Issue #112: Uber Paid $2.3B for Office Lunch

Currently, restaurants are not exactly the easiest business to partake in. However, amongst the tribulations, a bright spot emerges: catering orders. Catering is one of the fastest-growing channels. Despite a strong base of roughly $81B in sales, according to Olo, catering is expected to grow 6.2% annually over the next 9 years, reaching over $140B by 2035.

The demand for this growth has been partially driven by offices, with an estimated 58% of sales coming from workplace and office orders. As companies try to get workers back to the office more frequently, providing meals is one way to do so. eZcater found a 38% increase in employees seeking out work-provided snacks or meals compared to last year. They also found nearly 70% of workers in their survey shared that free lunch would make them come in more often.

Back to the business side, for restaurants and anyone facilitating those orders, it is quite lucrative, as order values typically are hundreds of dollars compared to the typical maybe $30 order. Given all that context, I think it is not a surprise to anyone that Uber decided to acquire ezCater this week, a leading marketplace for catering and office orders in the US. The all-cash deal, valued at $2.3B, now extends Uber Eats to another use case. Financially, eZcater was in a great spot as it generated over $2.5 billion in Gross Bookings over the last twelve months, is growing in the high teens YoY, and is profitable with an AOV over $400. It also brings catering orders to the hundreds of thousands of restaurants on the Uber Eats platform, eZcater was only serving 140,000 restaurants. That is before you get to the international implications. Uber Eats did offer catering, but it did not have the same reach.

I think this deal makes a ton of sense for Uber. Firstly, the B2B space is super lucrative, and catering is just one angle to approach it. Once you are getting your meals from eZcater, why not your drinks and beverages as well? Second, once the catering strength emerges, it encourages restaurants to be on the platform so they get access to these lucrative orders. Third, I assume whether it is rolled out or not, this will give another opportunity to gain advertising revenue from these orders. Unlike other orders, the willingness to spend on advertising may be much higher given the payback potential. Let’s see how their competitors respond.

With the rise in AI, many VCs have been publishing more data around how consumers are using AI. After all, AI use will not be limited to business. I recommend checking out the whole thing, but from a future of commerce perspective, I pulled out a few interesting statistics for me:

With the close of Q3 a couple of weeks ago, earnings reporting will start to trickle out. As always, it offers a fascinating insight into the retail world. One of the first brands to announce was Pepsi. On the surface, it was a good quarter. Organic revenue growth was 3.1%, which is the highest rate of growth since Q4 2023. That was accompanied by unit growth, illustrating it wasn’t just a price increase driving up revenue.

However, as you see in the opening quote from the Pepsi US CEO, there is trouble brewing. Pepsi has been struggling against Coca-Cola and Dr. Pepper in the beverages space for a while. Going forward, it will be focusing on functional hydration, bolder flavored soda, energy drinks, and zero sugar varieties according to the earnings report. Half of those are spaces that the other two competitors don’t play in, which is telling. The two innovations in the soda space are not really true innovations. On the snacks side, business is doing better, and the future outlook is brighter. The move to portion-control multipacks and better-for-you products has been working to drive growth. Still, investment is being focused on the beverages side, and a ton of focus remains there. It will be interesting to see how long Pepsi tries to keep battling there, or will they end up focusing more on extending their lead in snacks.

A year or so ago, serial entrepreneur Jason Cohen set out to create a new type of RTD. One that blended the flavors and functional hydration of Gatorade with some alcohol. A year later, that business, SpikedAde, has been sold to Constellation Brands, the owner of Modelo, Corona, Kim Crawford, and more, for $75M. Constellation has the third-largest beer sales in the United States. Depending on how the integration and future rollout go, there is another $278M up for grabs. The spirit-based RTD category is one of the fastest-growing areas in beverage alcohol. Dollar sales have increased by 25% in the last year. Constellation has not played in this space until now. Consumers have gravitated to the non-carbonated, lower-calorie drinks, but the space will get more crowded. I think it was very smart for the team to sell now. The product has market fit, and Constellation has the distribution infrastructure to get a canned beverage everywhere. I think you will start to see more and more brands opt for the earlier sale, just like Graza is trying to do.

The DTC beauty category is crowded. To break through, Jennifer Aniston’s brand LolaVie, worked with Roku Ads Manager to easily set up, test, and optimize CTV ad creatives. The campaign helped drive a big lift in sales and customer growth, helping LolaVie break through in the crowded beauty category.

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