Amazon tried but then eventually backed away from building its cost-intensive rival Grubhub and DoorDash in the US in 2019. Now, three years later, it’s taking a different approach to dealing with the space to build into another one to encourage more tag-up to subscription service Prime. Today, the e-commerce giant and Just Eat Takeaway — which owns Grubhub in the US — announced a partnership in which Amazon will offer free membership to Grubhub+ for one year to Prime members in the country.
Grubhub+, when launched in 2020, was billed as “Amazon Prime for food delivery”: Like other loyalty programs run by other delivery services, it’s a subscription service where members get free delivery of orders and possibly other rewards. They are usually charged $9.99 per month.
It appears that the commercial terms of the agreement will give Amazon a stake in JET. Specifically, it will include a clause to renew the deal annually (just like a Prime subscription!), and that “an Amazon affiliate will receive collateral (exercisable at a minimum price) over 2% of Grubhub’s fully diluted common stock.” He also notes that “Amazon You will also receive collateral (exercisable at a formula dependent price) of up to a further 13% of fully diluted common stock in Grubhub, the entitlement of which is subject to meeting certain performance conditions, primarily the number of new consumers delivered through the commercial agreement.” These numbers will change, but as of December 31, JET said tGrubhub’s total assets were 6,521 million euros ($6.7 billion, down from the $7.3 billion it paid in 2020) and the pre-tax loss for the 12 months ending in that period was 403 million euros.
Just Eat Takeaway — a massive food delivery conglomerate that includes both those global brands, as well as US-based Grubhub, among other interests — has come under some pressure in its US business of late, as companies like Uber Eats, Doordash and many other Other clothing in a very competitive space, often low margin. In a trade update from April (its most recent numbers), it noted that first-quarter orders in North America came in at 89.6 million, down 5% from the same period last year (when pandemic buying lifted several delivery boats). Revenue on paper looked like it grew by 3% but in constant currency it also fell by 5%.
At the same time, the company was reassessing its ownership of Grubhub. It was strongly opposed to buying the operation again in 2020 for $7.3 billion, but by May of this year it was considering the company’s options. Today it confirmed that this remains the case: “The company and its advisors continue to actively explore the partial or complete sale of Grubhub,” a statement said.
JET notes (as abbreviated) that the deal is expected to expand Grubhub+’s membership, although it does not disclose current membership numbers; And that it will have a “neutral effect” on Grubhub’s 2022 earnings and cash flow, with a cumulative effect from 2023 onwards.
This isn’t the first time the two companies have danced together. About a year ago, Amazon started offering free Grubhub+ subscriptions for a year to Amazon Prime Student members. It’s not clear how well this partnership has gone, although today’s news looks like an expansion on that, so it’s likely that it has been generally positive.
Sometimes those dances are not in harmony. In the UK, where Amazon has pulled out of its original restaurant service as it did in the US, it has also returned to the world of restaurant delivery in a similar partnership, but this time with competitor JET, Deliveroo, which is offering a free year of Deliveroo Plus to its key members in the country. Deliveroo Plus is – you guessed it – Deliveroo takes in a free membership subscription/delivery model.
Amazon is part-owner of Deliveroo. Given JET’s bigger picture of the state of its US business, and the fact that Amazon still sees plenty of opportunities to build more chains for the delivery and subscription monster, it’s interesting to think about how and where these three companies will continue to compete, where they will collaborate, and perhaps where they can Asset swap?
Today’s deal certainly appears to indicate at least some other relationship in this respect.
“I am very excited to announce this collaboration with Amazon that will help Grubhub continue with our long-term mission to connect more diners with local restaurants,” said Adam DeWitt, CEO of Grubhub. “Amazon has redefined convenience with Prime and we are confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers.”