Global food delivery business DoorDash, that serves in over 4000 cities in all of the 50 States and Canada with over 310000 restaurants is acquiring it’s direct competition Caviar from Square for $410 Million in cash and DoorDash Stock. How this integration will work has not been determined so far.
WHAT THE ACQUISITION WILL MEAN:
- Expansion to the Premium Restaurants Domain: The acquisition will expand the number of premium restaurants listed with DoorDash. As per The New York Times, DoorDash tends to have more delivery orders coming in from chain restaurants in sub-urban areas. With Caviar’s presence in the 15 of the largest cities including Boston, Philadelphia, New York etc. DoorDash will get just that.
- Enhanced Relationship with Square: This will also deepen DoorDash’s relationship with Square- that currently powers the in-person and online transactions between restaurants and DoorDash.
- Improved Monetization Arenas: Better user base will improve monetization opportunities. Not only will DoorDash then serve to customers with fast-casual food, but also to those wanting premium food. This enables them to serve a broader customer base.
- Unique Marketing Opportunity: There are better upselling options that open up here. Fast-food can be sold as a “cheat-day meal” while premium food can be sold as “luxury meals”
Having a solid delivery management system that can host multiple merchants is primarily what it takes to scale success in a delivery management business.
DoorDash, that was founded in 2013,has raised a total of $2 Billion in funding so far; and with the last round of funding, the company is now valued at a total of $12.6 Billion. This is the company’s first large acquisition.
“Restaurant delivery is just the beginning of how we hope to touch and grow every local business,” says Tony Xu, CEO, DoorDash.
The acquisition is possibly in response to movements in the global delivery market that is racing to scale operations. The competition is soaring with more and more mergers and acquisitions.
March 2019- Uber purchased Careem for $3.1 BillionSource: Business Insider
May 2019- Amazon led a $575 Million Series G Funding in Deliveroo
July 2019- Just Eat and Takeaway.com agreed to an $11.1 Billion merger
It is crucial how acquisitions happen on-field. It is important the acquisition is smart and not splashy- capital allocation should happen most effectively. Investment in the right delivery management software and acquisition of businesses that don’t overlap customer bases and existing operations can be called a smart acquisition. DoorDash’s acquisition of Caviar can be called so since both have their operations majorly in the US but different customer bases- collab of which can be of bigger benefits than visible on the surface.
Another smart acquisition strategy surfacing now is food delivery companies being acquired by platforms that offer tangential services like parcel delivery, cab services, ride sharing etc. that can aide building a broader business ecosystem.
In a similar stream, Aramark acquired Good Uncle in Philadelphia. Read about it in our next blog.
To create a competitive edge in a crowded market in the food delivery business, a top notch backend that delivers the right customer experience is critical. This, supported by scaling leads, reduces the operational costs significantly.
At Jungleworks, our delivery management software Tookan offers the flexibility of serving multiple businesses on different user accounts to simplify managing your business. Try Tookan’s Free 14-Day Trial here.
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