Amazon receives approval for Deliveroo investment

Date : 20 April 2020

Rachel Sibson

Retail Analyst

The UK’s Competition and Markets Authority (CMA) announced Amazon will provisionally be allowed to invest in food courier service Deliveroo, considering the impact of the Coronavirus (COVID-19) pandemic.

US$575m funding round

In May 2019, Amazon became the biggest investor in a US$575m investment round in Deliveroo, with the exact amount Amazon spent unknown. Deliveroo said the new investment would contribute to expanding its London based engineering team, reaching new customers through international expansion of its delivery reach, and new innovations in the food sector.

Investing in Deliveroo could help Amazon provide more efficient last-mile fulfilment by utilising its delivery couriers. In July 2019, the CMA issued an enforcement order against the companies while it considered whether a full merger inquire was required. After initial investigation, the CMA then launched a Phase 2 investigation as it said Amazon’s investment in Deliveroo could harm competition in online convenience grocery delivery, where both companies are currently active.

Impact of the coronavirus pandemic

As a result of the continued ‘lockdown’ in the UK, many of the key restaurants available through Deliveroo have closed, resulting in a significant decline in revenues. Sales of Deliveroo’s expanded supply of convenience groceries have been limited and have not made up for the losses in its restaurants business.

After being informed that the impact of the pandemic could cause Deliveroo to fail financially without Amazon’s investment, the CMA has granted provisional approval for the investment.

The CMA’s final decision will be made on 11th June, whilst it gathers feedback on these provisional findings in the meantime.

Stuart McIntosh, chair of the CMA’s independent inquiry group, commented:

“Without additional investment, which we currently think is only realistically available from Amazon, it’s clear that Deliveroo would not be able to meet its financial commitments and would have to exit the market. This could mean that some customers are cut off from online food delivery altogether, with others facing higher prices or a reduction in service quality. Faced with that stark outcome, we feel the best course of action is to provisionally clear Amazon’s investment in Deliveroo.”

For further coverage of retailer responses to coronavirus (COVID-19)

See here for more developments from Amazon.

Retail Analysis subscribers can view our Post-COVID-19: how the pandemic will change grocery retail   report to find out more on increasing market consolidation.

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