How the coronavirus outbreak is affecting your online food delivery

The spread of the coronavirus and sweeping policy measures to combat it have led to a spike in online food delivery. As consumers globally have been either mandated to stay home or voluntarily chosen to do so, many have been ordering in. 

According to new UBS research, demand for online delivery has risen in most markets impacted by the coronavirus outbreak. Demand for Food Panda, Delivery Hero’s brand in Asia, has shot up 80% during the New Year holiday in Hong Kong. Yogiyo, which is Delivery Hero’s brand in South Korea, has seen a weekly 3% to 4% increase in deliveries since Jan. 20. Singapore’s food delivery business saw a similar upward trend. Grab orders rose 20% in early March. 

Uber (UBER) CEO Dara Khosrowshahi believes that Uber’s food delivery business will grow during the coronavirus outbreak. “Certainly our rides business to the extent that people stop leaving their house will take a hit, while our business Eats will probably actually benefit,” he said last week at the Morgan Stanley 2020 Technology, Media & Telecom Conference in San Francisco.

Grubhub (GRUB) CEO Matt Maloney expressed some reservations about the benefit of the coronavirus outbreak on the company’s bottom line. “We’ll see. I have no idea. Coronavirus is a scary situation,” he said. 

Risks to booming meal delivery business

The increase in meal delivery demand may be short-lived, however. After spiking initially in China, online meal orders fell, according to UBS. Increased consumer concerns about being delivered contaminated meals led to a slowdown in orders, and a rise in online grocery delivery. Many Chinese consumers are increasingly opting to cook instead. 

China’s rate of infection has decreased from hundreds a day to fewer than 50 this week, but the number of deaths has surpassed 3,000. UBS expects this consumer online food delivery evolution from prepared meals to groceries will develop similarly in new markets exposed to the coronavirus.

Restaurant owner Joshua Berkowitz makes a food delivery as he walks inside what’s called a “containment area” in New Rochelle, N.Y., Wednesday, March 11, 2020. Berkowitz, owner of the Eden Wok restaurant inside the containment area, said customers have been grateful for deliveries. (AP Photo/Chris Erhmann)

Supply disruptions caused by the coronavirus outbreak are a threat to the food delivery business. UBS points out that the temporary closure of 30% of Yum China (YUMC) restaurants during the Chinese New Year holiday negatively impacted the food delivery business. Italy’s food delivery companies are also at risk, according to UBS. While search trends for online delivery spiked in Italy, the nationwide quarantine and closure of restaurants could impact the volume of food supplies and in turn end up hurting online food delivery.

In the U.S., if more people are quarantined that could lead to a scarcity of drivers. The combination of fewer drivers and forced restaurant closures would negatively impact supply for the food delivery business.

“Delivery drivers typically work on a gig economy model and there is no obligation to show up. This could be problematic as drivers might become concerned with contact with users being placed on quarantine,” writes UBS analyst Hubert Jeaneau. 

Recently health concerns have prompted U.S. food companies to alter their sick leave policies. McDonald’s is offering quarantined workers 14 days of sick pay. This new policy, though, only applies to workers at its corporate-owned locations, representing 5% of its overall restaurants. Darden Restaurants (DRI), which counts Olive Garden as one of its top brands, recently announced their hourly workers would be getting 40 hours of sick pay per year. Uber and Lyft have made emergency funds available for drivers who are quarantined or test positive for coronavirus.

Graphic: David Foster/yahoo Finance

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