Uber makes food-delivery market move with purchase of Postmates

Andy Uhler, Nova Safo, and Alex Schroeder Jul 6, 2020
Heard on: Marketplace Morning Report
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Food delivery is one area where business has been up during the COVID-19 pandemic. Chris Delmas/AFP via Getty Images

Uber makes food-delivery market move with purchase of Postmates

Andy Uhler, Nova Safo, and Alex Schroeder Jul 6, 2020
Food delivery is one area where business has been up during the COVID-19 pandemic. Chris Delmas/AFP via Getty Images
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Lots of companies are struggling because of the coronavirus pandemic, but some are thriving — food delivery companies for one. Demand is up as Americans shelter in place.

So what to do if you’re a struggling company with less demand right now? Why not buy a food delivery service? That’s what Uber is doing, buying Postmates.

Marketplace’s Nova Safo has more on the story. He spoke with Marketplace’s Andy Uhler, and the following is an edited transcript of their conversation.

Andy Uhler: What do we know about this deal?

Nova Safo: The companies announced Monday that they have reached an agreement for Uber to acquire Postmates for about $2.65 billion in an all-stock deal.

Postmates will combine with Uber’s existing food delivery service Uber Eats, which has been a growth area for Uber while its ride-hailing service has suffered during the pandemic. Fewer people are taking rides, but more people are ordering in.

Uhler: Wasn’t Uber supposed to be buying another food delivery company?

Safo: Yes, Grubhub. That deal fell apart last month over antitrust concerns, because an Uber and Grubhub combo would have controlled more than half of the U.S. restaurant food delivery market. They couldn’t figure out how to deal with that problem.

A European firm, Just Eat Takeaway, ended up buying Grubhub. And now Uber is buying Postmates, which itself had had discussions with rivals over potential tie-ups.

What’s happening is that food delivery is a growth area. But profits have been elusive because these various apps are competing against each other on price. So they’re trying to grow market share by acquiring each other instead.

But the sector is popular among consumers. Even pre-COVID-19, orders were growing by double-digit percentages each year. Food delivery is expected to be a $16.5 billion industry fairly soon.

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