Postmates app on a smartphone
A deal for Postmates will not push Uber much closer to its goal of profitability in the short term © AFP via Getty Images

Just Eat Takeaway’s gluttonous $7bn acquisition of Grubhub has whetted the appetites of its US food delivery rivals for a market share fight. Just a few weeks after Uber lost the chance to buy Grubhub it is eyeing up private rival Postmates.

Postmates, last valued at $2.4bn, is a far smaller prize. But a deal would allow Uber’s food arm Uber Eats to remove one of the four big US competitors. The combination may prove more palatable to regulators who baulked at the idea of Uber/Grubhub creating the country’s largest food delivery business. With Postmates, Uber Eats could have just under a third of US sales, according to data from Second Measure — a smaller share than leader DoorDash. If Uber can ape JET and agree an all-stock deal, it would also be able to preserve its cash to prop up its struggling rides business.

Gross bookings revenue for Uber’s taxi business fell 80 per cent in April from a year earlier. Since February the company has lost $16bn in equity value. The boom in food delivery is therefore worth pursuing. Across the US, orders rose two-thirds in March, according to market researchers The NPD Group. In the first three months of the year gross bookings for Uber Eats jumped 50 per cent.

Still, Postmates will not push Uber much closer to its goal of profitability in the short term. GrubHub, which makes most of its money on commissions from restaurants that offer their own deliveries, has reported profits. Postmates, which delivers itself, has not.

Digital food delivery could be a $467bn business by 2025, according to a forecast by Morgan Stanley. But making money in a low margin, high volume food delivery business remains arduous. Uber Eats lost $313m in ebitda in the first quarter of this year. Add in group costs for technology and the losses might be even higher. Exiting unprofitable markets such as India and focusing on the US will stem Uber’s losses in food delivery. But its ride-hailing battle with Lyft shows that it only takes one serious competitor to wipe out hopes of profitability.

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