Still, the meal delivery business remains unstable. In the first quarter, Uber Eats recorded a $313 million loss in adjusted EBITDA. 

As Forrester Research analyst Brendan Witcher points out, it’s hard to imagine that consumers will want to continue to pay high fees for food delivery once the pandemic has passed. When restaurants come back, the demand for Uber Eats and its competitors is likely to decline.

“This is a moment that will determine whether or not [the food delivery apps] will be successful,” says Witcher. “Because if you can’t succeed and be profitable in a time when nearly everybody is moving to a service that you provide, then I think you have to really question your business plan.”

The merger, he notes, reflects the need for food delivery apps to reach a scale that allows them to operate profitably at affordable prices.

With the food delivery industry increasingly saturated with unprofitable players, investors are eyeing opportunities for more consolidation. Just Eat Takeaway is itself a combination of two European companies that were facing pressure from Uber Eats and Deliveroo in their respective markets.

While the Uber deal for Grubhub may have fallen through, that doesn’t mean the company isn’t looking for another merger. In a Bank of America conference call last week, Uber CEO Dara Khosrowshahi noted that the food delivery business is a “big” and “important” category—and that the area is going to continue to consolidate. In the pursuit of achieving the top spots in the global markets where Uber operates, Khosrowshahi says, “[t]he deal has to be right.”

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