Grubhub Crushed By Food Delivery Competition

Online food delivery is an increasingly competitive space for commerce, and the newest evidence comes from Grubhub. Its shares were tanking early this week after the company posted what investors apparently viewed as a disastrous third-quarter 2019 financial report.

The company posted Q3 revenue of $322 million – that’s a 22 percent increase over the same period last year, but it missed analyst expectations of $330.5 million. Earnings stood at 27 cents per share, down 15 percent year over year, but an amount that met analyst expectations. Investors did not take kindly to the company’s fourth-quarter guidance of $315 million to $335 million, below the forecast of $388 million. That helped send Grubhub’s stock tanking into early Tuesday (Oct. 29).

“Competitive food delivery offerings (Uber, DoorDash and others) are eroding GRUB usage and [is] expected to worsen in 4Q, suggesting historical [long-term value] is no longer reliable,” said Oppenheimer Analyst Jason Helfstein, according to a report from CNBC. The report added that “Grubhub has lost more than half of its market value this year as competing food delivery services like Uber Eats, DoorDash and Postmates pressure fundamentals.”

Grubhub put its best angle on its most recent financial results report. “Our teams had another strong quarter of execution, adding nearly one million active diners and 15,000 restaurants to our platform,” said Matt Maloney, founder and CEO. “As we detail in our shareholder letter, we are entering the next phase of growth in the U.S. online food ordering industry, where it is increasingly important to create a differentiated experience for diners and long-term value for restaurants. We are excited to leverage the robust profitability of our core business and best-in-class restaurant-facing products to grow our two-sided marketplace in a sustainable manner.”

Delivery Growth Efforts

Indeed, the online food delivery space is getting more competitive and undergoing changes.

For starters, delivery apps may be known for working with restaurants for lunch or dinner orders, but they are also bringing retailers such as pharmacies onto their platforms. Walgreens and Postmates, in one case, announced a collaboration to provide on-demand delivery for shoppers seeking over-the-counter medications, beauty products, health and wellness items and grocery products in New York City.

With the tie-up between the two companies, Postmates will deliver hundreds of popular items from 174 Duane Reed and Walgreens locations in Brooklyn and Manhattan. Shoppers can order products from participating stores through the company’s website or via its Android or iOS app. Consumers don’t pay delivery fees when they sign up for the Postmates Unlimited membership service, which is available for a monthly fee.

Grubhub Moves

For Grubhub’s part, it recently announced the launch of “Perks” for mobile users, featuring exclusive offers only available on Grubhub, as well as new ways to earn and redeem restaurant loyalty rewards.

“Restaurants have always used free food as a perk for their VIP diners to keep them happy and coming back. We have now extended this practice to Grubhub diners by building loyalty tools so our restaurant partners can promote their restaurants more aggressively on our marketplace and reward their best digital diners as well,” Maloney said in a press release.

Eligible diners will now be able to choose from a range of offers only available on Grubhub from participating restaurant locations, including a free Cheesy Gordita Crunch from Taco Bell; a free Original or Cinnamon Sugar Pretzel from Auntie Anne’s; a free dozen Cheddar Bay Biscuits from Red Lobster; and a free 20-oz. smoothie from Smoothie King. There will also be perks offered by such brands as Shake Shack, Just Salad, honeygrow, Pokeworks, Argo Tea and more. Perks can be accessed via a tab at the bottom of the screen in the Grubhub and Seamless mobile apps.

Expect more such efforts in the food and retail delivery space as players race to gain more dominance.