After ponying up an all-stock offer of $4.9 billion to acquire Grubhub back in May, multiple reports suggest Uber CEO Dara Khosrowshahi is swapping in some lighter tackle to land Postmates, the fourth largest U.S. restaurant delivery service, for a less biting $2.6 billion. Possibly playing hard to get, Reuters also reports that Postmates has revived its plans for an initial public offering, all suggesting the U.S. delivery scene will remain hotly contested moving into the dog days of summer.
Much smaller than Uber Eats, Grubhub and market leader DoorDash, Postmates is the smallest of the “big four” U.S. third-party delivery brands, and, at nine years old, it’s one of the oldest players, especially among the nationally known providers.
Compared to its primary competitors, Postmates delivers more than just food. While other delivery providers have recently inked deals with pharmacies and retailers as they diversify their own offerings, Postmates has long been known for its grocery, convenience store and other verticals its drivers deliver.
Based in San Francisco just like Uber, Postmates has outsized influence in the critical Southern California market, and the brand has become a pop culture touchstone, with many celebrity cameos featured in the brand’s marketing and social media channels.
Postmates is currently valued at $2.4 billion, which means that, if news reports are accurate, Uber is willing to pay a smaller premium compared to its ill-fated attempt to buy Grubhub that had many industry watchers and investors scratching their heads. Of course, Europe’s just Eat Takeaway.com then swooped in with a $7.3 billion deal to buy Grubhub that’s still awaiting final approval.
Both Postmates and DoorDash had postponed plans for separate initial public offerings. Now that COVID has proven a boon for restaurant and grocery deliveries, the Reuters story said Postmates was reconsidering going public due to the Grubhub acquisition, “as well as recent fundraising by peers.” The pandemic has provided similar motivation to Instacart and other grocery providers looking to capitalize on their suddenly improved fortunes with a move onto the public markets.
Uber’s Khosrowshahi has previously said Uber Eats would seek to become a market leader in its respective territories while exiting those where such scale was unattainable. While eliminating a large-scale delivery provider in the U.S. would theoretically be a boost to the entire industry that’s largely unprofitable and waging an expensive battle for market share, no details have leaked about Uber’s thoughts on retaining the Postmates name in a possible takeover.
With 8 percent of the March 2020 U.S. delivery market according to research firm Second Measure, Postmates is a distant fourth chair to DoorDash’s 44 percent, with Uber Eats and Grubhub essentially tied with just over 20 percent of the U.S. market.
Certainly the crown jewels of the Postmates empire, aside from Jared Leto’s backing, is the Los Angeles megalopolis where Postmates has approximately 36 percent of the total market, according to Second Measure. From there, its top markets are Phoenix and Miami, with Postmates controlling 20 percent and 18 percent of the respective metro areas.
After the Uber-Grubhub deal fizzled, various reports suggested that Uber’s leadership took issue with various aspects of the negotiations, including Uber’s “genuine and significant concern” about Grubhub’s business practices. It will be interesting to see if this one ends in bad blood or a new, beefed-up player aiming for DoorDash’s crown.
As the industry waits to see how this plays out, all indications suggest the brutal war for market share will continue indefinitely to the benefit of deal-seeking delivery customers. This much is clear: Uber’s Khosrowshahi wasn’t fooling around when talking about becoming a market leader.