In today's America, it's groceries vs. Grubhub

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In today's America, it's groceries vs. Grubhub

By Gina Acosta - 03/20/2018
A new deal between the company and Yelp expands Grubhub's reach to over 80,000 U.S. restaurants. 

Grubhub just made a big move to become the dominant meal provider for Americans.

A new deal between the company and Yelp expands Grubhub's reach to over 80,000 U.S. restaurants. This finalizes GrubHub's $288 million acquisition of Yelp's Eat24 directory that it began last fall. 

By more than doubling the number of Yelp restaurants Grubhub offers delivery to, the latter hopes to trim delivery fees overall by sheer scale. But this also makes Grubhub an even bigger competitor to food retailers and meal kit companies, because, after all, all of these businesses are looking to solve the same problem of, "What's for dinner?".

“By tapping into Grubhub’s restaurant network, Yelp now offers users the ability to order from a larger and better selection of restaurants across the country,” said Jeremy Stoppelman, Yelp’s co-founder and chief executive officer. “Our long-term partnership with Grubhub strengthens Yelp’s competitive position in the restaurant category, which brings millions of users to our platform every day.”

As Yelp continues to provide more options to users, the company is also carefully engineering new product experiences to make it even easier to find, order and transact with restaurants that offer food delivery and takeout. 

“We’re thrilled to complete our integration with Yelp, which enhances the online ordering experience for diners and will drive more orders to our restaurants from Yelp’s tens of millions of monthly users,” said Matt Maloney, Grubhub’s founder and chief executive officer. “For the first time, Yelp users can order from Grubhub’s huge network of local favorites, some that don’t provide their own delivery services, including many of the most popular restaurants in each market.”

To accompany the inventory, Yelp released a new mobile Delivery tab, available to iOS and Android users, where consumers can find the very best local food delivery and takeout. Through the Delivery tab, Yelp surfaces useful information — like which restaurants offer free delivery or which hot spots in your area offer delivery — to help consumers find the most relevant ordering options available.

During its fourth quarter Grubhub facilitated food sales of $1.1 billion, a 39% increase from the prior year. The number of active diners who use Grubhub increased 77% to 14.5 million. The company defines the word “active” broadly as someone who used the service within the past 12 months, but nevertheless usage has spiked. The company also saw profits surge with net income of $53.5 million, or 60 cents a share, up 293% from the prior year’s $13.6 million, or 16 cents a share.

"Over the past two years we have taken incredible strides in expanding the breadth and depth of our restaurant network, growing the number of local restaurants we work with from 40,000 to over 80,000 today," said Maloney.

Now the company has taken arguably its largest stride of all by signing a deal with Yum! Brands that involves the parent company of KFC and Taco Bell investing $200 million in Grubhub and making its brands available on the platform. KFC, Taco Bell and Grubhub will work with franchisees to test and roll out online ordering for pickup and delivery to thousands of participating restaurants so consumer will be able to have a chicken or tacos delivered.

"The partnership with Yum! which we announced this morning will accelerate the expansion of our delivery network and amplify our diner acquisition efforts, raising consumer awareness of online ordering and driving more volume for all restaurants across our platform,” Maloney said.

The reason why food retailers should care about Grubhub’s future has everything to do with the larger trend of food away from home versus food at home and related traffic challenges. Segmenting consumers into the two large buckets of food at home and food away from home becomes increasingly challenging as the distinctions blur. For example, food away from home, basically restaurants, becomes food at home because of where it is consumed rather than where it is purchased.

When viewed broadly, Grubhub is a competitor of sorts in much the same way as home delivered meal kits. Grubhub delivers food from restaurants while meal kit purveyors like to tout that home chefs can prepare restaurant quality meals from a box of ingredients. Either way, both siphon customer traffic away from traditional food stores, robbing retailers of the valuable trip and all the incremental purchases that come along with it.

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