Dive Brief:

• DoorDash acquired Caviar from Square for $410 million in cash and DoorDash preferred stock, according to a press release.
• Caviar, which focuses on premium restaurants, will offer a complementary geographic footprint to allow DoorDash to reach new customers. Caviar’s executive team will join DoorDash once the acquisition closes. 
• The transaction builds on DoorDash’s existing partnership with Square, which DoorDash uses for restaurants point of sale. The transaction is expected to close later this year.

Dive Insight:

Consolidation in the delivery industry is to be expected, especially as companies scale into new regions and become more competitive. With so much competition, companies will start to lose market share and need to either shut down operations or enter into a transactions. 

Consolidation has already started to ramp up in the last 18 months, especially as a tactic to grow into new regions. Earlier this week delivery.com acquired Mr. Delivery, expanding into 38 states and 1,800 cities. Waitr bought BiteSquad late last year for $321 million, allowing the company to increase its reach in the Midwest. Grubhub has been among the most active acquirers in the space, but has yet to acquire any like-minded companies this year. Last year, it acquired Tapingo and LevelUp. Postmates was rumored to be under consideration for an acquisition by Uber or DoorDash, but its CEO later said it wasn't on the table.

The Caviar acquisition is DoorDash’s largest to date, and its first purchase of another food delivery company. It previously acquired tech and delivery startup Rickshaw in 2017. Given its most recent $600 million funding round in May and its valuation of $12.6 billion, it definitely had the financial means to acquire a competitor. It also could be using this acquisition to better prepare it for a rumored IPO.

While Caviar wouldn't add too much to DoorDash's market share, it did garner 2.7% of consumer spend as of February, which could keep it ahead of its closest competitors Grubhub and Uber Eats.

DoorDash has also been on a steep growth trajectory, growing 280% year-over-year. It now also partners with 90% of the top 100 restaurant chains offering delivery, and adding Caviar to its repertoire will allow the company to reach many more local and independent operators. It expanded into 50 states earlier this year.