Worth $35 billion in 2020 and set to top $98 billion by 2027, the food delivery market is now in a competitive war.
It’s a war that’s even more ferocious than streaming.
And the stakes have never been higher for the food delivery industry, with some giants burning cash like crazy and still unsure if they will ever turn a profit.
One possible strategy is consolidation--at any price.
But this war is ripe for new ideas in a massively growing industry that is now hated on multiple fronts, with restaurants held prisoner to delivery bullies, prompting city authorities to step in to cap commissions.
While Uber is prepared to pay a premium for Grubhub - the delivery service with the biggest US market share, Facedrive (TSXV:FD,OTC:FDVRF), the new face of “ride-sharing”, is cutting a food delivery acquisition deal for pennies on the dollar.
The winner of this war should be the business model that defies the out-of-control cash burn, broadens the revenue potential and wins the hearts and minds of every stakeholder in the chain, including drivers and restaurants.
Facedrive isn’t just challenging Uber for the ride-sharing throne. Its planning on challenging it for the food delivery throne, as well.
Kicking off its aggressive expansion drive in the food delivery segment, Facedrive entered into a binding term sheet to acquire the assets of Foodora Canada, a subsidiary of the $20-billion multinational food delivery service Delivery Hero, which operates in over 40 countries and services more than 500,000 restaurants.
The acquisition will give Facedrive a revenue boost, and plans on threatening struggling competitors such as Uber Eats and Skip The Dishes.
Not only will Facedrive gain instant access to hundreds of thousands of Foodora Canada’s customers, but it will also have deals with Foodora’s 5,500 restaurant partners to add to its already growing Facedrive Foods business.
Overnight, Facedrive is set to leap into the top echelon of Canadian food delivery services. Then comes planned global expansion.
And while this deal hit the scene as a surprise, another Facedrive deal this week grabbed even more attention amid the coronavirus pandemic.
Over 650,000 members strong across North America, LiUNA - The Labourers’ International Union of North America announced it would adopt Facedrive’s TraceSCAN digital COVID-19 contract-tracing app to protect the health and safety of its Canadian 130,000 members.
That’s a huge boost for a brand new, high-tech app developed in a joint initiative by Facedrive Health and the University of Waterloo.
The TraceSCAN app and wearables provide contact tracing to help mitigate the spread of the COVID-19 virus. Using Bluetooth technology, TraceSCAN alerts users with a notification if they have come in contact with an individual who has tested positive for the COVID-19 virus.
This all ties in to Facedrive’s “people and planet first” business model and back the core of shared mobility experience: Facedrive wants its users to feel safe and comfortable traveling again and help to limit a second wave of COVID-19.
The next logical step here for Facedrive is to see other unions and councils—and possibly even the Canadian Federal and Provincial governments to adopt the TraceSCAN application.
The Giants Are Failing
Uber Eats and Grubhub are not doing well. Everyone hates them, from consumers who think they’re wildly overpriced, to investors who are tired of the lack of any profitability. Even COVID-19 hasn’t helped, though it should have, in theory.
That’s the background for Uber’s desperate takeover bid of Grubhub this month in an offer potentially valued at $6.9 billion.
And the pressure continues to mount as fast as the hate grows. It didn’t help that in the throes of a global pandemic this social media post went viral, criticizing Grubhub for charging $666 for a food delivery order of $1,042.
The post went viral because food delivery companies have been advertising themselves as platforms that help support local restaurants facing closure by delivering for them. But when the delivery service takes 64% of the bill, it’s hardly lending a helping hand.
In fact, restaurants can barely cover the costs of the food.
Profitability has always been a problem for these giants.
Uber Eats and DoorDash waived fees to restaurants during the pandemic, and while that will help restaurants, investors will of course flee in droves because it makes an already unprofitable business potentially even less profitable.
While no one expects these services to be profitable yet--they do expect serious revenue growth and shareholder gains.
Right now, there is only one giant making investors, restaurants and consumers happy.
And there is one emerging player that will challenge the food delivery segment with a novel idea: You can put the people and planet first, and still be profitable. The trick is smart acquisitions on a terrain already prepped thanks to the massive cash burn of those who tried first, and failed.
The giant is the global Delivery Hero, and the emerging player that will challenge the model is Facedrive.
While everyone else was floundering, German-founded Delivery Hero was exponentially growing revenue even in 2016. For 2018, it reported revenue growth of 64.6%, with the Middle East and North Africa accounting for almost half of those revenues. For 2019, revenue grew even further. Over the last 12 months, Delivery Hero’s revenue grew by 86%, and 2020 guidance puts revenue between EUR2.4 billion and EUR2.6 billion.
In fact, Delivery Hero (ETR:DHER) shareholders managed to book an 82% gain in 2019. They are probably the only satisfied food delivery company shareholders.
Why? It’s all about the fees charged to restaurants, which for many food delivery companies can be as high as 30%.
Delivery Hero charges much lower commissions and works toward higher volume in a win-win situation for everyone involved. The balance sheet speaks for itself. Restaurants benefit.
Delivery Hero and Facedrive--across its revenue ecosystem--have different business models.
Facedrive’s “people and planet first” model runs through its litany of services, from ride-sharing and food delivery to medical delivery services and even with its exclusive line of merch co-branded with Will Smith’s Bel Air Athletics. All partners are sustainable businesses, with healthy nourishment (or diet) options for Facedrive Foods, medical services that contribute to the frontline efforts to battle COVID-19, and “merch” that strives towards using 100% sustainably sourced materials. And let’s not forget the ground-breaking carbon-reduced ride-sharing compared with other ride-sharing companies ...
Instead of butting heads in defiance with local authorities and communities, Facedrive works directly with them, to ensure that everyone benefits. In its ride-sharing business, it plants trees for communities to offset emissions, and offers something no one else has: A choice to hire an EV or a hybrid for a lower emissions travel experience.
The Canadian authorities love it, and now it’s headed to other continents.
And unlike Uber, Facedrive views its drivers as stakeholders rather than simply paths towards profitability, which even Uber has admitted may never happen.
If the drivers aren’t happy, business will suffer.
The same goes for food delivery services: If the restaurants aren’t happy because they can barely cover the cost of food, they may stop participating and there will be no business. And if they end up having to pass those higher costs on to the consumer, consumers may stop buying and there will be no business.
Put in another way: Uber and Grubhub, among others, have been trying to force a path to eventual profitability that requires making enemies out of the most important elements of the service. So far, it hasn’t worked.
When this deal settles, it will see Facedrive acquire a food delivery asset which can complement its ride sharing and other businesses, bought out of bankruptcy protection from Delivery Hero—that stands as one of the biggest and most successful food delivery businesses in the world.
Not only is Facedrive getting an already established food delivery operation in 10 cities to compliment newly launched Facedrive Foods, but it also would inherit partnerships with 5,500 restaurants signed on to Foodora across the country.
Consider this: Uber may have deep pockets, according to Forbes, but it takes more than that to make money in this highly competitive food delivery market that Swiss investment bank UBS expects to grow by 10 times to hit a $365 billion by 2030.
Forbes doesn’t mince words: Only Delivery Hero comes out of this heroically--among the giants. Delivery Hero even refers to itself as the “United Nations of food delivery”. That’s because it spans 28 brands in over 40 countries and partners with more than 250,000 restaurants on five continents. And it’s aggressively pursuing more.
Delivery Hero’s success is all about the marketing, which most competitors are getting wrong, according to Forbes. It’s been summed up by Delivery Hero CMO Mats Diedrichsen like this: The ‘Big Picture” is to turn “brand interest into brand love” with a marketing approach that goes “beyond audience segmentation to drive deep emotional connection.”
And for Canada, Facedrive aims to be that emotional connection.
In every single element of its broad sharing ecosystem, Facedrive focuses on sustainability, and that’s what makes Foodora a perfect match for a great deal at a time when sustainable investing has already topped $30 billion as a megatrend.
And a company such as Facedrive--which truly understands the megatrend stands a chance of becoming a sustainability darling. Even better, a company that understands how community support and nurturing must work to be widely accepted won’t just challenge everyone in the food delivery space--it will challenge everyone across the shared mobility industry.
Other companies looking to capitalize on the trillion-dollar tech push:
Microsoft (MSFT) is a genuine leader in the sustainability push. The company is going above and beyond in its emissions goals, aiming to be carbon neutral in the next ten years. A feat that will not be an easy task for such a massive technology corporation. Additionally, Microsoft is has also pioneered new solutions to aid other companies in curbing their emissions as well.
Microsoft has built hardware and software to help monitor and better understand the effect of different institutions have on the planet, gathering data to better figure out how companies and people can improve. The company is creating tools to better handle the b the world’s growing waste crisis.
Other tech giants are getting involved, as well. Both Facebook and Google have embarked on similar paths to Microsoft, with massive business-wide changes with the goal of becoming leaders in the sustainability space.
Take Google (GOOGL), for example. Despite being one of the largest companies on the planet, in many ways it has lived up to its original “Don’t Be Evil” slogan. Not only is Google powering its data centers with renewable energy, it is also on the cutting edge of innovation in the industry, investing in new technology and green solutions to build a more sustainable tomorrow. It’s bid to reduce its carbon footprint has been well received by both younger and older investors. And as the need to slow down climate change becomes increasingly dire, it’s easy to see why.
Social media giant Facebook (FB) is doing its part, as well. Not only have they made dramatic progress towards their goal to run on 100% renewable energy by the end of 2020, they’re working to build more water-efficient data centers. In fact, their data centers use 80 percent less water than typical data centers.
Facebook has even gone a step further with its focus on building more sustainable workplaces. It’s building designs incorporate a number of renewable energy sources and water recycling methods, in addition to promoting the recycling and sustainability of all products consumed on site.
Energy companies are doing their part, as well. As one the world’s leading renewables producers, NextEra Energy (NEE) is literally building the path towards sustainability. To make matters more exciting, the company was the number one capital investor in green energy infrastructure, and the fifth largest investor across all sectors.
In addition to its already massive impact combatting the world’s looming climate crisis, it has ambitions of investing an additional $55 billion in infrastructure in the next two years in the United States. And while it helps deploy the world’s new energy reality, it has also committed to weaning itself off foreign oil. And shareholders are all in. Over the past 15 years, shareholders have seen 945% returns.
Even Big Oil supermajors have been diving head first into the ESG trend, diversifying their portfolios and to hedge their bets in the rapidly changing new reality of energy. And no other oil major takes this more seriously than Total (TOT). maintains a ‘big picture’ outlook across all of its endeavors. It is not only aware of the needs that are not being met by a significant portion of the world’s growing population, it is also hyper-aware of the looming climate crisis if changes are not made. In its push to create a better world for all, it has committed to contributing to each of the United Nations’ Sustainable Development Goals.
Total checks every box in the ESG checklist. It is promoting diversity and safety, making massive changes in its day to day operations to ensure that its business is environmentally sound, and has even committed to going carbon neutral by 2050 or sooner. It’s no surprise that shareholders are loving its forward-thinking approach.
Canadian companies are doing their part as well:
Let’s start with some Canada’s renewable energy push. Boralex Inc. (TSX:BLX) is one of Canada’s premier renewable energy firms. It played a major role in kickstarting the country’s domestic renewable boom. The company’s main renewable energies are produced through wind, hydroelectric, thermal and solar sources and help power the homes of many people across Canada and other parts of the world, including the United States, France and the United Kingdom.
Polaris Infrastructure (TSX:PIF) Is a Toronto-based renewable energy giant with a global footprint. The company’s biggest projects are in Latin America. It’s Nicaragua geothermal project, for example, is already producing over 77 MW of renewable electricity. And in Peru, its El Carmen and 8 de Augusto power plants, is set to produce a combined 17MW of electricity in the near future.
Westport Fuel Systems (TSX:WPRT) is a renewable energy provider for the transportation industry. it provides systems for less impactful fuels, such as natural gas. In North America alone, there are over 225,000 natural gas vehicles. But that shies in comparison to the global 22.5 million natural gas vehicles globally, which means the company still has a ton of room to grow!
While renewable providers clearly take the lead, Canada’s tech and telecom giants won’t be left out!
Take telecom giant Shaw Communications Inc (TSE:SJR.B), for example. Shaw is taking a leadership role among Canadian telecom providers through its use of renewable energy, In fact, it is one of the biggest customers of Bullfrog Power which sources its electricity from a blend of wind energy and hydropower. It is also building its own portfolio of clean energy investments.
BCE Inc (TSX:BCE)) is another Canadian telecom giant going to great lengths to reduce its carbon footprint. For the past 25 years, BCE has been at the forefront of the environmental movement. Their environmental management system (EMS) has been certified to be ISO 14001-compliant since 2009.
By. Carol Pierce
**IMPORTANT! BY READING OUR CONTENT YOU EXPLICITLY AGREE TO THE FOLLOWING. PLEASE READ CAREFULLY**
This publication contains forward-looking information which is subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ from those projected in the forward-looking statements. Forward looking statements in this publication include that the demand for food delivery and ride sharing services will grow; that other unions and councils—and possibly even the Canadian Federal and Provincial governments may adopt the TraceSCAN application; that the demand for environmentally conscientious ride sharing and food delivery services companies in particular will grow quickly and take a much larger share of the market; that Facedrive’s marketplace will offer many more sustainable goods and services, and grow revenues outside of ride-sharing; that new products co-branded by Bel Air and Facedrive are ready to launch, with pre-orders coming soon on the Facedrive website; that Facedrive can achieve its environmental goals without sacrificing profit; that Facedrive Foodswill expand to other regions outside southern Ontario soon and will close its purchase of Foodora; that Facedrive will grow the food delivery service profitably and expand globally; that Facedrive will b able to fund its capital requirements in the near term and long term; and that Facedrive will be able to carry out its business plan. These forward-looking statements are subject to a variety of risks and uncertainties and other factors that could cause actual events or results to differ materially from those projected in the forward-looking information. Risks that could change or prevent these statements from coming to fruition include changing governmental laws and policies; the company’s ability to obtain and retain necessary licensing in each geographical area in which it operates; the success of the company’s expansion activities and whether markets justify additional expansion; the ability of the company to attract a sufficient number of drivers to meet the demands of customer riders; the ability of the company to attract drivers who have electric vehicles and hybrid cars; the ability of Facedrive to attract providers of good and services for partnerships on terms acceptable to both parties, and on profitable terms for Facedrive; that the products co-branded by Facedrive may not be as merchantable as expected; that Facedrive does not close the purchase of Foodora and even if it does, the purchase does not bring the customers, partnerships or revenues expected; Facedrive may not be able to retain the partnerships with 550 restaurants or increase that number; the ability of the company to keep operating costs and customer charges competitive with other ride-hailing companies; and the company’s ability to continue agreements on affordable terms with existing or new tree planting enterprises in order to retain profits. The forward-looking information contained herein is given as of the date hereof and we assume no responsibility to update or revise such information to reflect new events or circumstances, except as required by law.
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