Amazon and Grubhub strike deal to bring restaurant delivery to Prime members

July 7, 2022

Amazon  has agreed to add Grubhub to its suite of Prime services in the United States,  in a deal that also gives the e-commerce giant the option to acquire a small stake in the parent of the food-ordering company, reports The Wall Street Journal.

Grubhub’s parent, Netherlands-based Just Eat Takeaway  tells the Journal that Amazon has an initial option to take a 2% stake in U.S.-based Grubhub; and U.S. Prime members can have their delivery fees waived from select restaurants.

What’s more, Amazon has the opportunity to bump up its total stake to 15% of Grubhub, based on performance terms focused on adding new customers, Just Eat notes.

Just Eat still will own Grubhub and will continue exploring a full or partial sale of Grubhub, it comments. The deal will renew annually unless either Amazon or Just Eat terminates it and it is expected to materially add to Grubhub’s business next year, Just Eat said.

The deal brings Amazon further into food-related services through its Prime membership program. The online commerce giant has provided grocery benefits to Prime members under its Whole Foods Market division as a way to make its annual subscription program more valuable.

“The value of a Prime membership continues to grow with this offer,” Jamil Ghani, vice president of Amazon Prime, told the Journal.

Amazon last year said that millions of Prime members in the U.K. and Ireland would get discounts through U.K. food delivery firm Deliverooin which Amazon invested in 2019.

Amazon will offer Prime members a subscription to Grubhub’s membership program for a year—which includes free delivery from a network of restaurants, as well as other discounts.

Shares of Just Eat surged 22% in European trading on Wednesday, July 6. In early U.S. trading, shares of rival DoorDash  fell 9.9%; and Uber Technologies, another food delivery provider, declined 4.4%, with major stock indexes mixed. Amazon shares were slightly lower.

Grubhub CEO Adam DeWitt said the deal will introduce new customers to the company’s membership program and bring more business to restaurants and drivers that work with Grubhub.

Just Eat said in April that it would consider a full sale of Grubhub after acquiring Grubhub in a $7.3 billion deal that closed last year. Activist investor Cat Rock Capital Management, Just Eat’s third-largest shareholder according to FactSet, has pressed the company to focus on its European markets, and sell Grubhub.

Research contact: @WSJ