The financial turmoil in the food delivery industry is presenting new opportunities for Amazon.
The e-commerce giant reached an agreement with Grubhub on Wednesday that allows Amazon Prime subscribers in the United States to waive the costs of sending orders from certain restaurants, according to a statement from Just Eat Takeaway.com, the company Dutch owner of Grubhub.
The deal offers Amazon the option to buy more than a 2% stake in Grubhub at an undisclosed but insignificant price, according to the statement. Amazon can also buy an additional 13 percent stake in the company at an unspecified “formula-based price,” which depends on Grubhub achieving certain performance goals, such as adding new customers.
In 2021, Grubhub lost 403 million euros, or about 410 million dollars. He said the Amazon deal would increase its profits and cash flow starting next year. The agreement with Amazon is automatically renewed each year, unless a party decides to withdraw.
Highlighting changing opinions toward food delivery companies, Just Eat is exploring ways to download Grubhub about two years after paying $ 7.3 billion to acquire it. The outlook for the industry has been severely affected as pandemic restrictions have lifted and demand for restaurant delivery has declined. Labor shortages and increased government regulation have added new costs. In a recent research report, analysts at Berenberg Bank estimated that Grubhub would get less than a billion dollars in a sale.
Just Eat, Europe’s largest food delivery platform, said it would continue to explore a partial or total sale of Grubhub amid pressure from investors to improve its business. According to Bloomberg Second Measure, Grubhub controls about 13 percent of the U.S. food delivery market, compared to nearly 60 percent of DoorDash and 24 percent of Uber Eats, and Grubhub records lower sales for customer than its main rivals. Shares of Just Eat have fallen more than 60 percent this year, even after a big jump in Amazon news on Wednesday.
Amazon also has a stake in Deliveroo, a UK distressed food delivery service, whose shares have dropped by around 50 per cent 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 dropped nearly 50 percent this year.