Get To Know UberEATS

In a report published Monday, Cowen And Company analyst Kevin Kopelman discussed Uber’s next major initiative (dubbed UberEATS) and what it means for other food delivery services.

Kopelman pointed out that in major cities (such as New York, Los Angeles, Barcelona), the “UBER” logo at the top of the app has now been replaced with two different icons. The first icon is a car while the second is a dinnerware setup, as seen below.

The change marks what Kopelman describes as Uber’s move into food delivery as a second service. The analyst added that he believes Uber is “gaining some traction” in food delivery and the space represents a “significant” opportunity.

“Uber is pioneering the “Ultra-Fast” subcategory of food delivery, offering a limited selection (usually 2-3 options) around mealtimes,” Kopelman explained. “The food is already prepared and ready for delivery in couriers’ thermal bags – UberEATS promises delivery in under 10 minutes for a flat all-in delivery fee of $3-4 (there is no tip), an unprecedented speed/cost combination in restaurant food delivery.”

Implications For GrubHub

GrubHub Inc (NYSE: GRUB), a restaurant pick-up and delivery service company, recently reported in its second quarter that order growth has slowed to 24 percent from 33 percent in the fourth quarter last year.

According to Kopelman, GrubHub’s slowing growth was attributed to the growing competitive landscape which already includes Postmates, Yelp Inc (NYSE: YELP), DoorDash, Munchery, Caviar.

Back in July, Kopelman downgraded GrubHub to Market Perform from Outperform due to a "worse than feared" competitive landscape. The analyst stated at the time that GrubHub's first mover advantage is now "eroding in the face of new delivery models."

However, UberEATS is still “small” based on scope, food options and user adoption. Nevertheless, Uber’s move into the already crowded market suggests an “aggressive expansion” of food delivery as a core service as the company hopes to roll out its service to as many as 15 cities in the coming months.