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Grubhub Idea Proposal (GRUB)

Grubhub Idea Proposal (GRUB)
 

Will Grubhub’s purchase of Eat24 be enough to hold off competitors?

 

Report Available:August 31, 2017

 

Blueshift’s initial research found GRUB buying one of its chief rivals, setting it up to take on the challenge from deep-pocketed competitors UberEATS and AMZN’s Amazon Restaurants. While the deal gives GRUB significantly more coverage in the food delivery space and helps it maintain its lead, competitors are still gunning for share and GRUB’s margins have been affected as it increases operations and marketing spending.

 

Observations

  1. GRUB’s Q2 earnings were in-line with expectations while revenue beat consensus slightly, growing 32% year to year. Active diners climbed 25%, Daily Average Grubs grew 16%, and gross food sales increased 20%. GRUB also announced plans to purchase YELP’s Eat24 for $287.5 million, with a five-year deal allowing readers of YELP’s reviews to order food from restaurants that use GRUB. It will also take on 27 markets of GRPN’s OrderUp food ordering service.
  2. GRUB’s purchase of Eat24 gives it 75,000 unique restaurants and 48% market share of transactions, making it roughly twice the size of UberEATS. The deal with GRPN allows customers to order food delivery from GRUB and the ability to redeem GRPN deals when they order GRUB delivery through GRPN.
  3. In Q2, GRUB focused more on food delivery, including to Tier 2 and 3 markets, and developed partnerships with chain/franchise restaurants such as JACK, BJRI, and FRSH, while also gaining traction with Subway where it now delivers for over 1,000 of its locations.
  4. Not all is rosy for GRUB, however. Daily Average Grubs were lower sequentially in Q2, while EBITDA per order was down 3% because of increased advertising from the previous year. Operations expenses grew 55% year to year, a function of increased delivery orders necessitating higher payments to drivers. Sales and marketing expenses climbed 37% year to year.
  5. UberEATS continues to grow aggressively, lunching services in Tucson, Spokane, Tallahassee, Gainesville, and Bristol in the U.K. – all since July 26. A side-by-side comparison in Melbourne, Australia revealed UberEATS as the clear winner on service and delivery quality with a score of 82.5% compared to 62.5% for Foodora and 48% for Deliveroo. And for all the restaurant partnerships announced by GRUB, UberEATS is now delivering MCD.
  6. Blueshift’s April 5 report said GRUB faces mounting pressure from competitors and is finding it more difficult to fight them off. This worrisome trend for the company is a continuation of Blueshift’s Nov. 16, 2016, findings. Thirteen of 19 restaurant sources using both Grubhub and other delivery services and all three sources who do not use Grubhub said the incumbent now ranks below its competitors. Of note, four of the six repeat sources said their satisfaction with or the percentage of sales from Grubhub has declined since their prior interview, highlighting competitors’ gains. National chain sources are concerned about Grubhub’s ability to scale, especially when compared to UberEATS and AMZN’s Amazon Restaurants.UberEATS was noted as Grubhub’s biggest competitor and has made significant strides since our November report.

 

What effect will GRUB’s purchase of Eat24 have on your orders? What will it mean for customers? How will this affect GRUB’s competitors? What trend are you seeing in your orders through GRUB? What trend are you seeing in your orders through UberEATS? Other competitors? If you could choose only one food delivery service to use, which would it be? To gain insight into GRUB’s Eat24 acquisition and efforts to keep competitors at bay, Blueshift will gather data and issue a market research report from independent sources in the following areas: Restaurants using Grubhub and competitors, Restaurants using only Grubhub, and Restaurants using only competitors.

 

Companies: Grubhub (GRUB), Amazon (AMZN), Groupon (GRPN), Square (SQ), Yelp (YELP)

 

Research Begins: August 14, 2017