Amazon sparks feeding frenzy in the takeaway food market

published 23 May 2019

948_MW_P07_Shares_Top — Amazon considers Deliveroo a tasty morsel

UK food-delivery platform Deliveroo has announced that Amazon has become a major investor in its business through a new $575m funding round, notes Sam Shead in Forbes. This increases the overall amount invested in Deliveroo to $1.53bn, giving it "a war chest to cement its position" at home and financefurther growth. Amazon, meanwhile, is"buying its way back into the meal-delivery market", which is expected to be worth$365bn by 2030, after its own service,Amazon Restaurants, "floundered".

Amazon's investment in Deliveroo couldwell be the "amuse-bouche" for a broadertie-up, says Alex Webb on Bloomberg, and there are "a lot of reasons [why that] would make sense". First, it's a good idea for Amazon to maintain a foothold in the food-delivery markets as rival food platforms in Latin America and India "are already extending into products such as pharmaceuticals and groceries, and that approach could spread to other regions".

Another, more positive reason is that combining deliveries from Amazon and Deliveroo means both companies could make more efficient use of their delivery network during slack periods.

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An Amazon-Deliveroo collaboration maybe good news for the two firms involved, but their competitors won't be happy, says Dominic Walsh in The Times. Indeed, shares in Just Eat fell by 8% on the news, as it faces "further pressure on delivery fees" and more discounting. Further bad news comes from Uber's initial public offering last week. The transportation network company will probably use at use at least some of the $8.1bn raised to expand its Uber Eats delivery business.

Just Eat isn't the only firm under pressure in a sector "that epitomises the promise and profligacy of Silicon Valley", says Stephen Wilmot in The Wall Street Journal. Indeed, when news of Amazon's investment hit the wires, "shares in Delivery Hero and Takeaway.com, which offer similar services to Deliveroo in other markets, also cratered". Mergers to shore up profitability are unlikely while money is "flowing so freely" into the sector; for now, investment will finance further rapid growth.

Do we still need restaurants?

Matthew graduated from the University of Durham in 2004; he then gained an MSc, followed by a PhD at the London School of Economics.

He has previously written for a wide range of publications, including the Guardian and the Economist, and also helped to run a newsletter on terrorism. He has spent time at Lehman Brothers, Citigroup and the consultancy Lombard Street Research.

Matthew is the author of Superinvestors: Lessons from the greatest investors in history, published by Harriman House, which has been translated into several languages. His second book, Investing Explained: The Accessible Guide to Building an Investment Portfolio, is published by Kogan Page.

As senior writer, he writes the shares and politics & economics pages, as well as weekly Blowing It and Great Frauds in History columns He also writes a fortnightly reviews page and trading tips, as well as regular cover stories and multi-page investment focus features.

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