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Order Your Pizza for Delivery as the Crow Flies

January 30, 2020
4 min read
Order Your Pizza for Delivery as the Crow Flies
By: Tasha Keeney, CFA

ARK previously estimated that the potential market for food delivery orders could be measured in the trillions, thanks to the convenience of online platforms like Grubhub and DoorDash. In this blog, we examine the impact of autonomous drones on food delivery and size the opportunity for delivery providers. Autonomous electric drones could add dramatically to the potential with even more cost effective and convenient services that could extend beyond dense urban areas to suburban and rural areas. According to our research, as a percent of total food spending, delivery could grow from just 1% today to 41% by 2030, as shown below.

Drone Food Delivery Graph 1 | ARK Invest

Based primarily on advances in battery power, ARK estimates that a drone could deliver the average meal for only 20 cents, or 20 times less than human-based food delivery would cost, as shown below. Facing fewer regulatory hurdles, drone-based food delivery is likely to debut in less densely populated areas. While most restaurant deliveries span 5 or fewer miles today, drones could enable longer distances while preserving the temperature of meals. Taking share from cyclists, they also should increase the safety of food delivery.

Drone Food Delivery Graph 2 | ARK Invest

If eventually they were to deliver about 60% of restaurant meals, ARK estimates that drone delivery revenues could increase from nil today to roughly $7 billion in five years and then scale more than 15-fold to more than $100 billion by 2030, as shown below.

Automation is likely to cut costs across the food industry from preparation to delivery, stimulating restaurant sales further and, in a virtuous cycle, deliveries as well. Dark kitchens – fully automated food preparation centers – will likely be optimized for drone deliveries.

Drone Food Delivery Graph 3 | ARK Invest

China is responding vigorously to low-cost delivery options. Meituan subsidizes delivered restaurant meals, in some cases offering 80% discounts on meals, undercutting the cost of those prepared at home. As a result, some customers have stopped shopping at supermarkets. In time and in the absence of subsidies, continued increases in automation are likely to make food delivery more cost-effective than restaurant meals and perhaps home-cooked meals, especially when adjusting the latter for the unpaid labor associated with shopping, cooking, and cleaning up.

In addition to drones, ARK expects autonomous rolling robots to tackle heavier deliveries like groceries. Regulation likely will impact the timing of adoption for all robotic deliveries, as both drones and rolling robots have faced pushback in the US and abroad. All in all, food delivery drones are part of a wave of autonomous electric logistics vehicles that are likely to proliferate during the next decade.

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