Amazon takes a stake in Grubhub and adds food delivery benefits to Prime

A driver for food delivery service ‘Grubhub’ rides a bicycle during a delivery in midtown Manhattan following the outbreak of the coronavirus disease (COVID-19) in New York City, July 9, 2020.

Mike Segar | Reuters

Amazon Wednesday agreed to take a stake in Grubhub as part of a deal that will also give members of its Prime membership program a one-year membership in the food delivery service.

The partnership gives Amazon the opportunity to take a 2% stake in Grubhub, the US subsidiary of Just Eat, the European food giant said. Amazon may increase its total stake to 15% of Grubhub depending on certain performance factors, such as the number of new customers added.

News of the deal sent delivery platform shares lower. Uber shares fell more than 3% and DoorDash shares plunged as much as 9%.

Amazon is sweetening the benefits of its Prime program, which has more than 200 million members and already includes some food-related benefits such as grocery discounts at Whole Foods. Prime members will now be able to waive delivery charges on select Grubhub orders and access other Grubhub Loyalty Program benefits at no additional cost.

“The value of a Prime subscription continues to grow with this offer,” said Jamil Ghani, vice president of Amazon Prime, in a report.

The deal comes as Netherlands-based Just Eat plans to sell Grubhub under pressure from investors to improve its business. Shares of Just Eat have fallen more than 60% this year.

Amazon had previously experimented with adding food delivery benefits to Prime. In September, it announced a tie-up with European delivery company Deliveroo which gave Prime members in the UK and Ireland access to Deliveroo Plus for a year. Amazon took a stake in Deliveroo in 2019.

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