Last month it was reported that Uber was in talks to acquire Grubhub in a deal that would have given it a 50% share of the US food delivery market.
The deal is currently awaiting the approval of both sets of shareholders but if it goes through it will see the Europe-based Just Eat gain a major foothold in the US’ highly lucrative food delivery market.
Founded in 2004, Grubhub currently has a 30% share of the delivery market across the pond.
Grubhub doesn’t operate on these shores but the acquisition still has implications for the UK delivery market because it has the potential to make Just Eat a far more powerful player globally.
Consolidation in the global delivery market has been on the cards for some time. The food delivery business is highly competitive putting pressure on rival companies to grow quickly and undercut each other, which has resulted in big losses for many companies.
While profitability remains a big issue, the value of these companies are in general holding up.
According to global law firm Linklaters, share prices of a selection of food delivery businesses were up between 5% and 14% from the start of March to the end of April, in contrast to the index of European consumer companies (STOXX Europe 600 Consumer Services) which was down by 12%.
Earlier this year, Amazon’s $575m investment in Deliveroo was provisionally given the green light by the Competition and Markets Authority (CMA) after it concluded that the ongoing Coronavirus pandemic was ‘having a significant negative impact’ on the delivery company’s business.
The CMA had previously halted the deal, saying that it believed consumers would have less choice as a result of the tie up and that it would discourage Amazon from re-entering the online restaurant food market and further developing its presence within the online convenience grocery delivery market in the UK.