Uber’s success in food delivery sector is a “wonderful surprise,” CEO says

As Uber’s new CEO, Dara Khosrowshahi looks to guide the company back to stability after a flurry of corporate upheaval and operational stumbling blocks. Khosrowshahi says the success of the company’s food delivery arm, UberEats, has been a “wonderful surprise,” The New York Times reports.

According to the Times, Uber’s aid UberEats generates more revenue than its ride-hailing operations in certain markets, including Tokyo; Taipei, Taiwan; and Seoul, South Korea. Average daily deliveries grew by a factor of 24 from March 2016 to March 2017.

Uber’s first forays into the food delivery market came in 2014, when UberEats’ predecessor, UberFresh, launched in Los Angeles. Food quality issues born as a result of the way drivers transported the food, along with the limited selection of available restaurants, checked the success of that operation.

In December 2015, UberEverything, the division that handles food delivery and a number of other projects for the company, launched the UberEats app in Toronto. As the service succeeded, it expanded its sales force, partnered with more restaurants and made inroads in additional locations.

Today, UberEats is available in 120 markets. Uber declined to disclose the amount of revenue the service has generated, but the Times says top executives at the company are excited about growth potential in the food delivery sphere.

Several other companies beat Uber to that market, which is worth $100 billion today. Postmates, a delivery service that launched in 2011, employs more than 100,000 drivers, performs 2.5 million deliveries every month, and has raised over $250 million, according to the Times.

GrubHub, another giant in the food delivery sector, has been operational for 13 years, and reported over $3 billion in “gross food sales” in 2016, the Times says. The company serves 8.17 million customers.

GrubHub’s founder and CEO, Matt Maloney, said Uber has spread itself too thin to pose any real threat to his and other established companies within the food delivery sector.

“Uber has built a great company focused on black car service and human transportation, but succeeding in food delivery is a different game,” Maloney said in a statement, per the Times. “We are known for one thing only — takeout ordering — and we have engineered our entire product around this purpose.”

But Uber believes its experience in ride-hailing can translate into a competitive advantage over single-focus companies like GrubHub.

Uber already employs about two million drivers worldwide, the Times says. As UberEats continues to grow, that network will grow as well. As the Times notes, the potential labor pool from which UberEats can pull its employees is wider than that which is available to the company’s ride-hailing business.

While Uber vehicles that carry passengers must meet a laundry list of regulative criteria, guidelines governing the transport of food are more relaxed. In fact, UberEats delivery people are not required to own a car. Many make their deliveries on bikes via a service called UberBike.

Moreover, Uber has spent the last decade or so identifying the most efficient routes from point A to point B in cities all around the world. The company believes it can harness that knowledge to shorten delivery times.

“What Uber has are the last-mile logistics, and that’s crucial,” James Cakmak, an analyst at the equity research firm Monness, Crespi, Hardt & Company who follows the food delivery space, said per the Times.

UberEats has turned to partnerships to further expand its network of available restaurants. In May, the company inked a deal that allowed it to deliver food from over 1,000 McDonald’s locations, the Times says. Lucy Brady, a McDonald’s executive, said in July that the fast-food chain was pleased with the fruits of the alliance so far.

The already-crowded food delivery sector is preparing for the arrival of Amazon, which acquired Whole Foods earlier this year. Many of Whole Foods’ 460 locations already offer a cafeteria-like buffet stocked with freshly prepared food, and Amazon could hire drivers to deliver that food, the Times points out.

Cakmak adds that Amazon, whose business model is based largely on offering the lowest possible prices, has the resources to match or undercut the prices of competitors in the food delivery sphere.

“The number-one concern for all of these delivery companies is Amazon,” he said, per the Times.  “How could Amazon use its network to crush our business? They have the logistical network and the balance sheet to be able to compete on the price side with all of these players.”

Khosrowshahi plans to take Uber public within the next 18 to 36 months.

Featured image via Flickr/Guillermo Fernandes

Lyft Partners With Taco Bell to Allow Passengers to Order Food With the Push of a Button

If you realize you’re hungry in the middle of a Lyft ride, can you ask your driver to go through a drive-thru? The quandary has plagued hungry passengers ever since the ride-hailing company was established in 2012.

But now Taco Bell has partnered with Lyft to create a feature that allows Lyft customers to request a stop at the late night fast food joint with the push of a button, Kate Taylor of Business Insider reports. Taco Mode, as the beta service is called, will be available on a trial basis in Orange County, CA from July 27-29, and again between August 3rd and 5th. It is slated to go nationwide in 2018.

“We realized that for every person who has asked their Lyft driver to make a pit stop at Taco Bell — and we’ve seen many — there are likely those who weren’t sure if this was possible,” Taco Bell CMO Marisa Thalberg said in a statement. “With the advent of this fantastic partnership with Lyft, we will erase any lingering uncertainty and celebrate the ability to ‘ride-thru’ in Taco Mode.”

Taco Mode will give customers access to a “custom, in-car” menu, and will include a “taco themed car” (whatever that means). Free Doritos Locos tacos will be on the table for Taco Mode users as well.

The service will be available between 9 p.m and 2 a.m., making it the perfect option for those who, whether due to fatigue, intoxication, or some combination of the two, are unable or unwilling to pursue more complicated avenues of obtaining food. Taco Bell serves almost 15 percent of its customers between 10 p.m. and 4 a.m., according to Taylor, and Taco Mode will give the fast food chain another means of reaching the key late-night eater demographic.

Uber, arguably Lyft’s chief competitor in the ride-hailing space, launched its UberEats service, which allows customers to get food delivered via Uber, in August 2014. Today, it is available in 50 cities across North America, as well as in select locales in South America, Europe, Australia, Asia, and Africa.

“The UberEATS app,” Uber’s website says, “connects you with a broad range of local restaurants and food, so you can order from the full menus of your local favorites whenever you want.” Once a customer orders, an Uber driver brings the food directly to the customer’s address, typically within 35 minutes, the site claims.

Lyft is entering the food delivery space from a different angle, and the niche is in demand amongst restaurants as well as customers.

Taco Bell CEO Brian Niccol told Business Insider in April that taco delivery was the “number one request” amongst Taco Bell customers. The restaurant chain has made various efforts to fulfill that demand, including partnering with DoorDash, a service similar to UberEats, but in all cases, Niccol said, “the third party folks, the aggregators — they’re just not fast enough.” Presumably, Taco Bell declined to partner with UberEats because it, too, was not fast enough.

With Lyft’s Taco Mode, though, the food does not have to travel far before it reaches the customer’s mouth: at the most, the driver has to hand it to his fare in the back seat, who may have to wait a minute before the food is cool enough to eat.

In the food service space, Lyft is taking steps to differentiate itself from Uber. The competition increases consumers’ options: if a person gets hungry while lounging around at home watching a movie, he/she can order from UberEats. If someone wants to eat a hot meal in the car on the way home from the bar, he/she can use Lyft’s Taco Mode.

The only real downside is that Lyft drivers everywhere will end up with sauce on their seats and crumbs on their floorboards.

Uber-Yandex Ride-Sharing Merger in Russia

Uber and Yandex have agreed to a merger of their ride-sharing businesses in Russia and five eastern European markets with Yandex. This is the second withdrawal on Uber’s global presence since their exit from China a year ago. Yandex, which is essentially the “Google of Russia,” will be the leading partner in this newly established company.

Yandex and Uber both stated that they will join together in Russia, Armenia, Azerbaijan, Belarus, Georgia, and Kazakhstan through a new company operating in 123 cities. Uber will invest $225 million into the company, owning 36.6 percent of the company. Yandex on the other hand will be investing $100 million into the new company, but owning 59.3 percent of the company. The remaining 4.1 percent will be held by employees according to a fully diluted basis.

Uber will also be contributing its UberEATS food delivery business into the merger venture, which will act under the joint company in the 6 previously mentioned countries. Despite Uber’s influence as a global ride-sharing company, Yandex holds a more dominant position in the specified regions, providing services including Web search, maps and mobile navigation in the region.

Uber’s position has significantly weakened as more competition has developed as well as the scandals resulting in Uber CEO Travis Kalanick resigning from his position. Instead of trying to adapt and dominate each market around the world, Uber is better off allying itself with local players that dominate their fields to compensate for the over encompassing regulations that Uber was originally responsible for upholding. This does not absolve Uber of ensuring their drivers and riders are protected and fairly treated, but instead of controlling the specific regulations, Uber will be in charge of supervising that the proper regulations are being managed by its partner companies.

While some may view the ratio between what Uber is investing and the percentage of ownership of the new company they are receiving is unfair, but it is in fact beneficial for Uber in the long run. The partner company is responsible for everything beside operations, and all Uber has to focus on in these new developments are the operations themselves. Uber in fact saves on logistics costs, and grant themselves a powerful platform to spread its services throughout regions that are otherwise impenetrable by foreign businesses. While Uber’s position within the new company is up to the discretion of Yandex, 36.6 percent is not an insignificant portion that does provide Uber with some leeway.

In this relationship, Yandex will be controlling the direction of the proverbial ship that is the new company, and it is up to Yandex that the environment either maintains a status quo or proves beneficial for the new company, so that it can continue its operations. UberEATS is a helpful tool in ensuring that even when the drivers are not working with riders, they are still maintaining a revenue stream through food delivery.

It will be interesting to see if more countries follow suit in establishing a merger with Uber. Local companies can use Uber as proof of a powerful global business partner, further establishing and improving the local company’s reputation. As long as rates are competitive, the ride-sharing and food delivery components that Uber provides can act as free publicity and a fairly dependable revenue stream.

One thing to keep in mind are the recent news involving Uber, and whether establishing a partner relationship will in fact diminish the partner company’s reputation, as one interpretation is that through partnership the company in fact condones the behavior exhibited by Uber drivers and the reaction to criticism.

Considering the increase in ride-sharing companies even within the U.S., maybe Uber will consider new mergers with local companies, should mergers become an established business practice that’s proves profitable for Uber.