Did Amazon buy Grubhub? How this hurts Doordash and Uber?

Did Amazon buy Grubhub? One of the highlights of Amazon’s Prime membership option is the promise of free delivery, a service it’s extending into the restaurant sector after signing a commercial agreement with Grubhub.

The food delivery app’s parent company, Just Eat Takeaway.com, agreed to sell a 2 percent equity stake to e-commerce giant Amazon. The deal grants Prime subscribers access to Grubhub’s own premium membership.

For 53 percent of adults across the country, purchasing takeout and delivery food is considered to be “essential” to the way they live, as found by the National Restaurant Association. At the same time, about 38 percent of Americans use third-party delivery companies to get it, Ipsos found. As Amazon and Grubhub team up, their goal is to extend this delivery convenience to Prime members who are new to Grubhub.

Amazon buy Grubhub

Did Amazon buy Grubhub?

“Both Grubhub and Amazon have transformed people’s lives by providing them with unprecedented choice and convenience,” Ariella Kurshan, Grubhub’s SVP of growth, said in a statement. “With the new Grubhub and Amazon offering, Prime members now can enjoy free delivery from hundreds of thousands of restaurants across the country when they sign up for a year of free Grubhub+. I’m thrilled that new Grubhub diners from Amazon can get even more delivered to their door with their Prime membership.”

With the new agreement, Amazon Prime members in the U.S. can sign up for a free one-year subscription to Grubhub+ at no extra cost. This Grubhub membership is otherwise priced at $9.99 a month. The offer includes unlimited zero delivery fees on orders of over $12, as well as exclusive perks for Grubhub+ members and rewards like free food and discounts.

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Subscribers will be able to access this perk across 4,000 cities nationwide when placing an order through Grubhub. The deal between the two companies will renew annually unless either decides to end it.

“Being able to give Prime members one year of Grubhub+ and no delivery fees from restaurants is our way of saying ‘thank you’,” Jamil Ghani, VP of Amazon Prime, said in a statement. “The value of a Prime membership continues to grow with this offer, and this year is shaping up to be a great time to enjoy the convenience, savings, fun — and deliciousness — that membership provides.”

GrubHub’s parent looks for an investor

In April, Netherlands-based Just Eat said it planned to find “a strategic partner into and/or the partial or full sale of Grubhub.” That was less than two years after buying Grubhub for $7.3 billion. Grubhub also attracted preliminary interest from private equity firms, including Apollo Global Management Inc., Bloomberg reported in June.

Just Eat will continue to explore a full or partial sale of the U.S. business, the company said.

During a March 2 earnings conference call with analysts, CEO Jitse Groen said he could not disclose much about the future of Grubhub. But he added that the parent company was talking to strategic investors and investors and private equity firms.

“It’s difficult, of course, to give you a horizon on that because it depends on what people are offering,” Groen told investors.

Groen is under pressure to find a way to reignite growth after a slew of competitors took market share and restaurants that had been closed during the COVID-19 lockdowns reopened to diners. In an October presentation to analysts and investors, Groen laid out a strategy to grow in the U.S., targeting suburbs in key markets and testing miniature warehouses in New York for faster order fulfillment.

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In its statement, Just Eat said it expects the deal with Amazon to “expand membership to Grubhub+, while having a neutral impact on Grubhub’s 2022 earnings and cash flow.” Any earnings and cash flow benefits would accrue from 2023 onwards, the statement said.

Just Eat faces internal turmoil after it launched an investigation into its chief operating officer’s personal conduct and its chairman stepped down in May.

Grubhub says it delivers about 715,000 daily orders and works with 320,000 restaurants in the U.S.

Amazon buy Grubhub

Grubhub and Amazon offer free restaurant delivery to Prime members

Under the deal, Amazon gets the option to buy a 2% stake in Grubhub and the opportunity to increase its holding to 15%.
Amazon.com Inc. agreed to take a stake in Just Eat Takeaway.com NV’s Grubhub food-delivery business. It also agreed to offer U.S. Prime users a one-year Grubhub+, the food delivery service’s paid membership program, the two companies announced on Wednesday.

In a statement, Amazon said Prime members can use this new benefit in more than 4,000 cities.

The Grubhub+ membership, which usually costs $9.99 per month, includes unlimited free delivery on orders over $12 and other benefits, like the ability to earn free food and order discounts.

Amazon’s stake in Grubhub is in the form of warrants. Under the deal, Amazon receives the option to buy a 2% stake in Grubhub and will have the opportunity to increase its holding to 15%, Just Eat said.

A warrant gives the holder the right to buy or sell stock at a specified price before a specified date. But warrant holders are not obligated to buy or sell the underlying shares. The value of the warrants will depend on how well the partnership performs and how many new customers it attracts.

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The membership agreement will renew every year unless Amazon or Grubhub terminates it.

How this hurts Doordash and Uber

DoorDash and Uber are the kings of food delivery in the United States. In May of 2022, third-party analysts estimated that DoorDash had a 59% market share of monthly sales and Uber had 27% (combining Uber Eats and Postmates). These market shares have grown over the past few years at the expense of Grubhub, which only had an estimated 13% market share in May.

It’s pretty obvious how this Amazon partnership could hurt Doordash and Uber. Food delivery is almost entirely a commodity business, and if Grubhub can offer a better price to consumers, subsidized by one of the largest companies in the world, it’s likely many customers will switch providers.

We can already see this happening, with Grubhub’s mobile application shooting up the app-store rankings in the United States. If I were an investor in Uber or Doordash, I would be watching this Amazon partnership with great interest as it could be a huge threat to the long-term value of my shares.

There’s a ton on the line here. Doordash generated almost $5 billion in revenue in 2021. With food-delivery sales growing at 8% a year right now, this could be a huge opportunity for both Grubhub and Amazon if they can win back significant market share from these delivery rivals.

Amazon buy Grubhub

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