Is Amazon plotting a takeaway takeover?
£450m Deliveroo deal sparks fear it will devour UK market
AMAZON has joined the takeaway food wars with a huge investment in Deliveroo.
The giant US online retailer was the biggest investor as the British meal delivery company raised £450million from new and existing backers to fund its expansion.
The tie- up with Amazon spooked Deliveroo rivals Just Eat and Uber Eats amid fears the American titan is plotting a full blown assault on the food delivery market.
The investment in Deliveroo, which was founded in 2013, comes around six months after Amazon axed its own takeaway delivery service in London.
It wound up Amazon Restaurants UK after just two years, in a rare failure for the firm.
Experts believe Deliveroo is worth up to £3billion. The private company, which has its headquarters in London, did not disclose how much of the £450million announced yesterday came from Amazon or how large a stake the online retailer acquired.
But the firm’s move yesterday provoked speculation that Amazon might now consider buying Deliveroo outright. Greg Lawless, an analyst at stockbroker Shore Capital, said: ‘ Today’s news will send shockwaves through the UK food service sector, given the potential firepower and distribution capabilities that Amazon has at its disposal.
‘It has always felt a question of when, not if, Amazon would enter the food service arena. Whether this leads to an outright acquisition of Deliveroo in time, remains to be seen.’
The share price of Just Eat – the UK’s largest delivery company – plunged by as much as 10 per cent after Deliveroo’s announcement yesterday, in a sign that the stock market believes the Amazon investment represents a sizeable threat. Shares in some of its European rivals, such as Berlin-based Delivery Hero and Dutch company Takeaway, fell by 6 per cent.
In addition, Uber’s stock fell by 2 per cent in New York. Although Uber’s main service is still its taxi services, its Uber Eats division is a key growth area for the company.
Britain’s fast- expanding food delivery sector was worth an estimated £8.1billion last year. More and more people are opting for the convenience of ordering online, often using an app, and having the meals delivered to their door by a courier on a motorcycle or bicycle.
Deliveroo, which operates in 500
‘Investing and evolving rapidly’
towns and cities in more than a dozen countries, said it would use the extra cash raised to fund international expansion and its deliveryonly kitchen business. These are not connected to a restaurant, which cuts costs considerably.
Julie Palmer, a partner at consultancy services firm Begbies Traynor, said: ‘The partnership comes at a time when Deliveroo and its competitors, Uber Eats and Just Eat, are investing and evolving rapidly as they continue to grab market space from each other.
‘Despite having failed with its own service, Amazon knows the potential that is still to come from this growing market and has put its money where its mouth is.’
Deliveroo was founded by Will Shu and Greg Orlowski. Mr Shu, an American investment banker, came up with the idea while working at Morgan Stanley’s office in London. He was surprised that so few restaurants delivered when he was working late at night.
Mr Shu, 39, said: ‘Amazon has been an inspiration to me personally and to the company, and we look forward to working with such a customer-obsessed organisation.’