Uber Rides Into Grocery Delivery -- WSJ

Date : 10/12/2019 @ 7:02AM
Source : Dow Jones News
Stock : Walgreens Boots Alliance Inc (WBA)
Quote : 61.94  0.0 (0.00%) @ 11:07AM

Uber Rides Into Grocery Delivery -- WSJ

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By Heather Haddon and Kimberly Chin 

This article is being republished as part of our daily reproduction of WSJ.com articles that also appeared in the U.S. print edition of The Wall Street Journal (October 12, 2019).

Uber Technologies Inc. has reached a deal to buy a majority stake in grocery-delivery company Cornershop, the latest in a rush by restaurant-delivery services to grab a slice of the larger food retail market.

Uber continues to expand its reach beyond the core ride-hailing business, and has flagged its food-delivery arm, Uber Eats, as an area it will heavily invest in for some time.

Uber didn't disclose how much it would pay for the stake.

DoorDash, Inc., Postmates Inc. and other third-party delivery companies are increasingly pushing into the market to transport consumers' grocery orders to their homes.

Postmates earlier this month struck a deal with Walgreens Boots Alliance Inc. to begin delivering consumable goods from New York City stores owned by the drugstore chain, with hopes to expand the partnership nationwide. DoorDash now does grocery delivery for Walmart Inc., and in August it signed an agreement with e-commerce platform Mercato Inc. to make same-day deliveries from about 750 independent grocers.

Grocery delivery can build sales for a company, but it is expensive to run and profits so far have been scarce. Kroger Co., the largest U.S. supermarket chain, has reported lower profits this year, in part because of investments in its online business. Kroger is working to develop its own network of warehouses using digital technology and robots that could fulfill customers' online orders.

Delivering groceries costs supermarkets an average of $10 an order, but grocers recoup only around $8 from customers, because charging more risks turning shoppers off, according to a survey of supermarket executives by consulting firm Capgemini.

Restaurant-delivery companies also have struggled to turn profits, as they spend to gain market share while keeping costs down for consumers.

Uber has pointed to its Eats division as an area with high-growth potential. Gross bookings, or the total amount users spent on meal orders, reached $7.9 billion for Eats last year, up from $3 billion the year earlier, it said in a securities filing. Adjusted net revenue per order last year was 10%, down from 12% in 2017. The company attributed the decrease to increased driver incentives, new market expansion and lower service fees from big restaurant partnerships.

Uber landed a major food-delivery deal last year by striking a partnership with McDonald's Corp., then had to negotiate to a lower amount earned from each delivery, as franchisees pushed back at the costs. McDonald's has since expanded its delivery partners, adding DoorDash and Grubhub Inc., in efforts to reach more diners.

Uber is testing grocery delivery in Australia and is in talks with some European and North American chains, executives have said. The company just rolled out a new version of its app that gives more prominence to its Eats division.

With Cornershop, Uber said it plans to bring grocery delivery to its millions of consumers around the world. Cornershop already provides on-demand delivery for supermarkets, pharmacies and food retailers in Chile, Mexico, Peru and Toronto, Canada's largest city.

Beyond ride-hailing and food delivery services, Uber last week launched the Uber Works app, aiming to pair businesses with temporary workers. It also offers services such as freight brokerage, and it recently launched a helicopter service in New York to take travelers from Manhattan to John F. Kennedy International Airport.

"We want Uber to be the operating system for your everyday life," Uber Chief Executive Dara Khosrowshahi said.

Last year, Walmart also had its eye on Cornershop, which is based in Santiago, Chile. The retail juggernaut agreed to buy the company for roughly $225 million, but those plans fell through after Mexican antitrust officials blocked the deal in June. The regulator said the acquisition could allow Cornershop to refuse service to Walmart competitors or that Walmart could refuse to sell its products on platforms operated by Cornershop's competitors.

Cornershop, which is backed by Accel, ALLVP, Creandum, and Jackson Square Ventures, was founded in 2015 by Oskar Hjertonsson, Daniel Undurraga and Juan Pablo Cuevas.

After the deal closes, Cornershop will remain under its current leadership and will report to a board that has majority Uber representation, Uber said.

The transaction is expected to close in early 2020.

Write to Heather Haddon at heather.haddon@wsj.com and Kimberly Chin at kimberly.chin@wsj.com

 

(END) Dow Jones Newswires

October 12, 2019 02:47 ET (06:47 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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