Amazon has been bullish on its food delivery expansion for a few years now. Back in 2019, it sought to build its own cost-intensive food delivery platform, but now it has adopted a new strategy. the-amazon-and-just-eat-takeaway-partnership
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The Amazon and Just Eat Takeaway Partnership 

Amazon and Just Eat Takeaway (JET), which owns Grubhub in the United States, recently announced an investment and partnership where the former would provide free Grubhub+ memberships to its Prime users for a year. It is estimated that Amazon could take up to a 15% stake, which roughly translates to hundreds of millions of dollars under this new partnership.

As per the details that surfaced post the big announcement, Amazon can choose a 2% stake in Grubhub for a minimal price or it can buy up to 13% of its shares at a formula-based price. This would be contingent upon how many new customers Amazon is able to direct towards Grubhub.

The deal is touted to drive significant adoption of Grubhub's subscription now that the service has easy and full access to Amazon's 200 million plus Prime users. This is a massive opportunity for the food delivery platform that had only 33 million total active users in April 2021.

"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. 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," said Adam DeWitt, CEO, Grubhub. how-does-the-grubhub-subscription-benefit-prime-members
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How does the Grubhub+ subscription benefit Prime members? 

When Grubhub+ launched in 2020, it was hailed as the Amazon Prime of food delivery. Much like other loyalty programs, the subscription service offers members free delivery on orders along with other benefits. The annual charge for the service was pegged at $9.99 per month.

Amazon Prime members can now avail themselves of the Grubhub+ subscription for free for a year.
Orders that cost more than $12 will be free of delivery charges. The subscription, much like the Prime membership fee, will be renewable on an annual basis. A subsidiary of Amazon will receive warrants (exercisable at a de minimis price) over 2% of Grubhub's fully-diluted common equity, according to the statement published by Grubhub. their-history
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Their History 

This partnership is not a first in either Grubhub or Amazon's history. The two companies joined forces about a year ago to offer Grubhub+ subscriptions to Amazon Prime Student members. Speculations suggest that the limited-time offer worked well for the two companies and possibly laid the foundation for this partnership.

Amazon has been trying to enter the food delivery space for some time now. It has also, on other occasions, floated itself as a potential player in similar deals. About a year ago, the e-retail giant forged ties with the British food delivery company, Deliveroo, to offer a similar subscription perk to its Prime users. Amazon said that the free food delivery subscription was its way of showing gratitude to its members. "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," said Jamil Ghani, vice president, Amazon Prime, in a statement.

A probe from the Competition and Markets Authority, citing issues of higher prices and lower-quality services, forced Amazon to pull out. Its recent investment in Grubhub is yet another effort by the company to enter the food delivery space. grubhubs-dwindling-numbers
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Grubhub’s Dwindling Numbers

Amazon's failure to enter and sustain a commanding position is a testament to the complicated economics of food delivery. Grubhub, too, has been struggling with dwindling sales and order values.

Grubhub lost $410 million and was acquired by JET (Just Eat Takeaway) last year. The company has been on the lookout for a strategic partner or buyer, and the search continues despite the Amazon partnership. The company said, "It continues to actively explore the partial or full sale of Grubhub." why-is-jet-looking-to-sell-grubhub
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Why is JET looking to sell Grubhub?

The highly competitive and low-margin food delivery space has only further been bruised by the pandemic. Grubhub's main rivals remain Doordash and UberEats in the United States, which control 60% and 24% of the US food delivery market, respectively. According to Bloomberg Second Measure, Grubhub has consistently recorded lower sales per customer than its competitors on its Mobile App.

Grubhub recorded 89.6 million orders in North America in its Q1, a decline of 5% from the same period a year ago, when desperate pandemic buying kept many delivery businesses afloat. Though revenue seems to have grown by 3%, the company's constant currency declined by 5%.

Amid pressure to improve its numbers, JET continues to look for opportunities for the partial or full sale of Grubhub. In a recent report, analysts at Berenberg Bank estimated that the sale of Grubhub would get JET less than a billion dollars.

JET expects its partnership with Amazon Prime to have a neutral impact on Grubhub's earnings and cash flow this year. It is touted to become accretive only in 2023 or later. As per the agreement, the partnership is slated for renewal on an annual basis unless one of the two players decides to pull out.

For Prime members, however, the partnership only adds to the benefits of their membership with Amazon. Streaming videos, access to quick and fuss-free grocery delivery, and free and faster product deliveries now come with a Grubhub+ membership. It's a sweet deal considering a Prime membership costs $139 while Grubhub+ members need to pay $9.99 every month! how-will-this-change-the-food-delivery-landscape
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How will this change the food delivery landscape?

While the investment marks Amazon's re-entry into the Food Delivery space in the United States, the partnership is touted to be a win-win for both companies. While Grubhub gets access to millions of new users, Amazon will establish a stronger foothold in the space. Amazon, most certainly, has the ability to change the landscape by making it harder for restaurants to drive first-party ordering.