London keeps calling to Uber, which has had a rough time in the U.K. capital. The latest developments involve a protest and possible acquisition, but a case can reasonably be made that things, at least for now, seem to be going Uber’s way.
The bigger piece of news in all this is that the ridesharing company is reportedly in early-stage talks to acquire Deliveroo, a U.K.-based food delivery company. Reports indicated the deal could be worth several billion dollars.
So, what is Uber (reportedly) seeking?
Buying Deliveroo would give Uber a significant boost in the race to dominate food delivery in Europe. Uber Eats is already the big player in the United States, with fast growth and the continuing addition of partners — that includes a recent deal with Starbucks for coffee delivery. That partnership reportedly kicked off earlier this month in South Florida, enabling people to order from 100 stores.
Such deals and growth — and Uber’s newly announced effort to tie together its ecosystem via closed-loop payments — have put the company’s food delivery service in a prime position, as that industry attracts more investment and seeks to diversify its offerings.
Deliveroo could also give Uber more standing and revenue in London, where regulators have not been too kind to its ridesharing business model. This summer, Uber won what reports have called a “short-term license” to offer rideshares again in that city. About a year ago, Uber lost its license after Transport for London, a transit regulator, said that Uber’s conduct represented a risk to public safety.
Like regulators and lawmakers in some other cities around the world, London authorities accused the company of cutting corners on consumer safety. Legacy transit operators also pushed back against Uber’s London activities. The city’s famous, thoroughly trained and experienced black cab drivers said Uber has undercut safety rules and threatened their livelihoods. In addition, the U.S. firm has faced criticism from unions and lawmakers, and has been embroiled in legal battles over workers’ rights.
The new license for Uber included a probation stipulation that lasts for 15 months, along with a bill of about $556,000 to cover Transport for London’s legal fees. “So, Uber is now free to continue operating in a very important market, but on probation, with Transport for London watching its every move,” wrote a columnist for the BBC.
That doesn’t mean Uber is off the hook in London — hardly. This past week brought protests from Uber Eats couriers there, who were reportedly seeking higher pay for food deliveries. “Motorcyclists, estimated to number more than 100, blocked the road outside Aldgate East station in central London on Thursday [Sept. 20] afternoon after they said the company cut the minimum delivery rate for riders on Wednesday,” according to The Guardian.
Uber Eats reportedly responded to those demands by hiking its minimum payment guarantees to those couriers and increasing pay during busy times.
Uber + Deliveroo = ?
Now looms the potential of Uber and Deliveroo working together to deliver food in the U.K. Deliveroo is the leading food delivery company in Europe and is in more than 200 cities. The acquisition is not certain, of course. Bloomberg warned talks could come unhinged in part because, in the past, Deliveroo and investors in the company haven’t been keen on giving up the company’s independence.
“A Euromonitor senior analyst suggested that the potential deal was an indicator of Deliveroo’s market strength, as well as an example of future consolidation in an increasingly saturated sector,” said Eater London. “With over half of takeaway orders now placed online, Uber would be able to marshal Deliveroo’s considerable growth in virtual restaurants to its advantage, while vindicating Deliveroo’s strategy that it sees as the only route to profitability.”
Deliveroo offers food delivery subscriptions and has started investing in kitchen space as a means of helping the service grow into new areas, particularly those that are underserved by restaurants (which tend to clump in cities). Called RooBox, the plan is to draw restaurants into those neighborhoods that have takeout demand, but not quite the ability to support a sit-down establishment.
The RooBox is their cooking space. Deliveroo makes the upfront investment in the space, and the restaurant enters into an agreement for use. Deliveroo is now selling merchants access to both hungry customers and a place to prep their dinners. The RooBox concept also enables hyperlocal delivery zones, which exist to make sure customers get their orders quickly enough that their food is not already cooled.
The food delivery market is quickly changing, and there is no guarantee this deal will go through, nor is it certain that Uber will stay on the good side of London’s transit regulators. However, there is no sign that the ridesharing pioneer intends to give up on the British capital.
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