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Amazon strikes a deal with Grubhub, which is struggling with food delivery

Financial turmoil in the food industry offers new opportunities for Amazon.

The e-commerce giant on Wednesday entered into an agreement with Grubhub that allows Amazon Prime subscribers in the US to waive delivery fees on orders from certain restaurants, according to a statement from Just Eat, the Dutch company that owns Grubhub.

The agreement gives Amazon the opportunity to buy over a 2 percent stake in Grubhub at an undisclosed, but insignificant price, the statement said. Amazon may also purchase an additional 13 percent stake in the company at an unspecified “formula-based price”[ads1];, which depends on Grubhub reaching certain performance targets such as adding new customers.

In 2021, Grubhub lost 403 million euros, or around 410 million dollars. It said the Amazon deal will increase earnings and cash flow from next year. The agreement with Amazon is automatically renewed every year, unless one side decides to withdraw.

Just Eat highlights the changing views of food delivery companies, and explores ways to download Grubhub of about two years after paying $ 7.3 billion to buy it. The outlook for the industry has been severely damaged as pandemic restrictions have been lifted and demand for restaurant delivery has declined. Lack of labor and increased government regulation have led to new costs. In a recent research report, analysts at Berenberg Bank estimated that Grubhub would achieve less than $ 1 billion in sales.

Just Eat, the largest food delivery platform in Europe, said they would continue to explore a partial or complete sale of Grubhub amid pressure from investors to improve their business. Grubhub controls about 13 percent of the U.S. meal delivery market, up from nearly 60 percent for DoorDash and 24 percent for Uber Eats, and Grubhub records lower sales per customer than its main rivals, according to Bloomberg Second Measure. Just Eats’ share is down more than 60 percent this year, even after a big jump in the Amazon news on Wednesday.

Amazon also owns a stake in Deliveroo, a struggling UK food delivery service whose shares are down around 50 percent this year. Delivery Hero, another European food delivery company, has seen its share price fall more than 60 percent. The shares of Uber and DoorDash are down almost 50 percent this year.

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