Here Are Two Ways To Deliver Meals Profitably

A little over a year ago we asked wether delivery costs for food are too high for dedicated startups. And to this day the answer to this question is still very much open. It is not that there is no conceivable theoretical end-point (high-enough density and according infrastructure) at which a dedicated company would then be profitable; though even that end-point not existing could also be the case. The reason for this is strong competition at the delivery companies’ own layer: Companies like Uber and Amazon can use capacity surplus to offer meal deliveries as well, and thus do this with different cost structures and margins to make it work.

While Uber provides UberRush for backend delivery logistics for merchants in general and builds out UberEats for restaurants, it is Amazon Prime that remains the main threat to meal delivery startups. Uber, let’s say, has its own fair share of challenges right now. Also, Uber has internal allocation issues (which hint at a strategic deficit at the company a few observers are already talking about):

As Uber invested more in Rush and Eats, the delivery services ate into the labor supply for Uber’s core rides business, one of the former employees told Quartz. “We got into a situation where dinner rush would mean a lot of people were taking food deliveries, but then they weren’t driving for UberX, so it was causing surge pricing,” the person said. “We were attacking our own business.”

In theory, this should be a flywheel, not a constraint. (This shows that it is still early for Uber, too.)


Launched in September 2015, Amazon Restaurants for Prime members is being rolled out further slowly but steadily. (London last year within Prime Now, for example)

For Amazon, everything slowly but surely comes together: Amazon Restaurants Customers can now reorder meals they’ve had bought in the past with Alexa, making this ludicrously frictionless. (It is by the way this combining of separate threads that increasingly defines Amazon and makes the company even more dangerous to competitors.)

So, bringing restaurant meals deliveries into the mix of an existing operation like Uber or Amazon Prime is most promising. And, as said before, the asymmetrical business model of Amazon Prime remains the biggest thread to those delivery startups, especially given the necessary scale effects and prohibitive cost structures. Here is what I wrote in 2015 on this topic:

Making restaurant delivery a part of Prime gives Amazon a way to calculate very differently compared to companies which have to make a direct profit from the deliveries. (Remember also that every single part of the bundle serves as advertisement for the whole thing.) This gives Amazon an advantage especially in a two-sided market as is here the case. Namely Amazon can simply offer restaurants a better deal and in the process at the least(!) destroy any attempts by delivery startups at creating exclusive partnerships with restaurants.

This is why I am so bullish on Amazon Prime.

Of course Amazon’s Prime approach only works in countries where an attractive subset of its parts (like free fast shipping and video streaming) are available. This slows down global roll-out significantly. But we are ‘just’ talking time frames here. Also, in every country where Amazon Prime is already available and growing this is a potentially strong model, meaning these countries are potential Prime land. Which is to say, today this is every western country.

The restaurants themselves are the biggest wild card here.

Bloomberg recently reported on another way, this, at least, is one way to deliver meals profitably that also works for startups (in contrast to the aforementioned Prime model):

One promising niche is targeting the hungry office worker. Investors recently put $30 million into Eat Club Inc., which delivers premade lunches in the San Francisco Bay area and Los Angeles. The company, which said it’s profitable, plans to use the money for an expansion to New York.

Eat Club offers similar options to Munchery or Sprig, with about 20 entrées per day, but only delivers to offices with 20 or more employees. Workers can order from an app or website. By delivering an office’s meals together, the company estimates it costs 90 percent less per dish compared with on-demand startups. Eat Club said its couriers drop off 20,000 meals a day, mainly to midsized technology companies such as Flipboard. Eat Club declined to say how many corporate customers have signed up but said it expects to generate $50 million in revenue this year. […]

Going after this niche makes a lot of sense. (Expanding from there into the consumer market remains an option for the (far off) future.)

Eat Club

Eat Club has raised $47 million to date.


Global investors had high hopes for on-demand meal delivery, doling out $4.1 billion in 2015, according to research firm CB Insights. Startups competed by offering elaborate marketing campaigns and steep discounts to customers. VCs quickly learned food delivery is a difficult business. In 2016, investments in the industry dropped to $1 billion[…]

But investments still pour in: In April, Alibaba confirmed a $1.25 billion investment in (See also Alibaba’s own Alizila on this.)

European delivery startup Deliveroo raised $275 million last August.

We’ll also soon get insights into the operations of one of the largest players in meal deliveries. According to Reuters, Delivery Hero is planning to go public soon:

Online food takeaway firm Delivery Hero is set to float before the summer break in a deal valuing one of Europe’s biggest start-ups at up to 4 billion euros ($4.5 billion), people close to the matter said on Tuesday.

Delivery Hero, the start-up in the portfolio of e-commerce investor Rocket Internet (RKET.DE) seen as most likely to go public next, plans to announce its intention to list in Frankfurt by mid-June with an IPO four weeks later, they said.

Probably the last acquisiton before the IPO, Delivery Hero just bought middle east company Carriage.

Delivery Hero first entered the Middle East in 2015 when it bought regional market leader Talabat from Rocket Internet. Ostberg said Carriage would be a “perfect addition” to Delivery Hero’s current offering under the Talabat brand.

Operating in 40+ countries, Delivery Hero is, except for maybe China’s, the biggest restaurant meal delivery company worldwide. So this will be very interesting.

More on this topic:


  1. […] Speaking of food delivery startups, here is market research company CB Insights on the food delivery space: […]


  2. […] Uber-Like Delivery Service Amazon Flex * How the Food Delivery Space Evolved From 2011 to 2017 * Here Are Two Ways To Deliver Meals Profitably * How Amazon Fresh Made a Former Department Store into a Pickup * Kroger, Uber and The Tripartite […]


  3. […] Here Are Two Ways To Deliver Meals Profitably […]


  4. […] Here Are Two Ways To Deliver Meals Profitably […]


%d bloggers like this: