DoorDash is acquiring food delivery rival Caviar for $410m

2 Aug 2019145 Views

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When the deal is finalised, all of Caviar’s existing employees will move to DoorDash, along with the company boss Gokul Rajaram.

Yesterday (1 August), DoorDash announced that it has entered into a definitive agreement to acquire food delivery rival Caviar for $410m in cash and preferred stock.

In a press release, DoorDash said that this strategic commitment will increase its merchant selection, adding all of Caviar’s premium restaurants to DoorDash’s services, and enabling the combined organisation to cater to “every food preference and occasion”.

Square, Caviar’s parent company, had provided its point-of-sale services to DoorDash prior to the announcement.

DoorDash said that the acquisition will provide the company with a “significant number” of new customers. When the deal is finalised, head of Caviar, Gokul Rajaram, will join DoorDash, along with the start-up’s existing employees.

CEO of DoorDash Tony Xu said: “Today’s announcement is another important step forward on our mission to empower local economies. We have long admired Caviar, which has a coveted brand, an exceptional portfolio of premium restaurants and leading technology.

“The acquisition further enhances the breadth of our merchant selection, enabling us to offer customers even more choice when they order through DoorDash. We look forward to welcoming the Caviar team to DoorDash and expanding our partnership with Square in the future.”

Square CEO Jack Dorsey, who is also the man behind Twitter, commented: “We are increasing our focus on and investment in our two large growing ecosystems – one for business and one for individuals. This transaction furthers that effort, and we believe partnering with DoorDash provides valuable and strategic opportunities for Square.”

Following the announcement, which coincided with Square’s latest earnings report, shares of the company dropped by as much as 8pc.

Food delivery market

According to analytics company Second Measure, nearly 34pc of all US meal delivery sales in July were made through DoorDash, which is more than any other food delivery service.

GrubHub was in second place, accounting for 33pc of food delivery sales, while just 17pc of food delivery sales were made through UberEats.

For a number of months ahead of this announcement, DoorDash was widely criticised for its practice of subsidising delivery driver’s wages with tips. A week ago, the company announced that it would abandon this payment model, but it has yet to do so. Workers’ rights groups in the US have suggested that DoorDash backpay the affected employees as compensation.

DoorDash’s announcement is the latest in a series of deals, with numerous food delivery services joining forces over the last few weeks to consolidate and better position themselves against rivals.

In the last week alone, Just Eat announced that it is set to merge with Dutch giant Takeaway.com in a £9bn deal, while Deliveroo announced that it has acquired Scottish software start-up Cultivate.

Kelly Earley is a journalist with Siliconrepublic.com

editorial@siliconrepublic.com