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Amazon Invests in U.K. Food-Delivery Startup Deliveroo --Update

17/05/2019 1:34pm

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By Parmy Olson 

LONDON -- - Amazon.com Inc. is investing in British food-delivery company Deliveroo, becoming one of the startup's biggest investors and giving it additional firepower against Uber Technologies Inc.'s Uber Eats service in the battle to meet growing consumer demand for delivered meals.

Deliveroo, whose delivery bikes are almost as common a sight on the streets of London as the capital's black cabs and double-decker buses, competes with Uber Eats and other services in the U.K. and 13 additional markets.

Deliveroo said Friday it raised $575 million in a recent funding round, led by Amazon. Investment firms T. Rowe Price Group Inc. and Fidelity Management and Research Co. also contributed. Amazon and Deliveroo didn't disclose how much the e-commerce giant invested, or give a valuation.

The food-delivery startup said the fundraising brings the total amount of money it has raised to $1.53 billion. Deliveroo was valued at around $2 billion during its previous funding round in September 2017, when it raised $482 million, a spokesman said.

Deliveroo makes money by charging restaurants a commission of roughly 10% to 20%, while customers also pay the company a flat fee of around GBP3 ($3.80) per order. Deliveroo isn't profitable globally but is in London and other U.K. cities where it has been present the longest, a spokesman said. The service launched in London in summer 2013, three years before Uber Eats launched in the U.K. capital.

Deliveroo doesn't have a presence in the U.S. but operates in various markets across Europe, Asia-Pacific and parts of the Middle East.

Online-food delivery is becoming an increasingly a competitive business. In the U.S. there is a hotly contested battle between companies including Grubhub Inc., DoorDash Inc. and UberEats, all seeking to partner with restaurants and grocers to deliver food within an hour.

Coordinating drivers is costly and many restaurants are struggling to see financial benefits, but Amazon's investment underscores the long-term promise big investors see in online delivery. Uber at one point considered an investment in DoorDash, The Wall Street Journal has previously reported. Amazon also tried to run its own restaurant-delivery service in the U.K., launched in 2016, but closed it late last year.

"We're impressed with Deliveroo's approach," said Doug Gurr, Amazon U.K.'s country manager, adding "we're excited to see what they do next."

Deliveroo said it would use the new money to grow its engineering team in London and expand further into markets where it already operates.

Shares in rival food-delivery companies, including Just Eat PLC and Delivery Hero SE, fell Friday.

Deliveroo's Chief Executive William Shu co-founded the company in 2013 after working as an investment banking analyst for Morgan Stanley in London. Mr. Shu worked as one of the company's first delivery drivers for months to learn how to plan the most efficient routes.

The company's original model involved dispatching delivery drivers to restaurants who didn't have their own takeout service. In recent years it has expanded by setting up its own kitchens where restaurant-operators can cook food for delivery. It now has 215 such kitchens. Deliveroo works with about 80,000 restaurant and takeout outlets.

In Singapore, the company has experimented with expanding its kitchen service to allow customers to dine in an area where several of Deliveroo's restaurant partners serve food under one roof. Customers can order through the Deliveroo app.

For Amazon, the investment marks the retailing giant's latest overseas bet.

Amazon has long been expanding overseas, building revenue for its global online shopping platform, but also buying or joining with foreign local firms. The Journal reported earlier this year, Amazon is in talks to merge its e-commerce business for goods imported into China with a Chinese competitor, NetEase Inc.'s Kaola. In 2004, it bought Joyo.com, at the time the China's biggest online vendor for books, video and music. In 2017, Amazon bought Dubai-based Souq.com for $580 million.

Deliveroo said the investment from Amazon would be completed in the coming months, following regulatory approvals.

 

(END) Dow Jones Newswires

May 17, 2019 08:19 ET (12:19 GMT)

Copyright (c) 2019 Dow Jones & Company, Inc.

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