Amazon tried but eventually gave up building its own costly competitor Grubhub and DoorDash in the US back in 2019. Now that it’s been three years, it’s taking a different approach to tackling the space to build out an extra sweetener to incentivize more people to sign up for its Prime subscription service. Today, e-commerce giant Just Eat Takeaway – which owns Grubhub in the US – announced an investment and partnership that Amazon will offer Free membership up Grubhub+ for a year for Prime members in the country and get equity in Grubhub potentially worth hundreds of millions of dollars.
Grubhub+, when it launches in 2020, is describe is the “Amazon Prime of Food Delivery”: like other loyalty programs run by other delivery services, it’s a subscription service where members get free shipping on orders and potentially other bonuses. It is usually charged $9.99 per month.
The commercial terms of the deal look like it will give Amazon a stake in JET (as Just Eat Takeaway for its name).
Specifically, it will include a provision to renew the agreement annually (just like a Prime subscription!) and that “an Amazon subsidiary will receive a warrant (which can be exercised at a minimum price).” more than 2% of Grubhub’s fully diluted common stock. “
It also notes that “Amazon will also receive warrants (exerciseable at a formula-based price) of more than 13% of Grubhub’s fully diluted common equity, the dispute of which must be met. meet certain operating conditions, primarily the number of new consumers delivered through the trade agreement. “
Those actual values will vary, but as of December 31, JET says that tHis total assets at Grubhub were €6,521 million ($6.7 billion, down from the $7.3 billion the company paid in 2020) and a pre-tax loss for the 12 months ended. that’s 403 million euros. Doing the math, the result is the first set of warrants valued at around $134 million, with performance-based warrants worth $870 million.
Just Eat Takeaway – a food delivery giant that includes both of those international brands, plus Grubhub in the US, among others – has been under some pressure in its US business in the past few weeks. in recent times, where they have had to compete with the likes of Uber Eats and Doordash and many other outfits in the highly competitive and often low competition space. In a trading update from April (most recent figures), it noted that North America Q1 orders were 89.6 million, down 5% year-on-year (when the pandemic bought many delivery ships). Revenue on paper appears to have grown 3% but in constant currency it is also down 5%.
At the same time, the company reassessed its ownership of Grubhub. It Fierce controversy acquired operations in 2020 for $7.3 billion, but as of May of this year, it has weighing options for business. It confirmed today that this remains the same: “The company, together with its advisors, continues to actively explore the sale of part or all of Grubhub,” it said in a statement.
JET notes that the deal is expected to expand Grubhub+ membership, although it does not disclose current membership numbers; and it will have a “neutral effect” on Grubhub’s 2022 earnings and cash flow, with a positive impact from 2023 onwards.
This is not the first time the two companies have danced together. About a year ago, Amazon started offers Grubhub + free registration for one year for Amazon Prime Student members. It’s unclear how well that partnership went, though today’s news seems like an extension of that, so it’s most likely positive overall.
However, sometimes those dances are not very harmonious. In England, where Amazon withdrew of the original Restaurant service as it did in the US, it has also returned to restaurant delivery in a similar partnership, but this time with JET competitor Deliveroo , offering a free year of Deliveroo Plus to its Prime members in the country. Deliveroo Plus – you guessed it – Deliveroo takes on the free shipping / membership subscription model.
Amazon is a part owner of Deliveroo. Given JET’s broader picture of its business in the US and the fact that Amazon clearly still sees a lot of opportunity in building more ropes for its delivery and subscription beast, It’s interesting to see how and where these three companies will continue to compete, where will they cooperate and maybe where they could potentially swap assets?
Today’s agreement certainly points to at least some more constraints in that regard.
Adam DeWitt, CEO of Grubhub, said: “I am extremely pleased to announce that this partnership with Amazon will help Grubhub continue our longstanding mission of connecting more diners to restaurants. local restaurant. “Amazon has redefined convenience with Prime, and we’re confident this offer will help new diners understand the value of Grubhub+ and drive more business for our restaurant partners and customers. our driver.”