Doordash Going “From Zero to a Multibillion-Dollar” Business, Aims To Expand and Penetrate Beyond Restaurants

By Moon Harper

Jan 02, 2024 05:11 AM EST

DoorDash is exploring opportunities to expand beyond delivering restaurant meals to home diners as ways to invest its increasing cash reserves.

"The two largest areas of investment are expansion and penetration outside of the U.S., as well as the same outside of restaurants," DoorDash CEO Tony Xu said in the Financial Times on Monday.

Gaining Financial Strength for New Opportunities

The statement about DoorDash's expansion into new markets comes 18 months after its 7 billion all-stock acquisition of Finland's Wolt, broadening the U.S. meal delivery company's presence to 27 countries. Meanwhile, the San Francisco-based company generated $878 million in free cash flow in the 12 months ending September, providing it with financial strength to explore new opportunities.

DoorDash, aiming to target smaller geographies often overlooked by competitors, expanded into Austria and Iceland last year through Helsinki-based Wolt. Their interest in smaller countries aligns with focusing on suburban areas and smaller cities in the United States. Job postings suggest the group is exploring entry into Luxembourg.

A Challenging Period for Delivery Companies

DoorDash and other food delivery companies faced challenges during the COVID-19 pandemic, where home orders increased during lockdowns but gradually slowed down when it eased, which analysts anticipate further consolidation as the food delivery sector becomes crowded.

Thriving DoorDash

DoorDash, compared to its competitors, experienced a more successful 2023, where its revenue increased by 27% to $2.2 billion compared to 2022, according to the latest earnings report. Xu stated that DoorDash won't invest in inefficient growth, will maintain high acquisition standards, and remain open to reinvestment opportunities.

In the last five years, DoorDash, the 10-year-old online platform, has nearly doubled its market share, establishing a dominant position in U.S. restaurant delivery, now holding 59% of the market, almost twice as much as its closest competitor, Uber, according to YipitData. In the previous year, DoorDash's shares reached a market capitalization of $39.4 billion, surpassing the sector's performance, but was still considered lower than the peak in 2021, which was approximately $246.

Expansion by Alcohol Deliveries

Miki Kuusi, CEO and co-founder of Wolt, now leading DoorDash's international business, mentioned that the company is still investing in expanding its coverage in the 29 active markets. DoorDash aims to increase population coverage, which is currently not 100% in most countries. As part of its expansion strategy, DoorDash introduced alcohol delivery in 2021, delivering beer, wine, and spirits rapidly to consumers' doors in 20 U.S. states and in Australia and Canada, following moves by competitors like Uber and Gopuff.

Expansion by Advertising Business

The company is also expanding its advertising business, introduced two years ago, allowing restaurants and brands to market to customers. This business, adopted by rivals for its high-margin sales, has boosted DoorDash's revenues.

Entering Retail and Grocery

Like other delivery groups like Deliveroo, DoorDash aims to grow its business significantly by entering the retail and grocery sectors. Xu stated that having a large customer and driver base, with frequent interactions, provides more opportunities to expand into additional categories, highlighting the company's success in growing from nothing to a multibillion-dollar business for non-restaurant deliveries.

By the end of 2022, the company had over 32 million monthly active users and more than 6 million drivers. DoorDash has also secured partnerships with supermarkets like B.J.'s Wholesale Club, previously exclusive to competitor Instacart.

The company is also partnering with major retailers like Dick's Sporting Goods and Sephora. According to Nikhil Devnani, an analyst at Bernstein, the company's expansion plans focus on grocery and convenience, which is seen as having the most straightforward use cases.