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Amazon partners with Grubhub to offer Prime customers meal delivery perks

By Catherine Thorbecke, CNN Business

Amazon Prime members in the United States can now get free meal deliveries through Grubhub as part of a growing business partnership between the two companies.

The deal, announced Wednesday, will give Amazon’s paying subscribers the option to sign up for a free one-year Grubhub+ membership (normally $9.99 a month) and receive unlimited free deliveries when they order from restaurants listed on the service.

At the same time, Amazon could become a stakeholder in Grubhub’s business. Amazon has the option to take a 2% stake in Grubhub, with the possibility to acquire up to 15% if certain business performance conditions are met, according to an announcement from Grubhub’s Netherlands-based parent company, Just Eat

For Amazon, the tie-up has the potential to broaden the appeal of its Prime service, which now costs $139 annually. It also helps bolster its meal delivery efforts. Amazon announced in 2019 that it was shuttering its short-lived restaurant delivery service in the US that delivered food to Prime members.

“Amazon has tried to build its own third-party food marketplace for years and did not have much success,” Ralph Schackart, an analyst with William Blair, wrote in a research note Wednesday. “Today’s announcement looks like a potential partnership approach to establish itself back in the space.”

Shackart also said Amazon could “look to acquire the Grubhub operations.”

In its statement Wednesday, Just Eat said it “continues to actively explore the partial or full sale of Grubhub.” Shares for Just Eat, which trade in Amsterdam, surged some 13% Wednesday.

Amazon’s latest foray into the food delivery sector comes as the industry faces new headwinds and a harsher fundraising environment. Demand for food delivery services has fallen sharply as pandemic-related business restrictions loosen and many consumers resume dining out. A labor shortage and ever-evolving regulatory landscape has also hit the sector hard in recent months.

Amazon’s moves could further upend the sector. DoorDash stock fell some 8% Wednesday morning on the news, and has plummeted around 50% since the beginning of the year. Shares of Uber, operator of UberEats, has similarly fallen about 50% in 2022, and slid more than 4% Wednesday morning.

DoorDash still dominates US meal deliveries, with 59% of the market compared to Uber Eats’ 24% and Grubhubs’ 13%, according to data published last month by Bloomberg’s Second Measure.

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