GrubHub IPO is Yet Another Sign of Growing Global Demand for Restaurant Delivery
GrubHub, the largest online delivery service aggregator in the US, filed for an IPO on Friday morning with a valuation of US$1 billion. The company currently partners with 29,000 restaurants – mostly independents – in 600 cities, allowing consumers to place orders for food delivery directly through the online platform. The company’s US figures are impressive, at US$1.3 billion in reported sales in 2013 from a total of 3.4 million diners and an average of 135,000 orders per day.
GrubHub’s business is confined to the US, but this move speaks to growing interest and investment in delivery service from all restaurant types around the world. Growing sophistication and increasingly hectic lifestyles among global diners have bolstered the appeal of delivery, and it has grown particularly popular among busy office-workers who have a universal appreciation for quick lunches or dinners at home after a long day. Many fast food leaders such as McDonald’s, KFC, and Pizza Hut are thus taking steps to increase their delivery presence in key growth markets like China, India, Russia and parts of Southeast Asia, and independents are following suit as interest in the channel grows. This has made platforms like GrubHub all the more necessary, as they allow small independents to compete on a more level playing field and give consumers a one-stop-shop online delivery experience. It’s also notable that this boom is not confined to emerging growth markets: Japan, in particular, is seeing a boom in delivery demand driven by its ageing population. 7-Eleven’s home delivery service has been very successful for the brand, and McDonald’s added delivery service to Japanese outlets in 2013.
So far GrubHub stands relatively uncontested in the US after its merger with Seamless in 2013, and its prospects are excellent. Domestic interest in delivery is still growing, and the company has a very long way to go before nearing saturation, even in key cities. Even fast food is finally recognizing the potential for delivery demand in the US, with Burger King testing the service in 2013 and McDonald’s reportedly considering adding it in the future. That said, there are also some formidable opponents looming in the broader global competitive landscape that might make any eventual international moves a challenge. Turkey-based Yemek Sepeti has been growing locally for years, reaching 7,000 restaurants and a reported 155,000 meals delivered per day, and it recently established a presence in the lucrative Middle East market by way of Dubai. Similarly in Russia, local online delivery hub Delivery Club is growing with the help of a 2012 venture capital investment, and is chasing what it believes to be a US$1 billion market across the country. As these local aggregators continue to grow more popular, consumers will continue to see delivery service as an integral part of the global foodservice experience, suggesting that there could be a very long runway for delivery growth in the global market. While such competitors and leading restaurant chains will all undoubtedly do their best to lure customers away from GrubHub as the service grows, the company has clearly only just scratched the surface of global demand.