Doordash has made a major acquisition by agreeing to purchase rival on-demand food delivery app Caviar for 410 million dollars. This purchase is the latest headline for Doordash which has recently been getting a lot of negative publicity due to their deceptive tipping policy. With the recent announcement from Doordash CEO Tony Xu about changing the tipping policy to what most people see as normal and fair, and a major purchase by acquiring Caviar, many are predicting a bright future for Doordash.
Why did Doordash purchase Caviar?
Doordash is in an all out battle with Postmates, Grub Hub and Uber Eats to become the number one go to food delivery app. These companies are what I like to call the major four. Sure, there are many other companies such as Caviar, but none of these companies are at the same level as the major four. Many of these smaller companies are regional and are very successful, but again, they are not at the same level of the major four.
Even though Caviar has never been at the top level of the major four, they are certainly on the next level. They have been providing food delivery in major markets such as Los Angeles, San Fransisco, Boston, Chicago and many other major markets for many years. Simply put, Caviar has never been a laughing stock in the food delivery industry. They have always been a major player that rival companies had to pay attention to. Doordash knew this, and when Jack Dorsey, CEO of Square, contacted Doordash about a possible deal, sources say that it was a short conversation.
Square, which bought Caviar in 2014 for about 90 million dollars gets a pretty good return out of this deal. It's always a good thing when you can buy something for 90 million dollars and sell it five years later for 410 million dollars. Caviar initiated the deal here with Doordash. Why Caviar chose to contact Doordash instead of the other companies is anybody's guess. There is no indication that Caviar contacted any of the other major four companies. You would presume that when a company is put up for sale that they would want to sell it for as much as possible. Seems to me that there had to be talk about this deal in the past between Doordash and Caviar.
Will the Caviar purchase help Doordash grow?
It certainly will. Recently, it has been reported that Doordash took over the number one spot from Grub Hub as the major food delivery app. In May of 2019, Doordash received 600 million in new funding which raised the company value to 12.6 billion. If you think about it, those new funds basically paid for this Caviar purchase.
Caviar has always concentrated on high end restaurants, and adding those merchants to the list of available Doordash restaurants is a major plus for the company. Doordash, which has been very successful in dominating the fast food chain deliveries will certainly grow and reach new customers that are interested in more high-end type restaurants.
What will happen to drivers that deliver for both Doordash and Caviar?
Those that driver for both Doordash and Caviar should not worry about anything right now. It is possible that in the future the Caviar app will eventually be dropped and all Caviar drivers will ultimately be using the Doordash app. As I have said, it is nothing to worry about right now and those drivers that work for both companies should just continue to do as they have been doing.
It's even possible that both apps will continue to exist. Sure, Doordash has bought Caviar, but that does not mean that they will completely destroy the brand. That is not a sure thing, but for now we know everything is safe. A Doordash spokesman has stated that even with the acquisition, both Doordash and Caviar will remain as individual brands for now. Doordash will ultimately do what is best for both brands whether that means combining them or keeping them separate.
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