Top 10 Food Delivery Stocks

The largest pure-play food delivery disruptor in the US.

• The online white-label delivery platform DoorDash allows customers to order food from local restaurants for delivery to their location. Initially focused on the US, Doordash quickly expanded internationally and increased its presence by 26 markets with their acquisition of Wolt. The company is also getting orders for non-food categories, which may present an additional delivery category in the future.
• DoorDash charges fees to both customers and restaurants for using their delivery services. The company is using light modes of transportation including bikes, scooters and experimenting with robots and drones. While automating delivery is an early concept, it may find a way to function in well-structured and low crime areas.
• As of March 2022 Doordash held some 59% of the food delivery market share in the US. However, competition is high in this emerging sector, and things may quickly change even for market leaders. Additionally, competitors may attempt poaching drivers by offering higher pay.
• DoorDash is in its high growth phase, which implies taking on many risks and expecting low profitability while growing. As the pandemic boost decreases, the company will have to find new markets or start thinking about higher monetization.
• As the company expands, their cost of customer acquisition (CAC) will increase with every new customer. This can pressure business margins and send the company to a spend-spiral. Overstretching is a risk for DoorDash, and the company needs to find a way to retain the customers it spent money on while growing.
• In order to show high growth, food delivery companies may spend investors’ money (dilution) on cheap customer acquisition projects such as discounts, coupons, cash-back programs, etc. These may not be sustainable if customers don’t stick with the business after the programs stop.
• Despite moving beyond COVID restrictions, DoorDash has still exhibited solid growth as total orders increased 27% year-on-year to 439M in Q3 2022. A change largely driven by a growing number of customers and the addition of Wolt.

A food and groceries delivery disruptor centered in Europe with an emerging markets expansion strategy.

• Deliver Hero is a high-growth delivery platform that started in Germany, now operating in over 70 countries. Delivery Hero made a large expansion with the acquisition of the Spanish Glovo, allowing it to include 24 new countries.
• Delivery Hero is pioneering quick commerce with more than 1200 specialized warehouses - Dmarts, across 60 countries. The quick commerce model enables local grocery deliveries in less than 30 minutes. This model has also been adopted by some competitors and is likely to expand.
• Delivery Hero is slowing down expansion efforts after the acquisition of Glovo, and shifting to a focus on profitability. The company expects breaking into profitability on an adj. EBITDA basis by the end of 2023 while growing quarterly revenues above 25%.
• By 2030, Delivery Hero expects to have a Gross Merchandise Value (GMV) between $200 and $350 billion, up between 3.6x to 7x from $43.65 billion in the last 12 months. Their target adjusted EBITDA margins are 5%-8%.
• The company views emerging markets including South Asia (ex. China), Turkey, Eastern Europe, South America (ex. Brazil) as a key value driver for their market share and is focusing on becoming a leader in those regions.
• Investors have roughly three unique cases for Delivery Hero: positioning in emerging markets, leveraging local delivery warehouses, diversification into an EU based company. As with most delivery businesses, the key risk lies in the profitability of the business.

Driving extra value with food deliveries.

• Besides ride hailing, Uber has a platform that connects customers with restaurants and delivery partners. Uber then collects a percentage of each transaction as its commission fee. This segment - “UberEats” also allows restaurants to expand their customer base, track orders, and manage the delivery business on the app.
• Uber gives investors an opportunity to gain exposure to the mobility, food delivery, and even freight business. Taken together, these use cases can reduce the risk of a business as they provide additional services by using Uber’s large network of drivers.
• Although Uber is known as a ride hailing company, the food delivery business is a large and growing segment, representing (p. 46) some 33% of the quarterly revenues. Uber is focused on the US, but is expanding to Canada, Europe, and internationally.
• While food delivery became popular during 2020 and 2021, the reopening and current economic drag may present a challenge to the business as people who used delivery as a discretionary choice may revert to more affordable eating options. However, the business can be sustained in the portion of consumers that have a large workload and find it more productive to order instead of cook.
• In 2021, the U.S. Secretary of Labor expressed his view that in some cases “gig workers should be classified as employees”. If the US pursues regulation along these lines, the company’s profitability may be pressured.
• Uber offers investors optionality as a business that may become something completely different in the future. The company will have profitability issues as it grows, but reduces its risk by offering services for consumers’ multiple needs.

A large FoodTech disruptor capturing the change in eating habits of India’s middle class.

• Zomato, an Indian-based FoodTech business, has made a name for itself as a leader in delivery and restaurant discovery. The company may be interesting for investors that want to gain access to the Indian food delivery market and are optimistic on the region’s economic growth.
• The company continued to show its growth focus in the acquisition of Blinkit, which was finalised in August 2022. This acquisition has already proved fruitful as Blinkit’s Gross Order Value grew 26% quarter-on-quarter to INR 14.82 B while the revenue grew 44% quarter-on-quarter.
• While it is focused on India, Zomato has a presence in over 24 countries serving more than 14.7 million monthly customers with around 285,000 active delivery partners.
• Zomato has pushed for multiple ways of monetizing its platform. On one hand, the company gets paid by restaurants to be featured on its app. On the other, it generates revenue from delivery fees, order commissions, and advertising.
• At its core, Zomato’s business model is based on providing customers with a convenient way to find and order food. Its platform enables users to search for restaurants by location, cuisine, reviews, and more.
• In addition, Zomato has launched a cloud kitchen business, which enables restaurants to rent out kitchen space to prepare meals for delivery. It has also developed a table reservation system, which allows customers to book tables at restaurants.

A high-risk UK centered food delivery disruptor with international branches.

• Investors looking for a food delivery stock that is based in the UK may want to review Deliveroo. The company also has a strong presence in Europe, the United Arab Emirates, Kuwait, and Singapore.
• The company had a market pull as it exited Australia due to a highly-competitive environment. This may reflect the low barriers to entry in this business, and investors may expect delivery companies to settle in their core markets where they have a cultural edge and regulatory backing.
• Deliveroo started as a food delivery service in 2013, but is quickly expanding to delivering groceries and alcohol. As with other delivery peers, the company is moving to increase the portfolio of delivered goods.
• Along with other delivery stocks, Deliveroo is under regulatory pressure as governments like Singapore enact more protections for their gig workers, which may impact future profitability. This can lead to a concentration of market share in companies which are regionally based as governments increase their protectionist policies.
• As a company, Deliveroo seems to be investing in a technological and hardware edge in order to gain a competitive advantage. Both the client and operator side of the delivery software are streamlined and highly automated, while contractors have incentives to work with electric vehicles that boost their productivity.
• In terms of performance, Deliveroo has been able to deliver an 8% increase in gross transaction value year on year, bringing in £1.702B in orders for the quarter compared to £1.572B in Q3 2021. Although, investors should be wary. With inflation hitting ~8% in Deliveroo’s biggest markets, this change could be largely explained by inflated prices. This is further supported by looking a the total orders which actually saw a 1% drop from 73.6M in Q3 2021 to 72.8M in Q3 2022.

A mobility and food-delivery platform centered focused in on the South-Asian market.

• Grab is a high-growth company formed via a SPAC in 2021 that has set out to lead the South-Asian ride-hailing and food delivery market, with a central focus in Singapore.
• The company expanded aggressively against Uber’s business in Singapore, to the point where Uber agreed to leave in exchange for buying a stake in Grab. This means that investors can also gain indirect exposure to Grab via Uber’s shares, as long as the company keeps Grab as part of its portfolio.
• Grab initiated a large expansion and included multiple services in its app, such as delivery, ride-hailing, and financial services. This expansion has come at a cost as the company struggles with its top competitor GoTo.
• It seems that the key advantages of the stock is the high 27.8% expected revenue growth rate and the $5.6b available cash to finance that growth. After that, investors can hope that the company will breakeven. Note that analysts following the company forecast a net loss in the next three years.
• Grab is a high-risk company that may be more interesting for investors wanting exposure to the South-Asian market, and investors that are hoping to see a cyclical recovery in the delivery market.
• Grab’s growth over the last year has been more explosive than other companies in this collection. The company’s recent third quarter results paint a relatively positive picture of growth, with the company recording US$382M in revenue for the quarter, up 143% year-over-year. The company was also able to deliver healthy growth in gross merchandise value, reporting, US$5.1B, up 26% year-over-year and were able to cut losses from US$988M to US$342M, a 65% improvement in spite of FX and macroeconomoic headwinds.

The largest US food retailer expanding into grocery delivery.

• Kroger is one of the largest food retail companies in the United States, with over 3,000 stores.
• While not being strictly involved in food delivery, the company offers customers a variety of delivery channels to meet their needs. Customers can order groceries and other products for delivery using the company’s online ordering platform, usually choosing between same-day and next-day delivery.
• Kroger also offers customers the convenience of grocery pickup, which allows them to order groceries online and pick them up at a store. This service is especially helpful for those who are short on time or unable to visit a store in person.
• Kroger ranks higher on the vertical integration scale, as it has infrastructure that produces food, grocery and other products; owns stores that it leverages as points of pickup, and distribution centers for delivery; has its own delivery fleet and collaborates with 3rd party partners such as Instacart.
• The company has also invested heavily in digital technologies, such as mobile apps and online ordering, to improve customer experience and boost sales. The company’s mobile app, Kroger Pay, allows customers to easily pay for their purchases without having to wait in line.
• Investors interested in stable, vertically integrated food retailers, with the optionality to expand further into food delivery while having the backing of their infrastructure, may want to consider the company.
• One of the more attractive aspects to Kroger is its lasting dividend history. The company has consistently increased payments and has a conservative cash payout ratio of 40% giving the company a margin of safety for difficult times.

Leveraging its large membership pool, logistics and software infrastructure into food and grocery delivery.

• Amazon is making strides in the online grocery and food delivery market, which is expected to become a $26.7b project in 2026 from the $14.5b captured in 2021.
• The company offers food delivery via Grubhub+ for Prime members, and online groceries from “Whole Foods” & Amazon Fresh. This approach allows the company to expand their offering with online food & grocery delivery, increasing the value of their Prime membership.
• Amazon’s food delivery business is based on its fulfillment centers (warehouses), which the company uses to ship orders quickly to customers. Amazon also has a network of third-party logistics companies, which help it manage the entire process of food delivery.
• The company also utilizes advanced technologies such as artificial intelligence to optimize its delivery process. This helps Amazon reduce costs and keep delivery times short. Amazon also offers a wide range of delivery options to its customers, such as same-day delivery, one-hour delivery, and even drone delivery in some cases.
• The massive infrastructure, AI capacity, large existing membership base, and innovative delivery approaches allow the company to become a market leader in the segment.
• One of the key components of Amazon’s food delivery model is its Prime membership. Prime members receive free two-day shipping on all orders, which is a major convenience for customers. This helps to drive more customers to Amazon’s food delivery service and increases customer loyalty.
• Up until 2018 Amazon had its own “Amazon Restaurants” service, which it closed due to competition. With the Grubhub+ partnership, investors are effectively witnessing round 2 of that project and need to monitor if the change in eating habits will be enough to sustain the business.

Top global restaurant brand with a name that is synonymous with food delivery.

• Domino’s Pizza ranks among the world’s top public restaurant brands, with a global enterprise of more than 19,500 stores in over 90 markets. The company may have potential for investors that seek exposure to a validated restaurant and food delivery business.
• The company has its own well-established food delivery infrastructure. Not relying on third-party delivery partners saves them money in fees and gives it complete control over the delivery process.
• Domino’s was one of the first companies that pioneered food delivery, and has become a household name on account of its innovative marketing campaigns, such as the popular "30 minutes or it’s free" guarantee.
• While food delivery disruptors argue that delivering multiple food types allows them to reach a wider market, companies like Domino’s may have entrenched themselves in a profitable segment and have a whole network infrastructure that can be deployed should another delivery branch turn out to have potential.
• Even though Domino’s revenue momentum dropped after 2021, the company is still opening hundreds of new restaurants each quarter, mostly in international markets. New restaurants will likely be the main driver of sales growth, and management expects an annual revenue growth between 6% to 10% in the next few years.
• The amount of debt in the company may pose a risk factor for investors, especially if the company decides to reduce the dividends in order to reduce debt. The debt burden can be amplified by the higher interest rate environment, as the company may be forced to refinance past loans at higher rates.