Uber to Acquire Majority Stake in Grocery-Delivery Service Cornershop -- Update
12 October 2019 - 3:29AM
Dow Jones News
By Heather Haddon and Kimberly Chin
Uber Technologies Inc. has reached a deal to buy a majority
stake in grocery-delivery company Cornershop, the latest in a
growing 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 nation-wide. 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 11, 2019 12:14 ET (16:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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