Food delivery industry: Funds fuel stiff competition

Ten years back, the food delivery industry hardly existed. The only food people expected at their doorstep was either Chinese takeout or a big, cheesy pizza. Fast-forward to the 2010s, and things have changed. Booking a cab, a room, or a table at a restaurant — every facility has been encapsulated in a smartphone. But the thing that comes as the biggest relief is the presence of food delivery apps. Delivery has been prevalent for ages, but what made the phenomenon a rage is the ease of ordering from an app. You literally have all the restaurants at your fingertips. The funding has been great, and investors are putting huge amounts of money on bet for the same.


The food delivery industry experienced a growth of 152 percent from 2014 and thats definitely not the end of it

Investors put in huge funds in the competitive food delivery industry

As per the CB Insights, food tech start-ups raised a whopping $5.7 billion globally in 2015. The food delivery industry experienced a growth of 152 percent from 2014. “Consumers want the ‘dining out’ experience of quality food, but they’re saving money and time by having food delivered to their homes,” said Bonnie Riggs, restaurant industry analyst for research firm NPD. “There is the appeal of being in the comfort of their own homes and not having to deal with the hassle of the outside world.”

But the growth has gradually led to the overcrowding of the industry. There are too many people fighting in the same industry for the same thing while targeting the same customers. This is making the funding scattered and disrupted. Researcher and data analyst at CB Insights, Matthew Wong, who focuses on start-up industries and global trends, says, “When we look at the environment in 2016, food delivery is an area where we expect consolidation and a more scrutinized funding environment. In this market especially, it looks like it’ll be difficult to raise further rounds of funding. Food is such a big segment of consumer spending, and we’re going to see companies emerge as big players here. Some companies in the space might lose, but the space as a whole won’t.”

The customer drives the industry as demands change

The evolution of the food industry has been completely customer driven. They have given the apps an action plan, and their demands guide further updates. Companies with consumer-facing software partner with local restaurants and take care of ordering and delivery. Restaurants exclusively hire someone for the delivery process. Stan Chia, senior vice president of operations at GrubHub, one of the pioneers in food industry, says there is still a major scope for growth. “Ninety-five percent of the market is still transacting via paper menus and phones. There’s a lot of room for people to come in, innovate and disrupt,” says Chia.

Another interesting proposition is the “cook-it-yourself meal kit delivery.” This is replacing the grocery store from the food industry. The aim is to supply people with healthy food ingredients at their doorstep. “Most people’s best childhood memories are from family meals, and we hear every single week from customers who call and tell us this has changed their lives and saved their marriages. Home cooking is an emotional thing for people. It’s a family experience in a way that eating pizza on demand is not,” says Matt Salzberg, Blue Apron’s chief executive. “We’re not an app where you press a button and some bicycle guy gets you food from a restaurant. We’re really about the food system and the food supply chain in this country.”

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