America’s obsession with pandemic-era food delivery appears to be over — and the companies’ stocks are taking a hit.
After hitting a high of $246 in November, DoorDash shares have plunged 62 percent to $89 a share. Over the same period, Uber shares have fallen 29 percent, from $45 to about $31.
Much of the decline can be explained by the leveling off of Covid-19 cases. While the apps saw explosive growth during the pandemic’s early stages as consumers stayed at home, analysts say such growth was ultimately not sustainable.
But the downturn for these companies has proved quite sharp, as some Americans have become increasingly budget-conscious amid rising inflation and higher fuel costs.
“It was inevitable that they were going to start to retract as people returned to dine in,” said Rich Shank, vice president of research and insights at Technomic, a consulting company that works with the food service industry.
There has also been a return to restaurants. Data from Technomic show the portion of meals consumed at in-person dining establishments hit a post-pandemic high in the first quarter of 2022, while the share of food-app deliveries fell to its lowest level since the fourth quarter of 2020.
The decline in app usage can also be attributed to fees, tips and higher food prices that are starting to turn off some customers, Shank said.
“The share shift toward off-premise ordering seems to have plateaued,” Shank said, referring to orders placed on food-delivery apps. “The odds of it slipping a bit further are pretty good given the inflationary pressures consumers face and the higher fees they incur via third-party apps.”
The biggest casualty among the apps has been GrubHub. On Wednesday, its Netherlands-based parent company Just Eat said it was exploring a sale of the longtime delivery app. Bloomberg reported that orders on Just Eat platforms saw a sharp decline in the U.S. in the first quarter as jurisdictions like New York imposed fee caps and an ongoing slowdown in orders from workers returning to the office.
That’s another factor weighing on the apps: Many workers are continuing to work from home — and are likely finding alternative ways to get lunch compared with pre-pandemic delivery orders.
“It’s starting to look a little more like pre-pandemic, but it’s nowhere near where it was before,” Shank said. “Weekday lunches are cropping up again when people are in the office. … But lots of workers are still not in the office five days a week.”
Delivery app companies have long struggled with profitability, said Raj Joshi, vice president and senior credit analyst at Moody’s. As a result, many are now looking to balance cutting costs while expanding into other lines of business, like grocery and package delivery. But it is not yet clear whether these strategies will work, he said.
“The industry is clearly in the evolution stage,” Joshi said.
The upshot of these trends: Larger restaurants could emerge even stronger than mom-and-pop restaurants that won’t be able to afford the fees delivery apps will continue to charge — and could fall off the platforms entirely. That’s on top of managing rising labor and fuel costs.
“The big chains are in a better position to manage that stuff; they have more resources and scale,” said Joe Guszkowski, a senior editor with Restaurant Business magazine.
