Uber-ezCater deal: Why Uber is spending $2.3 billion on corporate catering

Uber will buy ezCater for $2.3 billion to expand corporate catering, grow Uber Eats and strengthen its delivery business with high-value orders.

Uber Technologies said on Tuesday that it will buy US corporate catering platform ezCater for $2.3 billion in an all-cash deal. The acquisition is Uber’s latest move to grow its delivery business, which has become its fastest-growing major business segment. The deal will give Uber a bigger presence in the corporate food and catering market.

Uber is buying corporate catering platform ezCater for $2.3 billion. (Representational Photo/REUTERS)

Founded in 2007, ezCater helps companies order food from caterers for office meetings, corporate events and workplace meals. Instead of ordering individual meals, businesses can use the platform to arrange large food orders for groups of employees or event attendees. Uber said ezCater generated more than $2.5 billion in gross bookings over the past 12 months, according to Reuters.

Uber ezCater deal

Corporate catering can bring Uber much larger orders than normal food deliveries. Uber said the average ezCater order is worth more than $400. This means one corporate order can be worth much more than a typical individual Uber Eats order. The deal also gives Uber a new business line based on large food orders paid for by companies, rather than individual customers.

Why Uber wants ezCater

The acquisition will bring together ezCater’s catering business, Uber Eats’ restaurant network and Uber for Business’ corporate customers, Uber said. This could allow Uber to offer companies a broader food-ordering service through its existing business network. Uber can use its existing restaurant and delivery infrastructure while ezCater brings its corporate catering business, according to Reuters.

The deal also strengthens Uber’s business-focused segment, which serves corporate customers. Gross bookings in this segment grew by more than 40% in the second quarter, according to Rosenblatt analyst Scott Devitt. Devitt said bringing workplace buyers into Uber’s ecosystem could also help strengthen its membership business.

Uber vs DoorDash

Uber Eats has a larger global reach, but DoorDash remains the biggest player in the US food delivery market, according to analysts cited by Reuters. Buying ezCater could help Uber close some of that gap in the US. Corporate catering gives Uber another way to attract food-delivery customers beyond regular restaurant orders.

Uber said ezCater’s average order value is above $400. The company expects the acquisition to boost margins. Larger orders can make the delivery business more valuable because Uber can generate more business from each corporate transaction.

The ezCater deal comes only months after Uber agreed in July to buy German food-delivery company Delivery Hero for $14.8 billion. That deal is aimed at creating the largest food-delivery group outside China, according to Reuters. Together, the two deals show that Uber is putting significant money into expanding its delivery operations.

Uber delivery business

Uber’s delivery business accounted for about 37% of the company’s total revenue in the second quarter. It has also been Uber’s biggest growth driver in recent times. The ezCater acquisition therefore fits into Uber’s wider strategy of making delivery a bigger part of its business.

Uber’s shares have fallen about 15% this year as investors consider how the company will compete if robotaxis changes the ride-hailing industry. The possible rise of autonomous taxis could put pressure on Uber’s traditional ride-hailing business. Expanding food delivery and corporate services gives Uber another source of growth as the future of traditional ride-hailing becomes less certain.

The deal gives Uber access to a corporate catering platform that already handles billions of dollars in bookings. It adds high-value orders, brings more companies into Uber’s ecosystem and expands Uber’s business customer base. It also gives Uber another way to compete in the US food-delivery market while strengthening its fastest-growing business. The acquisition still needs regulatory approval. Uber expects the deal to close in the coming months, according to Reuters.