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07/06/2022

Amazon takes stake in Grubhub, offers free Prime food delivery

Dan Berthiaume
Senior Editor, Technology
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Amazon now owns 2% of Grubhub.

Amazon is giving its U.S. Prime members a new perk.

Amazon has reached an agreement with Netherlands-based global online food delivery marketplace Just Eat Takeaway, which purchased Grubhub in 2020, to acquire a 2% stake in the online delivery service. As part of the deal, U.S. members of the Prime paid loyalty program can sign up for a free one-year membership in the Grubhub+ plan, which includes unlimited $0 delivery fees for orders over $12. Grubhub+ membership normally costs $9.99 per month.

Under terms of the agreement, this free Grubhub+ membership automatically renews each year unless terminated by either Amazon or Grubhub. Amazon also has the option to purchase up to a 15% total stake in Grubhub, which partners with more than 320,000 restaurants in over 4,000 U.S. cities.

This deal, which gives Grubhub a competitive advantage against DoorDash and Uber Eats, once again inserts Amazon into the highly competitive online meal delivery market (the e-tailer offers multiple online grocery delivery options). Amazon launched a restaurant delivery service for Prime members in 2015, but shuttered it in 2019.

Meanwhile, JustEatTakeaway.com expects the agreement to bolster Grubhub membership. According to a fall 2021 survey from CouponFollow, DoorDash led all meal delivery apps with a 70% usage rate among respondents, followed by Grubhub (49%) and Uber Eats (45%).

Amazon initially partnered with Grubhub in August 2021, when members of its college-focused Prime Student loyalty program were offered exclusive savings for services including Grubhub+ Student on-demand food delivery.

Since then, Grubhub has pursued delivery agreements with partners including convenience retailer 7-Eleven and reality show MasterChef Table.JustEatTakeaway.com said it is continuing to actively explore a partial or full sale of Grubhub.

Analysts told Seeking Alpha that Amazon and Grubhub are making a good deal.

"Ultimately, we expect the Amazon/Grubhub incentive program will have little impact on DoorDash’s near-term growth or margins, with DoorDash already at nearly 60% U.S. market share (while Grubhub is at just 13%, per Second Measure), but we anticipate some overhang for the stock due to the long-term potential for Amazon to re-enter the food delivery industry," said Bank of America analyst Michael McGovern.

"Grubhub has secured not just a very powerful partner, but also a very efficient acquisition channel,” said Jefferies analyst Giles Thorne. “For a hitherto stranded asset and dead-weight to the JustEatTakeaway.com equity, this is positive news.”

"Being able to give Prime members one year of Grubhub+ and no delivery fees from restaurants is our way of saying 'thank you'," said Jamil Ghani, VP, Amazon Prime. "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."

“Both Grubhub and Amazon have transformed people's lives by providing them with unprecedented choice and convenience," said Ariella Kurshan, senior VP of growth, Grubhub. "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."

“I am incredibly excited to announce this collaboration with Amazon that will help Grubhub continue to deliver on our long-standing mission to connect more diners with local restaurants,” said Adam DeWitt, CEO of Grubhub. “Amazon has redefined convenience with Prime and we’re confident this offering will expose many new diners to the value of Grubhub+ while driving more business to our restaurant partners and drivers.”