Google and Uber enter India's meal delivery market


Both Google and Uber have recently launched online meal delivery schemes in India, taking on an uphill battle in a market that several startups have failed to crack, Quartz India reports.

Google launched its Areo restaurant delivery and home services platform in April, and Uber followed up by launching competitor UberEATS in India last week.

However, the two large tech companies are entering an online meal delivery space littered with troubled startups that have failed to gain much traction outside of India’s largest cities.

  • The list of online meal delivery startups that shuttered operations in the country last year includes Zupermeal, iTiffin, EazyMeals, Zeppery, and BiteClub.
  • There's also been a wave of consolidation lately — on-demand meal delivery startup TinyOwl was acquired by hyper-local delivery firm Roadrunnr last June. Then, in December, startup DeliveryHero acquired competitor FoodPanda.
  • Meanwhile, investment in Indian food tech startups, including meal delivery ones, plummeted to $80 million last year from $500 million in 2015.
  • The little success online meal delivery companies have found in India is concentrated in its biggest cities, with more than 80% of all orders for these companies stemming from the top five, according to research from RedSeer Consulting. Google’s Areo only delivers in Mumbai and Bangalore right now, and UberEATS is only in Mumbai.

Google and Uber have deep pockets, allowing them to undercut their competition on delivery fees. For instance, UberEATS only charges $.23 per delivery, with no order minimum, less than half of what some startups charge.

However, the tech moguls still face steep overall barriers in India’s fledgling online meal delivery space. Much of India’s population still doesn’t have access to the internet. That lack of internet penetration has also limited Google’s and Uber’s brand recognition in India compared with other markets like North America and Europe. Lastly, individual restaurants in India typically have their own neighborhood delivery services, and have very established networks of couriers and customers. For the tech behemoths to build successful meal delivery businesses in India, they will need to rely on massive expansion of internet access and find ways to differentiate their app or delivery experience from the plethora of other delivery services out there.

Pizza chains have long dominated meal delivery, but digital platforms are now enabling the entire restaurant industry to plug into online delivery. In the dominant on-demand meal delivery model, platforms like Grubhub serve as a middleman that connect people to food using the scalability of the internet.

Although some industry leaders are processing hundreds of millions, even billions, in annual food sales volume already, they're a drop in the bucket in terms of the total addressable market (TAM) for food delivery, which is valued at $210 billion, according to Morgan Stanley Research estimates.

Companies are adopting diverse business models in the market to deliver these meals; some, like Postmates, are focused on the logistics of delivering food, while end-to-end providers like Sprig cook, facilitate ordering, and deliver the food themselves. Ultimately, order-focused platforms like Grubhub/Seamless and Eat24 appear to hold the strongest positions in the market. The former controlled an estimated 59% of total order volume in 2015, while Eat24 held an estimated 7% share. Moreover, Grubhub/Seamless could pose a threat to the logistics companies DoorDash and Postmates if it pushes further into proprietary delivery services, especially in markets its competitors haven't expanded to yet.

Despite varying advantages and disadvantages, all stakeholders will have to navigate some challenges in the market, including cooling deal volume, consumer resistance to delivery fees, potential industry consolidation, and downward pressure on take rates, which measure the revenue a company actually earns out of the volume they process.

BI Intelligence, Business Insider's premium research service, has compiled a detailed report for on-demand meal delivery that sizes the market for on-demand meal delivery, outlines the main business models, assesses which key players are in the best and worst position in the market, and also analyzes the underlying risks that all stakeholders will have to navigate.

Here are some of the key takeaways:

  • There is a massive unfulfilled market opportunity. As of 2015, about $210 billion worth of food is ordered for delivery or takeout on an annual basis in the US, according to Morgan Stanley Research. But two of the industry leaders, Grubhub/Seamless and Eat24, generated a combined $2.6 billion in food sales last year. This means the market is underpenetrated but massive, which will incentivize continued competition and, potentially, an influx of new entrants.
  • There are three main business models that companies adopt. The dominant business model so far has been platform aggregators whose primary function is to support online orders. These include Grubhub/Seamless and Eat24, which control a combined 66% share of the market so far. Other models include delivery-focused logistics models and full-service models in which companies cook the food themselves.
  • There are a number of risks that all players in the ecosystem will have to navigate. SpoonRocket, a once promising full-service delivery provider, shut down earlier this year in the face of insufficient capital and intensified competition. This, along with cooling deal volume, could signal upcoming consolidation in the industry. Other risk factors include consumer resistance to delivery fees and lowering take rates, which measure the revenue a company actually earns out of the volume they process.

In full, the report:

  • Overviews the on-demand meal delivery market and quantifies the opportunity for expansion.
  • Explains the three main business models meal delivery companies adopt.
  • Runs through the main competitors in the market and assesses which are in the best position to succeed.
  • Identifies the underlying market risks and how they might disproportionately affect certain types of competitors.

To get your copy of this invaluable guide, choose from one of the following options:

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  2. Purchase & download the full report from our research store. 

The choice is yours. But however you decide to acquire this report, you’ve given yourself a powerful advantage in your understanding of on-demand meal delivery.


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