Amazon strikes deal with Grubhub as food delivery struggles

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Financial turmoil in the food delivery industry offers new opportunities for: Amazon

The e-commerce giant struck a deal on Wednesday with Grubhub that allows Amazon Prime subscribers in the United States to waive delivery charges for orders from select restaurants, according to a pronunciation by Just Eat Takeaway.com, the Dutch company that owns Grubhub.

The deal gives Amazon the opportunity to purchase a more than 2 percent stake in Grubhub at an undisclosed but negligible price, the statement said. Amazon may also purchase an additional 13 percent stake in the company at an unspecified “formula-based price,” which is contingent on Grubhub meeting certain performance goals, such as adding new customers.

In 2021 Grubhub lost 403 million euros, or about $410 million. It said the Amazon deal would add to its revenue and cash flow from next year. The agreement with Amazon will automatically renew each year unless one party decides to withdraw.

Just Eat highlights changing views on the food delivery companies and explores ways to unload Grubhub about two years after paying $7.3 billion to acquire it. The industry’s prospects are badly bruised as pandemic restrictions have been lifted and demand for restaurant delivery has declined. Labor shortages and increased government regulation added new costs. In a recent investigative report, analysts at Berenberg Bank estimated that Grubhub would bring in less than $1 billion on a sale.

Just Eat, the largest food delivery platform in Europe, said it would continue to explore a partial or full sale of Grubhub under pressure from investors to improve its business. Grubhub controls about 13 percent of the U.S. meal delivery market, versus nearly 60 percent for DoorDash and 24 percent for Uber Eats, and Grubhub has lower revenue per customer than its main rivals, Grubhub said. Bloomberg Second Measure† Shares of Just Eat are down more than 60 percent this year, even after a big jump on Amazon news on Wednesday.

Amazon also has a stake in Deliveroo, a struggling British food delivery service whose shares are down about 50 percent this year. Delivery Hero, another European food delivery company, has seen its share price fall by more than 60 percent. Shares of Uber and DoorDash have fallen nearly 50 percent this year.

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