Miguel Maeztu @AzeriaInvest: "𝐅𝐨𝐨𝐝 𝐝𝐞𝐥𝐢𝐯𝐞𝐫𝐲, 𝐦𝐚𝐫𝐤𝐞𝐭 𝐞𝐯𝐨𝐥𝐮𝐭𝐢𝐨𝐧 𝐚𝐧𝐝..."

Luxembourg

𝐅𝐨𝐨𝐝 𝐝𝐞𝐥𝐢𝐯𝐞𝐫𝐲, 𝐦𝐚𝐫𝐤𝐞𝐭 𝐞𝐯𝐨𝐥𝐮𝐭𝐢𝐨𝐧 𝐚𝐧𝐝 𝐩𝐫𝐨𝐬𝐩𝐞𝐜𝐭𝐬 I was reading about the Food Delivery industry over the week-end, partly because it lives for free in my mind since it is at the core of Alibaba's strategy (or fight) at the moment. I was trying to develop the mental model of what that looks like in 10 years. Let's also assume that Food Delivery also means short term delivery (30min-1hr) of anything, from food to groceries to any other goods. Arguably, its all about scale: that is my conclusion. To reverse engineer that, there are 4 parties: - The platform (Uber Eats, iFood, Meituan, Ele.me, DoorDash, you name it). That is a tech platform, largely a fixed cost but with ongoing R&D expenses to improve it as it needs to read data better over time. - The consumer: you or me when we order food online. The more of us in a platform the better, as the merchants get to sell more. - The merchant/shop: it is listed on the platform, the more of them you have, the better the offer, the more choices to the consumer. - The rider/deliverer: today its someone on a bike/car/motorbike, tomorrow likely a drone/robot (cheaper, no pension contributions, doesn't strike and doesn't change jobs). The platform keeps a cut (the take rate), the consumer needs the best offering, best price and fastest delivery, the merchant keeps a cut from the product it sells and needs lots of consumers but also drivers put by the platform in a timely manner to pick-up that food and get it to the consumer. The driver/rider takes a cut from the price of the delivery which is the salary in the end. Now, this clearly creates a feedback loop. The more merchants, the more consumers because there is more and better choice, the more riders because there are more orders. The platform keeps a % take rate of all that. Naturally, the more scale, the more profits. It seems natural that this will end up in a very concentrated industry likely by geography. I doubt there can be more than 2 players per market in the long-term at the risk of operating a loss-making or not very profitable platform. At scale, it is a lucrative market. Therefore, I can see why companies are fighting so much to be the winner in the space. My portfolio exposure to instant / food delivery is meaningful via Prosus and Alibaba (data is approximate but provides an overall picture of this oligopoly or almost monopolistic industry): - China: Alibaba owns about 30% of the market, Meituan 60/70 with JD breaking in. - India: Prosus owns ca. 20-25% of Swiggy, second player in the market with 45% of the market share - France: Uber Eats (45%), Deliveroo (DoorDash) 30%isg, Just Eat (15-20%) owned by Prosus - Germany: Just Eat Takeaway owned by Prosus has a 70% market share, DoorDash then 15% (both via their local companies). -UK: Uber has nearly 45-50%, Just Eat (Prosus) 25-30%, DoorDash 20-25%. - US: DoorDash over 60%, Uber the rest - Canada: split between DoorDash, Uber and Just Eat - Brazil: iFood (with Prosus behind) has around 80-90%. - Mexico: Didi 30-40%. This should lead to local buys of rivals and exits over time to focus on the most profitable markets, which would lead to concentration in a monopolistic or duopolistic market. 𝘋𝘪𝘴𝘤𝘭𝘢𝘪𝘮𝘦𝘳: 𝘵𝘩𝘪𝘴 𝘪𝘴 𝘵𝘩𝘦 𝘴𝘰𝘭𝘦 𝘰𝘱𝘪𝘯𝘪𝘰𝘯 𝘰𝘧 𝘵𝘩𝘦 𝘢𝘶𝘵𝘩𝘰𝘳, 𝑢𝑛𝑟𝑒𝑙𝑎𝑡𝑒𝑑 𝑡𝑜 𝑚𝑦 𝑒𝑚𝑝𝑙𝑜𝑦𝑒𝑟 𝘢𝘯𝘥 𝘪𝘴 𝘯𝘰𝘵 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘢𝘥𝘷𝘪𝘤𝘦. 𝘐 𝘮𝘪𝘨𝘩𝘵 𝘣𝘦 𝘪𝘯𝘷𝘦𝘴𝘵𝘦𝘥 𝘪𝘯 𝘵𝘩𝘦 𝘴𝘵𝘰𝘤𝘬𝘴 𝘮𝘦𝘯𝘵𝘪𝘰𝘯𝘦𝘥. 𝘋𝘰 𝘺𝘰𝘶𝘳 𝘰𝘸𝘯 𝘳𝘦𝘴𝘦𝘢𝘳𝘤𝘩 𝘢𝘯𝘥 𝘪𝘧 𝘶𝘯𝘴𝘶𝘳𝘦, 𝘴𝘦𝘦𝘬 𝘱𝘳𝘰𝘧𝘦𝘴𝘴𝘪𝘰𝘯𝘢𝘭 𝘢𝘥𝘷𝘪𝘤𝘦. 𝘊𝘰𝘱𝘺 𝘛𝘳𝘢𝘥𝘪𝘯𝘨 𝘪𝘴 𝘯𝘰𝘵 𝘪𝘯𝘷𝘦𝘴𝘵𝘮𝘦𝘯𝘵 𝘢𝘥𝘷𝘪𝘤𝘦 | 𝘊𝘢𝘱𝘪𝘵𝘢𝘭 𝘢𝘵 𝘳𝘪𝘴𝘬 | 𝘗𝘢𝘴𝘵 𝘱𝘦𝘳𝘧𝘰𝘳𝘮𝘢𝘯𝘤𝘦 𝘥𝘰𝘦𝘴 𝘯𝘰𝘵 𝘨𝘶𝘢𝘳𝘢𝘯𝘵𝘦𝘦 𝘧𝘶𝘵𝘶𝘳𝘦 𝘳𝘦𝘴𝘶𝘭𝘵𝘴 $UBER (Uber Technologies Inc.) $DASH.US (DoorDash Inc) $BABA (Alibaba-ADR) $PRX.NV (Prosus NV) $03690.HK (Meituan Class B) $JD.US (JD.com-ADR)

Not investment advice. The author may have financial interests in the mentioned instruments.