In a dramatic twist emblematic of the volatile food delivery sector, Wonder – a startup led by former Walmart e-commerce executive Marc Lore – has acquired Grubhub for $650 million.
This marks a staggering 90% drop from the $7.3 billion paid by Just Eat Takeaway.com (JET) in 2021, highlighting the industry’s post-pandemic recalibration.
Wonder, known for its multi-brand food halls and recent forays into virtual kitchens, aims to integrate Grubhub into its broader vision of a “super app” for food delivery and meal solutions.
Grubhub was an early pioneer in the U.S. food delivery market, but its dominance faded as competitors like DoorDash and Uber Eats capitalized on superior logistics, user interfaces, and aggressive expansion.
In June, 35% of aggregator users reported that they were Grubhub customers, down from 38% at the close of 2021. Meanwhile, 77% reported ordering from DoorDash, up from 71% at last year’s end. Uber Eats, for its part, has lost ground with aggregator users but remains well ahead of Grubhub, with adoption among aggregator users falling to 49% from 54%.
Factors contributing to this decline include:
Limited Technology Innovations: DoorDash and Uber Eats invested heavily in data-driven route optimization and AI-driven personalization, outpacing Grubhub’s offerings.
Brand Perception: Grubhub’s reputation for high fees alienated both restaurants and consumers, while competitors leveraged customer-friendly policies and incentives.
Failed Expansion Strategies: While DoorDash dominated suburban areas and Uber Eats captured urban markets, Grubhub struggled to find its niche, often losing on both fronts.
Just Eat Takeaway.com had been attempting to offload Grubhub since the first half of 2022., recognizing it as a liability amid its own financial struggles. Enter Wonder, a company with a novel approach to food delivery.
Fascinating fact: Matt Maloney, a co-founder of Chicago-based Grubhub, told the Financial Times he led two efforts to buy the US unit around the start of this year and in early 2022 for $1bn. Both proposals were rejected by JET management.
OderUp founder Brian Kirkland weighed in, offering a detailed analysis:
"Back in 2021, during the height of the pandemic, delivery companies were significantly overvalued. I personally acquired several smaller delivery companies during that time. With COVID driving online ordering and delivery demand through the roof, it seemed like delivery was a permanent fixture in the future of dining.
This surge in revenue temporarily allowed some major delivery companies – historically operating at a loss – to finally turn a profit. That excited investors who had been hearing for years that profitability was just around the corner. However, post-pandemic, the industry corrected, and the systemic unprofitability of many of these business models became apparent again.
Wonder’s acquisition of Grubhub, though, isn’t just about maintaining it as a traditional delivery company. With the rise of virtual kitchens like Wonder and CloudKitchens (owned by Uber’s founder), these companies now control hundreds of locations, representing thousands of restaurants. By owning both the distribution (Grubhub) and the production (virtual kitchens), they’re creating a vertically integrated model. This approach allows for tighter quality control and can potentially drive profitability."
This perspective underscores the challenges traditional delivery platforms face while hinting at the strategic advantage Wonder hopes to exploit with its vertically integrated approach.
Wonder’s move could set a precedent, prompting other players like DoorDash and Uber Eats to reconsider their reliance on fragmented restaurant partnerships. Virtual kitchens, such as those pioneered by CloudKitchens and Wonder, are likely to gain traction, offering a controlled and scalable alternative to the unpredictable economics of restaurant delivery.
The deal also underscores a shift from growth-at-all-costs to sustainable profitability, as exemplified by Wonder’s calculated expansion. With plans to grow from 28 to 90 locations by the end of 2025, the company is positioning itself as a disruptor in a market ripe for innovation.
While Grubhub’s legacy as a trailblazer in food delivery is undeniable, its relevance in a rapidly evolving industry hinges on Wonder’s ability to reimagine the platform. The combination of Wonder’s curated food offerings and Grubhub’s established network could redefine consumer expectations, potentially challenging the duopoly of DoorDash and Uber Eats.
In an industry where innovation is as critical as the bottom line, this acquisition might just be the shakeup needed to reshape the future of food delivery.
