Lyft Deal With Grubhub Challenges Uber in Food Delivery

Earlier this year, Uber Technologies (NYSE: UBER) pursued the acquisition of food delivery service Grubhub (NYSE: GRUB) to expand its Uber Eats business. When an agreement couldn't be reached on that deal, Grubhub announced it was being acquired by European food delivery company Just Eat (LSE: JET) for $7.3 billion.

Now Uber rival Lyft (NASDAQ: LYFT) has announced that it will be partnering with Grubhub, providing its Lyft Pink subscription members access to Grubhub+ for free food delivery and other perks.

masked food delivery driver with package on passenger seat

Image source: Getty Images.

The food delivery service has exploded during the coronavirus pandemic, with on-site dining restrictions in many places, and consumers opting to avoid going out. After Uber's failed bid for Grubhub, it agreed to buy Postmates for $2.3 billion.

Lyft's partnership with Grubhub takes advantage of the booming food delivery business using a different strategy. Lyft Pink was rolled out in December 2019 providing subscribers with discounts on rides and perks, including priority airport pickups, for $19.99 per month. Lyft Pink members now have access to Grubhub's subscription service, which normally costs $9.99 per month, as part of the Lyft membership program.

Lyft's move into the delivery business is an attempt to gain some share in the growing market without making a large acquisition. Uber said in its second-quarter earnings report that gross bookings for its delivery service grew 113% for the period ending June 30. This was an acceleration from the 54% year-over-year growth it saw in the prior quarter as pandemic restrictions were initiated. Now Lyft's monthly subscribers will have another option for home food delivery.

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Howard Smith has no position in any of the stocks mentioned. The Motley Fool recommends Just Eat N.V. and Uber Technologies. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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