Challenging Food Delivery Services, Amazon Makes Major Investment in Deliveroo

Photo Credit: Robert Stevens/AP/Shutterstock
May 17, 2019

By Spencer Feingold

Amazon is leading a $575 million funding round for Deliveroo, a London-based food delivery platform. The investment brings Deliveroo's total money raised to date to $1.53 billion, the company announced Friday.

Amazon's investment pits the e-commerce giant against major competitors, such as Uber Eats, DoorDash, and Seamless, in the crowded market of food delivery.

"Any industry where someone is doing great, someone else is ripe to take some cash, and get that investment and blow past them," Peter Shankman, a marketing and branding consultant, told Cheddar in an interview Friday.

Founded in 2013, Deliveroo now operates in over 500 towns and cities in 14 countries ranging from Ireland to Kuwait to Taiwan. The company has partnered with over 80,000 restaurants and employs 2,500 people around the world. Deliveroo said the infusion of funds will be put towards investments such as growing the platform's engineering team, increasing support for partner restaurants, and expanding into new markets.

"Amazon has been an inspiration to me personally and to the company, and we look forward to working with such a customer-obsessed organisation,"Will Shu, Deliveroo's founder and CEO, said in a statement. "This is great news for the tech and restaurant sectors, and it will help to create jobs in all of the countries in which we operate."

With its investment, Amazon ($AMZN) is making a significant push into a quickly growing industry. Grubhub ($GRUB), one of the oldest food delivery pioneers, reported $5 billion in gross food sales in 2018 and serves nearly 20 million active diners. The company's growth has been fueled by acquisitions of other brands such as Tapingo and AllMenus.

Uber Eats has also grown significantly in recent years and has become a key component of Uber's ($UBER) business model.

"It is going to be a race to the bottom on price and which company can afford to have the lowest margins possible," James Cakmak, a contributing editor at Techonomy Media, told Cheddar on Friday.

Deliveroo's current Series G funding round, which will be completed in the coming months, also includes T. Rowe Price, Fidelity Management and Research Company, and Greenoaks.

"We're impressed with Deliveroo's approach, and their dedication to providing customers with an ever increasing selection of great restaurants along with convenient delivery options," Doug Gurr, Amazon's UK manager, added in a press release.

Deliveroo did not disclose how much exactly Amazon contributed to the $575 million.

"Amazon getting into this was only a matter of time. I'm surprised it didn't happen sooner," Shankman said.