Financial turmoil in the food delivery industry presents new opportunities for Amazon.
The e-commerce giant struck a deal Wednesday with Grubhub that allows Amazon Prime subscribers in the United States to waive delivery fees on orders from certain restaurants, according to a statement from Just Eat Takeaway.com, the Dutch company that owns Grubhub.
The deal gives Amazon the option to buy more than a 2 percent stake in Grubhub for an undisclosed but insignificant price, the statement said. Amazon may also buy an additional 13 percent stake in the company at an unspecified “formula-based price” that depends on Grubhub meeting certain performance goals, such as adding new customers.
In 2021, Grubhub lost 403 million euros, or about $410 million. He said the Amazon deal would boost earnings and cash flow from next year. The agreement with Amazon automatically renews each year unless one of the parties decides to withdraw.
Underscoring the changing outlook on the food delivery business, Just Eat is exploring ways to offload Grubhub roughly two years after paying $7.3 billion to acquire it. The industry’s outlook was severely hurt as pandemic restrictions were lifted and demand for restaurant delivery declined. Labor shortages and increased government regulation added new costs. In a recent research report, analysts at Berenberg Bank estimated that Grubhub would fetch less than $1 billion in a sale.
Just Eat, Europe’s biggest food delivery platform, said it would continue to explore a partial or full sale of Grubhub amid pressure from investors to improve its business. Grubhub controls about 13 percent of the U.S. food delivery market, compared to nearly 60 percent for DoorDash and 24 percent for Uber Eats, and Grubhub records lower sales per customer than its main competitors, according to Bloomberg Second Measure. Shares in Just Eat have fallen more than 60 percent this year, even after Amazon’s big jump on Wednesday’s news.
Amazon also owns a stake in Deliveroo, a struggling British food delivery service whose shares have fallen about 50 percent this year. Delivery Hero, another European food delivery firm, saw its shares drop more than 60 percent. Shares of Uber and DoorDash are down nearly 50 percent this year.
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