 billion valuation if it goes public as planned early next year,” the story says.
There seems to be some difference of opinion about the sustainability of some of these companies. Some think that the delivery business will level off, in the same way that the meal kit business has after a flurry of investment activity. (Which it could, but I continue to believe that meal kits are a viable business, even as it evolves and matures.) Some think that there inevitably will be mergers and acquisitions. (Agreed. To me the question is what company is doing the acquiring, and what happens to the customer data.)
There also is the challenge, the Journal writes, that “customer loyalty largely lies with the food company, not the delivery service they use. Many grocery chains already run their own online pickup operations, and could eventually offer delivery services themselves.” (The problem, of course, is that companies like Instacart would like to disintermediate the retailers for which they “work” from their customers.)
Still, the delivery business - whether in-sourced or outsourced - is an enormous opportunity, albeit one that businesses must embrace with their Eyes Open.
- KC's View: