America’s obsession with food delivery in the age of the pandemic appears to be over – and corporate stocks are taking a hit.
After hitting a high of $246 in November, DoorDash shares plunged 62% to $89 per share. During the same period, Uber shares fell 29% from $45 to around $31.
Much of the decline can be explained by the stabilization of Covid-19 cases. While apps saw explosive growth early in the pandemic as consumers stayed home, analysts say such growth was ultimately unsustainable.
But the downturn in these companies has proven quite brutal, as some Americans have become increasingly budget-conscious amid rising inflation and rising fuel prices.
“It was inevitable that they would start to retract as people went back to dinner,” said Rich Shank, vice president of research and insights at Technomic, a consultancy that works with industry. of restoration.
There has also been a return to restaurants. Technomic data shows the share of meals consumed at in-person dining establishments hit a post-pandemic high in the first quarter of 2022, while the share of food app deliveries fell to its lowest level since the fourth. quarter 2020.
The drop in app usage can also be attributed to fees, tips and rising food prices that are starting to put off some customers, Shank said.
“The share shift to offsite ordering appears to have plateaued,” Shank said, referring to orders placed on food delivery apps. “The odds of it slipping a bit more are pretty good given the inflationary pressures consumers are facing and the higher fees they’re incurring through third-party apps.”
The biggest casualty among apps was GrubHub. On Wednesday, its Netherlands-based parent company, Just Eat said it was considering selling the long-running delivery app. Bloomberg reported that orders on Just Eat platforms saw a sharp decline in the United States in the first quarter, as jurisdictions like New York imposed fee caps and a continued slowdown in orders from workers returning to the office.
That’s another factor weighing on apps: Many workers continue to work from home — and likely find alternative ways to eat lunch from pre-pandemic delivery orders.
“It’s starting to look a little more like pre-pandemic, but it’s nowhere near where it was before,” Shank said. “Weekday lunches are popping up again when people are in the office. … But many workers are still not in the office five days a week.”
Delivery app companies have long struggled with profitability, said Raj Joshi, vice president and senior credit analyst at Moody’s. As a result, many are now looking to balance cutting costs while expanding into other lines of business, like groceries and package delivery. But it’s not yet clear whether those strategies will work, he said.
“The industry is clearly in an evolutionary phase,” Joshi said.
The result of these trends: large restaurants could emerge even stronger than family restaurants that won’t be able to afford the fees that delivery apps will continue to charge – and could disappear from the platforms altogether. This is in addition to managing rising labor and fuel costs.
“The big chains are better placed to handle this stuff; they have more resources and scale,” said Restaurant Business magazine editor Joe Guszkowski.