Amazon.com Inc.(AMZN.O) is leading a US$575 million investment in Deliveroo, buying a slice of the fast-growing startup and pitting it directly against Uber Technologies Inc. (UBER.N) in a fiercely competitive European food delivery industry.
The London-based startup, which has raised US$1.53 billion to date, will use the cash infusion to expand its technology team and network and compete against the likes of Just Eat Plc and Uber.
Consolidation has been heating up in the food delivery sector. Deliveroo rival Takeaway.com NV agreed to acquire the German businesses of Delivery Hero SE for approximately 930 million euros (US$1 billion) in December, while Uber was in early talks to buy Deliveroo, Bloomberg reported in September.
The U.K. food delivery marketplace -- Deliveroo’s home market -- is arguably the most competitive. Amazon closed down its London-focused food delivery business last year, and shares in Just Eat dropped nearly 11 per cent on Friday, their biggest drop since March 2018. Takeaway.com fell as much as 6.5 per cent, while Delivery Hero SE was down four per cent.
What Bloomberg Intelligence Says
Amazon’s investment should accelerate Deliveroo’s scale gains in Europe, heightening Just Eat’s investors’ concerns about slower order growth in its U.K. home market (50 per cent of its business). Yet Just Eat’s lead in smaller cities and with independents (80% of U.K. orders) gives it breathing space over the still-unprofitable Deliveroo, which has been slower at gaining share outside larger urban centers.
Diana Gomes, consumer analyst
Amazon will be joined in the Series G funding round by existing backers T Rowe Price, Fidelity Management and Research Co. and Greenoaks, Deliveroo said in an emailed statement.
Amazon has signaled its growing ambitions in food with Prime Now, which offers deliveries to major British cities within two hours. But it faces stiff domestic competition from the likes of Ocado Group Plc, an online grocery pioneer that licenses its technology to the likes of Kroger Co. and aims to halve that time with a service called Zoom.
Deliveroo said the new funding will partly go towards new innovations in the food sector, for example through delivery-only kitchens, as well as new formats.
Uber Eats and Deliveroo are also battling for so-called virtual restaurants, where eateries lease kitchen space to prepare food for couriers. With no dining rooms or wait staff, these outfits pop up where food delivery companies expect demand, and sell their meals through Uber Eats or Deliveroo’s app.
Amazon’s investment is also one of its rare forays into the region. In 2010, 3i Group Plc sold BuyVIP.com, a private online shopping club, to Amazon for US$96.5 million.