Amazon (AMZN, $114.33) has shown that it loves to grab a takeout just as much as anyone. The online retailer has taken a 2% stake in Just Eat Takeaway.com’s (JTKWY, $3.20) struggling US subsidiary, Gruhub, giving Prime members access to the service for a year. Just Eat, Europe’s largest meal delivery company, has watched its stock tumble 70% this year. Shareholders including Blackrock Capital, have previously demanded it sell Grubhub or find a partner. JET purchased Grubhub for $5.8 billion last year.
Amazon has an initial option to take a 2% stake in Grubhub, which could climb to 15% if certain performance conditions are met. The deal could give Grubhub a much-needed boost. The Chicago-based company was the U.S. market share leader as recently as January 2019, when it controlled 31% of food delivery sales. JPMorgan analysts claimed that the new deal with Amazon is likely to bring new customers and strengthen the firm’s position in the US.
In a statement, Grubhub CEO Adam DeWitt said he’s confident the offering will expose many new diners to Grubhub delivery. Food delivery company DoorDash (DASH, $69.36) shares sank on Wednesday The San Francisco-based startup tumbled as much as 11% in New York trading, taking the stock down more than 70% from the highs touched in November.
Why it matters
Amazon's move for Grubhub is a move by the retailer to grow an untapped area within its vast digital arsenal. Food and groceries have been one sector where Amazon has struggled to hit critical mass. By picking up Grubhub, Amazon not only allows Prime users a frictionless entry point into the product, but it also subtly nudges toward its long-term goal of teaming up with other brands on its roster. Don't be surprised to see a team-up with Whole Foods - in a bit to access its prepared foods, alongside this it also allows Amazon a window into the booming arena of virtual brands and ghost kitchens.
