Hungry

DoorDash is hungry for growth, so it’s splurging $8B on a European rival

Thursday, November 11, 2021 by Robinhood Snacks |

Forgot the extra ranch… DoorDash’s sales growth continued slowing last quarter after the pandemic dine-in boom, and net losses doubled from last year. Cue: a global feast. DoorDash announced plans to buy Finland-based Wolt for $8.1B. Dash shares jumped nearly 20% yesterday on the news.

  • Euro-presence: When the deal closes, in 2022, Dash says it will add Wolt’s 2.5M customers in 23 European countries. Dash currently delivers in the US, Canada, Japan, and Australia.
  • Piping hot growth: Last quarter, Wolt’s sales grew 3X as fast as Dash’s. But while the deal could boost Dash’s sales growth, it won’t increase Dash’s US market share or diversify its revenue streams.

May the best promo code win… Delivery customers have little loyalty, which is why companies like Dash, Grubhub, and Uber Eats are constantly throwing out profit-sucking promo codes. Competition is fierce, so food-delivery giants have gobbled up rivals to accelerate growth and expand market share. Last year, Uber acquired Postmates for $2.7B, and Euro delivery heavyweight Just Eat Takeaway bought Grubhub for $7.3B. DoorDash is still the biggest US food deliverer, but it’s losing its lead: Next quarter, Uber’s delivery sales are expected to grow twice as fast as Dash’s.

THE TAKEAWAY

It’s hard to consistently deliver accelerating growth... by delivering the same thing. DoorDash's acquisition may boost growth for a few quarters, but that may still slow once European markets are saturated. Uber’s ride-hailing biz bought international rivals to expand, but it still had to invest in new revenue streams — like food delivery — to attempt to turn a profit. If food-delivery growth cools, Dash may seek new revenue streams: It’s already investing in ghost kitchens and non-food deliveries, like its CVS partnership to shuttle staples like Advil and toothpaste.