Wall Street Is Banking Billions On The Food Delivery Boom
FN Media Group Presents Oilprice.com Market Commentary
London – December 23, 2020 – With the pandemic shuttering thousands of businesses in 2020, the food industry rolled back the clock, turning to a trend made popular in the 1960s to save it. It may be the most revolutionary change in the food business in decades, creating an unprecedented boom in this projected $154 billion industry. And it led to one of the biggest IPOs of the year, with DoorDash coming to market in a $71.3 billion IPO. Mentioned in today’s commentary includes: Uber Technologies, Inc. (NYSE: UBER), Grubhub Inc. (NYSE: GRUB), Domino’s Pizza, Inc. (NYSE: DPZ), DoorDash, Inc. (NYSE: DASH), Yum! Brands, Inc. (NYSE: YUM).
Since strict limits have been placed on indoor dining, restaurants are seeing nearly a 50% drop in customers dining in this year. In 2020 alone, over 100,000 restaurants have been forced to shut their doors. But while it’s hit many restaurants hard, others are surviving thanks to a booming trend…
One that’s already taken off in recent years and is now catapulting to new heights. It’s the trend that started nearly 60 years ago, when Dominos made the promise of delivering food to its customers’ homes in “30 minutes or less.” But now that’s spread to thousands of restaurants, all fueled by companies making up a projected $154 billion industry by 2023.
That’s why CNN is saying, “The pandemic boosted food delivery companies.“
The New York Times is saying, “Food delivery apps are booming.“
And Marketwatch is saying, “The pandemic has more than doubled Americans’ use of food delivery apps.“
This meteoric rise in the food delivery industry helped DoorDash catch the attention of major investors everywhere earlier this month with their IPO. And it’s helped smaller companies like the Canadian ESG investment platform Facedrive (FD, FDVRF) become an up-and-comer in a booming industry.
Most folks know them as the eco-friendly ridesharing company, but they caught onto this food delivery trend early this year as they saw the pandemic lead to an unprecedented sales surge in the industry. That’s why they’ve looked to grow their vertical in Facedrive Food quickly through major acquisitions and with key partners. And by acquiring hundreds of thousands of new customers quickly, they’ve seen their food delivery business grow an incredible 25% in just the last month.
This Mega-Trend is Saving the Restaurant Industry in 2020
The shift to move everything completely digital during the pandemic has helped save countless businesses. And it’s changed the face of everything from the workplace and schools to how people spend their leisure time. That’s why in recent years, a whopping 60 to 70% of Pizza Hut’s business has come from delivery.
The trend has been building now for years, but the seismic shift that’s happened in the restaurant industry over the last year is unprecedented.
DoorDash has seen their sales triple since last year. And the amount of money switching hands should give investors an idea of how confident businesses are that a fundamental shift has taken place in the restaurant industry.
UberEats just paid $2.65 billion to acquire Postmates, helping them challenge DoorDash for the restaurant delivery industry crown. But that’s pocket change compared to what happened with Grubhub.
They were acquired in a massive $7.3 billion all-stock deal this month when Uber lost out to Dutch food delivery company Just Eat Takeaway.com. And this shift has caused up-and-coming players to get in on the action too.
In May, they acquired Foodora Canada, a subsidiary company of the $20-billion multinational food delivery service, Delivery Hero, which itself operates in 40 countries and services more than 500,000 restaurants. With this move, Facedrive added hundreds of thousands of new customer names and over 5,500 new restaurant partners.
Then a few months later, they acquired Food HWY, a leading “ethnic and student focused” food delivery service, which added thousands more restaurants and tens of thousands of users to their service. And in September, they acquired the electric vehicle subscription service Steer.
Food Delivery and Ride Sharing
This bonanza in the food delivery market has led to some incredible gains that have paid off handsomely for investors. DoorDash saw their stock jump 86% in the first day of trading after their IPO this month. Grubhub has soared for 138% gains since March. And ride-share giant Uber skyrocketed for 242% gains since then with their UberEats food delivery service seeing a major boost in sales.
But with these giants looking to capitalize on the food delivery trend taking off. Many have started looking to alternatives like Facedrive because of the rampant complaints of price-gouging from drivers and ridiculous fees for customers in the ride-share market. There’s no shortage of stories of upset drivers accusing Uber of price-gouging, even taking over 50% of the cut for themselves at times.
Compare that to Facedrive, who lets their drivers keep 85-90% of the fare and 100% of their tips. That’s why Facedrive has seen their shares soar 605% in just the last year.
When Uber came on the scene over a decade ago, it sparked a revolution in the taxi industry and changed how people get around town each and every day…Now food delivery may be ready to spark the same kind of change in the restaurant industry, taking the dining experience to the comfort of users’ homes with the touch of a button.
The Biggest Change in the Restaurant Industry in Decades
CBS News has touted, “Food delivery apps are changing the way we eat, and raking in billions.” And this sales boom in food delivery is just beginning.
According to Marketwatch, most people say they still won’t dine in, even after restaurants fully open again. That could mean even more sales for food delivery as customers have made it clear they still have an appetite for the food they love from their favorite restaurants.
This has all meant a major boost for the big names in food delivery that most folks already recognize…But with this pandemic stretching on, the real winners could turn out to be the up-and-comers like Facedrive working to benefit both the customers and the drivers alike.
Big Names Paved The Way, But They Aren’t Out Of The Race Just Yet
Uber Technologies (UBER) is one of the most diversified companies in the new transportation-as-a-service industry. But nothing is doing as well in this crisis as its Uber Eats brand. The company’s food delivery platform has been booming as stay-at-home orders across the globe close down restaurants. In fact, in the second quarter of 2020, the company reported more than double gross bookings for its delivery business than its mobility business.
“It’s become clear that we have a hugely valuable hedge across our two core businesses that is a critical advantage in any recovery scenario,” Uber CEO Dara Khosrowshahi said, adding “When travel restrictions lift we know the mobility trips rebound. If restrictions continue or need to be re-imposed our delivery business will compensate.”
Despite some of its profitability challenges, however, Uber has had a stellar year. After falling to just $14 in mid-March as lockdowns swept the world, the company’s share price has skyrocketed by 278%, currently sitting at $53.
GrubHub (GRUB) was America’s dominant food delivery force for some time, but like Uber, it spent a lot to get its market share to that point. Not only that, it’s received a lot of criticism for the layers of fees it places in every order. While customers don’t see most of what restaurants are being charged, restaurant owners find the service difficult to work with, as the fees cut significantly into their own profits.
But these complaints did not fall on deaf ears. GrubHub has taken the criticism to heart, and is now offering restaurants a new way to receive orders. All without the massive commission fees it usually takes.
Thanks to its efforts, GrubHub has remained one of the less volatile giants in the delivery business. That’s not to say it hasn’t seen some growth over the year, however. GrubHub’s stock increased from $47.24 at the beginning of the year to $72.35 at today’s price, representing an increase of 53%.
Domino’s (DPZ) has seen some rough times in the past, but it’s worked hard to get to where it is now. After a major makeover, Domino’s burst back onto America’s pizza delivery scene and has made major waves ever since. The company has worked hard to secure its own deals with the other delivery giants to ensure its own market share was able to survive, and even added a number of little tricks to improve the customer experience and encourage its fans to order directly instead of via a third-party application.
In addition to its ambitious push back against the delivery app giants, Domino’s is also experimenting with exciting new ideas to help draw in newer customers and help retain its loyal customers. In fact, it’s all but become a “technology company that sells pizza.”
This tech push may have even helped keep Domino’s from taking the plunge with the rest of the market back in March. It was one of the few companies that didn’t fall to a yearly low. Year-to-date, Domino’s has seen its share price by 34%, but with the autonomous vehicle craze just getting started, Domino’s may be one of the best prepared in the biz to ride that wave into the future.
DoorDash (DASH) is a veteran in the food delivery business. Founded in 2012 in California’s Silicon Valley, the company has fought tooth and nail to become the top third-party delivery service in the United States. In addition to its food delivery dominance, DoorDash is also jumping on top of a brand-new emerging market: ghost kitchens.
Ghost kitchens, sometimes called virtual kitchens or dark kitchens, have exploded during 2020 as the COVID-19 pandemic has forced many restaurants to close their doors, and DoorDash has been on top of it every step of the way.
DoorDash stock surged on its first day of trading by as much as 86%. Since then, however, the company’s stock price has fallen back to earth, finding stability in the $155 range. But as the world gears up for a future “on demand,” companies like DoorDash, which have been on the cutting edge of convenience from the very beginning, stand to make the most of this new consumer-driven reality.
Yum! Brands (YUM) is one of the original pizza delivery giants still in the game. But it’s not just about pizza delivery anymore. Now, Yum! is racing to grab a piece of this multi-trillion dollar trend. Kentucky Fried Chicken, the fast-food megalith, is diving in head first to offer its loyal customers a taste of the vegan lifestyle. Teaming up with the meatless sensation Beyond Meat, KFC has launched a line of chicken-less ‘chicken nuggets’ that have been a huge hit across the globe. Already Yum’s meatless fried chicken alternative is offered in the UK, China, across Europe, Canada and the United States, and thanks to its success, it will likely continue to expand this offering across the globe.
Yum is one of the major leaguers in the stock market. The massive $32 billion empire has shown only upward trajectory since it hit the market over 2 decades ago. Despite shedding nearly half its value in the March market crisis, it’s already rebounded to new all-time highs and is set to continue growing for years to come.
By. Paul Fisher
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This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that the demand for food delivery services will grow; that Facedrive will be able to expand to the US and globally; and that Facedrive will be able to carry out its business plans. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include that drivers are not as attracted to Facedrive as expected; that competitors may offer better or cheaper alternatives to the Facedrive businesses; changing governmental laws and policies; the company’s ability to obtain and retain necessary licensing in each geographical area in which it operates; the success of the company’s expansion activities and whether markets justify additional expansion; the ability of the company to attract drivers who have electric vehicles and hybrid cars; and the ability of Facedrive to attract restaurant partners, and on profitable terms for Facedrive. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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