Global Food Delivery Market to Grow to $360 Billion by 2030
'Winner-Takes-All' Characteristic with Only One Company Surviving per Region
Active M&A Among Companies Due to High Growth and Winner-Takes-All Nature
[Asia Economy Reporter Kwon Jaehee] As explosive growth is expected in the U.S. food delivery market, mergers and acquisitions (M&A) among companies are also becoming active. The food delivery industry has a 'winner-takes-all' characteristic where only one company survives per region, making economies of scale essential to increase market share. Accordingly, the M&A market is expected to heat up further, with domestic companies expanding their size and sending love calls to local companies for overseas expansion.
The most notable company recently is Grubhub, the second-largest food delivery company in the U.S. Initially, Grubhub was a target desired by Uber. According to Bloomberg News, Uber made an acquisition offer to Grubhub earlier this year. Uber owns a subsidiary called Uber Eats, which ranks third in market share in the U.S. Although Uber's core ride-sharing business saw a sharp decline due to COVID-19, Uber Eats' first-quarter order volume surged by more than 50% year-over-year, and the plan was to solidify a dominant position in the food delivery industry through acquiring Grubhub. Industry experts predicted that if the two companies merged, they would control 55% of the U.S. food delivery service market.
However, due to concerns over antitrust regulatory pressure, the M&A ultimately did not materialize. CNBC cited an insider familiar with the matter, reporting, "Grubhub decided to shift direction toward merging with a European competitor due to concerns about the long time it would take for regulatory approval of the merger with Uber and the uncertain future outlook."
Seizing this opportunity, Just Eat Takeaway.com, known as the European version of 'Baedal Minjok,' decided to acquire Grubhub.
Headquartered in the Netherlands, this company was formed by merging the Netherlands-based Takeaway.com and the UK delivery service company Just Eat. Just Eat Takeaway.com has grown aggressively in the European market through M&A. A representative example is its acquisition of the German food delivery company Delivery Hero in 2018 for 930 million euros (approximately 1.2 trillion KRW), securing the German business rights. Delivery Hero is known for acquiring Korea's Yogiyo and Baedaltong. Recently, it has been monopolizing the Korean food delivery service market by acquiring Baedal Minjok.
Just Eat Takeaway.com plans to dominate the market again through M&A with local companies. It intends to enter the U.S. market using Grubhub as a foothold. Grubhub shareholders will receive $75.15 per share, and the enterprise value is expected to reach $7.2 billion (approximately 8.7 trillion KRW). Matt Maloney, founder and CEO of Grubhub, will join the board of Just Eat Takeaway.com and oversee North American operations.
The reason M&A is active in the food delivery industry is due to the bright market outlook and the 'winner-takes-all' characteristic. According to Swiss financial group UBS, the global food delivery market is expected to grow more than tenfold from $35 billion (40.7 trillion KRW) in 2018 to $360 billion (419 trillion KRW) by around 2030.
In particular, securing many franchise stores is crucial in the food delivery business, and only one company survives per region.
Therefore, if the Europe-based Just Eat Takeaway.com enters the U.S. market alone, there is a high risk of remaining a latecomer. The Wall Street Journal cited an insider familiar with the matter, stating, "For Just Eat Takeaway.com to enter the U.S. market, merging with a local company is a strategic decision," and analyzed, "Grubhub likely found it easier to transfer shares to a European company rather than merging with Uber, which faces difficulties clearing regulatory hurdles."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
