GrubHub's "promiscuous" problem

Wednesday, October 30, 2019 by Robinhood Snacks | Disclosures

A scene yesterday from the grocery delivery wars

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Hey Snackers,

Theme party. We're dressed as "delivery" — every Snacks story below is wearing a delivery outfit, too.

Markets dipped Tuesday before today's aggressive serving of earnings reports: Apple, Starbucks, Facebook.

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1. Amazon triggers nuclear option: Free grocery delivery for Prime members

Groceries. Delivered free. Within 2 hours... That insanely convenient offering is now real for Amazon Prime members in America's top 20 cities (it's coming to 2K cities total, but not necessarily within 2 hours). Pulling that off is so logistically hard that only existing Amazon Fresh customers get it right now — 1st-timers will hit a waitlist so Amazon can assess how many grocery-dashing humans it needs to hire (spoiler alert: lots).

Will this finally make grocery delivery a thing?... Most Americans still grocery shop the ol'-fashioned way — by grabbing a shopping cart and blocking the aisle while squish-testing avocado firmness. Amazon's new offering eliminates 2 of the 3 big barriers to grocery delivery:

  • The cost barrier: Grocery delivery today features fees (Amazon's used to be $15/month on top of Prime). Plus tips.
  • The planning barrier: You typically need to know your fridge's shelf status at least 6 hours in advance. That's cut to 2 hours with Amazon's new offering.
  • The freshness barrier: Some of us undoubtedly still want to harvest our own produce and not risk someone grabbing the wrong almond milk.

Don't try to beat Amazon on price. You'll lose... Last week we mentioned that Amazon's profits suffered because it insisted on beating Walmart and Target's 1-day shipping. Now its profits could suffer more (in the short-term) as it takes on those two in groceries plus Instacart and Good Eggs. Amazon's long-term plan: Get everyone to join Prime by offering the lowest prices/best deals, no matter what the cost.


Your chicken parm is a million minutes away... GrubHub shares plummeted 43% to their lowest level in 2.5 years. The restaurant food delivery pioneer is sandwiched between 2 numbers from last quarter:

  • Revenues rose a healthy 30%.
  • But profits plummeted 96%. 96%. Let that sink in and sit in your stomach — Here's why:

“Promiscuous” customers... That's what the CEO just called us disloyal, price-focused GrubHub users. When we crave some pad thai, we open DoorDash...then Caviar...Uber Eats...Postmates. Comparison shopping forces delivery apps to slash prices to snag our late-night dinner $$$. Those "$2 off" coupon codes are crushing GrubHub's profits.


GrubHub should focus on brand — not price... Delivery is a commodity — it doesn't matter where it get it from, it's the same (just like socks). But people do irrational things for a brand (like splurging $200 on a Patagonia pullover, because, Patagonia). If GrubHub can build loyalty for its brand with banh mi festivals or a stance on social food issues, customers may ignore lower-priced rivals and become monogamous.


Could I get a 478-pack of F-35s?... The procurement person for the US government just placed the biggest order ever for military-grade fighter jets. Lockheed Martin won the deal. The Defense Department's pumped about the savings: Each $71M jet is 12.7% less than the last order — but Wall Street expected the result, barely budging Lockheed's stock on the news.

This thing is Air Force Fancy... The stealth F-35 is nearly invisible to the enemy and hits Mach 1.6 speed (a smooth 1,227 MPH). The Department of Defense calls it the “world’s most advanced, lethal, interoperable aircraft ever developed.” Most of the manufacturing happens in Texas, but they’re only flown by the US and 12 allies. Now Lockheed's gotta deliver them.


Lockheed Martin is in the business of war — and politics... Its core customers are governments treating themselves to battle machines. On the one hand, it's pretty much the only producer of its products... but there's pretty much just one buyer. So negotiations on price are tricky. And Lockheed investors may want an international relations degree to handle things like Turkey — geopolitical drama there may force Lockheed to find a new supplier for the nearly 1,000 Turkish-made parts in the F-35 program.

What else we’re Snackin’
  • Lineup: AT&T announces details for its HBO Max (it'll be $14.99 and include some South Park)
  • Well-balanced: Kellogg's shares rose 3% after a quarter fueled by snacks (pretty meta)
  • Snuffed: Murray Energy (America's biggest private coal company) files for bankruptcy
  • Vaped: Juul will cut up to 15% of its 4,000 employees as part of its "necessary reset"
  • Awkward: Boeing's CEO testified in front of Congress on the 737 Max plane's failures
  • Combine: Fiat Chrysler stock jumps 8% on word it's in talks to merge with Peugeot
Snacks Daily Podcast

The Bay Area is running low on black turtlenecks (maybe) because too many people are prepping Theranos founder Elizabeth Holmes costumes for Halloween.


Disclosure: Authors of this Snacks own shares of Amazon

ID: 997711

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