GrubHub GRUB has started Blue Apron's APRN on-demand meal kits on its online and mobile platforms.
The meal kits delivery option, which is in the pilot stage, have been available at a few places in New York since Oct 1. Blue Apron's kits come in two sizes - two and four serving meals with a different menu every week on GrubHub's platform.
The on-demand program will allow customers to get their meal kits in less than an hour, per Blue Apron. Notably, Blue Apron's meal kits will also be delivered on Seamless' online and mobile platforms. Meal Kit to Attract Users?
The online meal kit delivery business was introduced in 2012 and has been gaining traction on the back of increased Internet penetration and meal preparation convenience to customers.
The value of the meal kit delivery market in 2017 in the Unites States was $4.65 billion. In the same period, Blue Apron reported revenues of $881.2 million, which means it has a share of almost 20% in the United States meal kits market. Moreover, the market is expected to grow to $11.6 billion by 2022.
Additionally, from November 2017 to April 2018, 9% of the people in the Unites States have purchased a meal kit, per Nielsen, out of which 6% shopped online. Moreover, compared with other channels, meal kits spending grew three times from March 2015 to March 2017.
Increasing online purchases coupled with growing demand for meal kits market will help GrubHub to benefit from this deal. Notably, in the last reprted quarter, daily Average Grubs (DAGs) were 423,200, which increased 35% from the year-ago quarter.
Moreover, the deal may also attract Blue Apron's customers to GrubHub's other services, which will eventually drive user base. Increased user base will lead to increased transaction revenues for GrubHub. GrubHub Inc. Revenue (TTM)
GrubHub Inc. Revenue (TTM) | GrubHub Inc. Quote
Partnerships and Acquisitions a Tailwind
GrubHub has been supplementing organizational growth with strategic acquisitions. Recently, the company announced the acquisition of Tapingo - a leading mobile-app for campus food delivery services - for $150 million.
Additionally, acquisitions such as Yelp's YELP Eat24, certain assets of OrderUp markets and Boston-based Foodler have broadened GrubHub's portfolio of restaurants and its customer base.
GrubHub is benefiting from partnerships with the likes of Yelp and Groupon GRPN as well. Notably, these partnerships have made Grubhub the preferred partner for online ordering on these platforms.
The fast-growing food delivery market is also attracting other players. Currently, big names like Amazon and Facebook are trying to get into the market. Given the huge resources these companies have, it will not be difficult for them to expand rapidly and cut down on prices.
Moreover, Amazon's restaurant delivery service, which is free for its 101 million Prime members, is a major threat.
GrubHub is also facing significant competition from Uber Eats, which per Second Measure is the fastest-growing meal delivery service in the United States. Additionally, Postmates and DoorDash are considering joining forces to combat GrubHub's dominance in the market.
GrubHub currently carries a Zacks Rank #3 (Hold).
You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
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