How Uber Eats' Starbucks delivery deal changes the American delivery wars
Uber Eats, the food delivery arm of the ridesharing company Uber ($UBER), launched delivery services for all Starbucks ($NASDAQ:SBUX) in San Francisco after a successful test of the service in Miami. Now that its Starbucks delivery service is off the ground, it plans to expand to Los Angeles, Chicago, New York City, Washington D.C., and Boston all within the next weeks.
This move gives Uber Eats critical delivery territory and ground against competitors GrubHub ($NYSE:GRUB) and DoorDash ($DOORDASH), en route to keeping up with being the self-claimed fastest growing delivery company in America.
The deal with Starbucks adds about 3,500 Uber Eats-eligible locations in six massive hubs for American business. Specifically, Uber Eats is targeting busy workers who are too busy (or too cold) to run out and grab a coffee, and then have to buy a scone, sandwich, or something else to make that $2.49 booking fee more of an afterthought than half the bill.
Starbucks locations in these cities are nearly everywhere one would have to work. In Washington D.C., there are 5 Starbucks on K Street, as well as two right near Capitol Hill.
In San Francisco, there are plenty of Starbucks baristas frothing it up in the Financial District.
And, in Manhattan, there is a Starbucks on virtually every corner.
In the case of Boston, Starbucks delivery via Uber Eats will soon be available to more than 100,000 college students across 40+ colleges, as well as their professors and other staff.
According to the writer of this piece, when Boston freezes over and thousands of college students are in their dorm rooms studying or "studying," they aren't going to step outside to grab that Caramel Macchiato unless it is absolutely necessary (i.e. on the way to class). This is especially the case at Boston University, which has 11 Starbucks in and around the city campus and has the largest student enrollment in the city.
Furthermore, according to executives at the company (as reported by CNBC), Uber Eats excels in dense urban areas with low delivery fees and tend to spend more on food than in stores. Translation? These cities that Uber Eats targeted are prime not only for the company itself, but also potentially Starbucks, who would be more than happy to move breakfast sandwich and cake pop inventory around.
On paper, the deal looks like a home run for Uber Eats as it continues to expand globally. Meanwhile, parent company Uber waits patiently for the U.S. government to reopen so it can file an IPO.
What this gives Uber Eats in the delivery wars
Despite having an incredible international presence, Uber Eats' portfolio in America is lacking compared to competitors. According to our December study of 10 food delivery companies, Uber Eats had 62,075 places to order from in America, while Grubhub and DoorDash claimed over 100,000 locations each.
Adding 3,500 Starbucks locations doesn't put too much of a dent into its competitors, but should this roll-out succeed, Uber Eats could be looking at an additional 11,000 (approximately) locations where it can deliver from. That would expand its footprint to the size of GrubHub, whose Seamless and traditional GrubHub services have plenty of overlap.