Uber Expands Its Reach Into Grocery Delivery And Latin America

Moving forward with its mission to be the operating system of your daily life, Uber Technologies Inc. UBER plans to add grocery delivery to its offerings in 2020. 

Uber has made an agreement to take a majority stake in Cornershop, the dominate online grocery provider in Chile, Mexico, Peru and Toronto, Canada. 

"We're excited to partner with the team at Cornershop to scale their vision, and look forward to working with them to bring grocery delivery to millions of consumers on the Uber platform," states Uber CEO Dara Khosrowshahi.

Cornershop was launched in 2015 by Chilean and Swedish entrepreneurs and has raised $28.2 million in venture capital led by Accel. 

"In 2015 we started Cornershop with primarily the Latin American market in mind and we couldn't be more excited to work with Uber to help us take that mission much further," added Cornershop CEO Oskar Hjertonsson. "Uber is the perfect partner as we embark on our quest to bring our unique flavor of on-demand groceries from incredible retail partners to many more countries around the world."

Uber enters into a tight and competitive market, with grocery delivery giants like AmazonFresh, Instacart and Walmart. But when looking at grocery e-commerce on an international level, the United States still heavily relies on brick and mortar stores. 

The 2018 Statista chart below shows that only 4.4% of U.S. groceries are purchased online, in comparison to South Korea's 19.1% or China's 14%. Latin America is not represented on this chart, but Business Wire reported that only 3% of grocery sales in Mexico in 2017 were online. 

Needless to say, Uber's purchase of Cornershop's stock shows its ambition in this growing grocery e-commerce market. However, it wasn't the first big name to approach the grocery delivery company. 

Back in September 2018, Walmart Inc WMT tried to buy Cornershop outright for $225 million, but ultimately failed due to Mexican regulatory issues. Since Walmart was already in the grocery business, it had power to hinder competition. While Walmart tried to acquire Cornershop outright, Uber is taking the approach of only buying majority stake. While Cornershop will keep its own management, the board will be populated primarily by Uber. 

"Uber gets two things," said Bloomberg's Lizette Chapman. "It continues expansion geographically. It also gets to strengthen those markets by layering additional services on top of the ride-sharing, which is still unprofitable. So by layering on additional services like grocery delivery and food delivery, they're hoping to boost the overall profits."

Currently, Chapman said, Cornershop customers can get goods delivered from Costco Wholesale Corporation COST, Walmart, bakeries, or pharmacies, for instance, in about 90 minutes for a fairly large fee. 

Closing in on the third quarter, investors remain fixated on Uber's stock price being 33% below its IPO. This diversification of services could provide some hope for profitability, but it's not clear whether Uber will funnel grocery delivery through UberEats, its fast-growing but still unprofitable segment, or create an entirely new Uber Grocery segment. 

The amount paid by Uber for  majority ownership of Cornership has not been disclosed.

Image Sourced from Pixabay