Dive Brief:
- Just Eat Takeaway and Amazon have entered into a commercial agreement in which Amazon Prime members can sign up for a free, one-year Grubhub+ membership starting Wednesday, according to a press release.
- As part of the agreement, a subsidiary of Amazon will receive warrants over 2% of Grubhub’s fully diluted common equity. Amazon could receive warrants up to another 13% of Grubhub’s fully diluted common equity if the agreement fulfills certain performance conditions, namely the number of new customers it attracts to Grubhub.
- While this partnership is expected to build Grubhub+ membership, Just Eat Takeaway said it was still actively exploring the partial or full sale of Grubhub.
Dive Insight:
Partnerships between third-party marketplaces and credit card companies aren’t new — Uber Eats and DoorDash, have entered such agreements to offer rewards and access to food delivery subscriptions for card holders. But Grubhub’s partnership with Amazon offers unique value and provides access to a significant number of customers. As of Q2 2021, Amazon Prime was estimated to have about 153 million members in the United States.
In addition to adding value to its Prime membership, this partnership allows Amazon to get back into restaurant food delivery. The company dabbled in the space several years ago, but folded its operation in 2019. At its peak, Amazon Restaurants was in over 20 U.S. cities and London, but with Grubhub+ Prime members will have access to food delivery in 4,000 cities. Grubhub+, which typically costs $9.99 per month, provides members with $0 delivery fees from hundreds of thousands of restaurants and access to member-only perks and rewards.
“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,” Adam DeWitt, CEO of Grubhub, said in a statement.
Grubhub has been working on building market share in the U.S. for several years after DoorDash surpassed it in 2019. As of May, DoorDash held 59% of the share of monthly food delivery sales, with Uber Eats taking 24% of market share, according to Bloomberg Second Measure data. Grubhub came in at 13% market share.
Grubhub has been building more relationships with enterprise restaurants, such as its partnership with Brinker International this year, and has expanded into new channels, including convenience stores, hotels and stadiums.
JET said it expects its agreement with Amazon to have a neutral impact on Grubhub’s 2022 earnings and cash flow. The company expects earnings and cash flow to be accretive from 2023 on.
