November 14, 2023
Doesn’t it seem as if everyone is busier than they used to be? We are pulled in countless directions. And across the industrialized world, a large numbers of survey respondents tell researchers they’re overburdened with work and stressed by the pressures at home.
Even a task like cooking dinner has become stressful. So it is no surprise to see the rise of home food delivery. Home food delivery takes two forms: delivery companies that bring restaurant food directly to your home; and food prep companies that deliver all the ingredients for you to make a hot, fresh meal.
Online food delivery surged during the height of the COVID-19 pandemic, as governments around the world ordered people to stay at home. Since then, equity valuations for food-delivery companies have dropped as investors shifted away from unprofitable tech companies and rising interest rates negatively affected valuations. Despite the significant cooldown, however, Morgan Stanley Research analysts expect the global food-delivery sector to heat up.
“We expect growth to pick up to 14% next year, with average annual revenue growth at that level through the next five years, especially driven by demand in Asia and the Middle East,” says Miriam Josiah, head of Morgan Stanley Research’s European Internet Services. “That would result in the market growing to $810 billion by 2027, up from $424 billion today.”
After expanding by roughly 50% in 2020 and 2021, growth in the global food-delivery sector normalized to 4.1% in 2022, and that trend has continued into 2023 because of inflation and other pressures on consumers. While growth is unlikely to return to peak-pandemic levels, there are reasons to be optimistic about sector, according to Morgan Stanley.
“The sector’s market reach lags behind overall e-commerce, which had 22% penetration in 2022. However, we forecast online food-delivery sales growth will be faster over the next five years, to achieve 23% penetration by 2026 versus 26% for e-commerce,” said Josiah. “As companies attract new users who are spending more and making more frequent orders, we think profits will follow.”
Food delivery companies saw a huge boom in business during the pandemic that has moderated since. Bloomberg Second Measure’s consumer transaction data analytics show that in April 2020, combined observed sales for major meal delivery services grew 162% year-over-year and 59% compared to the previous month. The meal delivery industry as a whole is continuing to see some growth, though at much lower rates than those pandemic peaks. Bloomberg’s data shows that in October 2023, observed sales for major meal delivery services grew 3% year-over-year, collectively.
For retail shareholders, there are options to invest in both categories — companies that deliver restaurant food to your home and those that create and prepare meal kits for the consumer to cook themselves.
For home food delivery companies, individual investors might consider:
DoorDash (Tii:DASH) is a San Francisco-based company that operates an online food ordering and food delivery platform. With a 56% market share, DoorDash is the largest food delivery company in the United States. It also has a 60% market share in the convenience delivery category.
Uber Eats is an online food ordering and delivery platform launched by Uber Technologies (Tii:UBER) in 2014. Couriers deliver meals using cars, scooters, bikes, or on foot. It is operational in over 6,000 cities across 45 countries as of 2021. At the end of November 2020, Uber acquired Postmates in an attempt to consolidate market share and boost profitability. Postmates earned 2% of the observed U.S. meal delivery market in October 2023, bringing Uber’s total market share to 26%, according to Bloomberg.
Grubhub is an online and mobile prepared food ordering and delivery platform. Founded in 2004, it is a subsidiary of the Dutch company Just Eat Takeaway (Tii:JTKWY) since 2021. Grubhub and its other third-party delivery subsidiaries, which include Seamless, Eat24, and Tapingo, came in at 9% of observed U.S. meal delivery consumer spending in October 2023, according to Bloomberg statistics.
There are a few companies in the home food prep category that might appeal to retail investors as well:
Home Chef is owned by grocery giant Kroger (Tii:KR) and has a 12% share of the meal kit market. According to the company, it delivers 3 million meals monthly to its subscribers. The rotating menu includes up to 15 meals for dinner, and the company also provides a weekly breakfast, lunch, smoothie and fruit basket option.
Wonder Group announced recently that it will close on a deal to acquire Blue Apron (Tii:APRN), which expects the acquisition will further enhance its plans to create a super app for mealtime. Blue Apron offers weekly boxes containing ingredients, which also include suggested recipes that must be cooked by hand by the customer using the pre-ordered ingredients. In July, Blue Apron began offering meal kits and ready-to-serve foods at Walmart (Tii:WMT). Blue Apron has about 6% of the meal kit market.
Instacart (Tii:CART) inked a deal with Sunbasket that allowed customers to review recipes and, with a single click, buy all the ingredients and get them delivered the same day. Sunbasket is a subscription meal delivery service that ships members fresh, organic, and sustainable ingredients and recipes every week, allowing them to cook their own meals.
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