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The Spoon

Daily news and analysis about the food tech revolution

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U.K. Regulators Grant Provisional Clearance to Amazon’s Highly Scrutinized Deliveroo Investment

The U.K.’s Competition and Markets Authority (CMA) has provisionally cleared Amazon’s 16 percent investment in Deliveroo on the basis that the deal would not likely “damage competition in either restaurant delivery or online convenience grocery delivery,” according to a statement from the CMA.

Amazon was set to be the largest contributor to a $575 million investment announced in May 2019. By July of the same year, British regulators were scrutinizing the deal, claiming there were “reasonable grounds” to suspect that Amazon and Deliveroo would “cease to be distinct” were it to go through. Many months and a pandemic later, the CMA provisionally approved the deal in April 2020. Grounds for approval were that, thanks to the pandemic decimating the restaurant industry, Deliveroo would have had to exit the food delivery market without Amazon’s investment.

Though it seems the stakes are actually less dire for Deliveroo. The CMA said today that it has revised its provisional findings from April and found that “Deliveroo would no longer be likely to exit the market in the absence of this transaction.”

Even so, a lot has changed in the third-party since Amazon first announced its plans to invest in Deliveroo. The biggest development (besides COVID-19) has been Takeaway.com’s acquisition of Just Eat that was approved in April and created one of the largest food delivery companies in the world. That deal alone makes the U.K. food delivery market more competitive, and renders Amazon (a little) less of a behemoth come to gobble up marketshare. Uber Eats also operates in the U.K., as do a handful of smaller players. 

Another concern of the CMA’s was that through its investment, Amazon would cease to be competitive with Deliveroo. Thanks in large part to the Just Eat-Takeaway.com deal, that appears to no longer be the case.

“Looking closely at the size of the shareholding and how it will affect Amazon’s incentives, as well as the competition that the businesses will continue to face in food delivery and convenience groceries, we’ve found that the investment should not have a negative impact on customers,” Stuart McIntosh, Inquiry Chair for the CMA, said in a statement.

The CMA will now ask for views on the new findings by July 10. From there, it will make its final decision, which is due by August 6, 2020.

Takeaway.com and Just Eat’s $7.6B Merger Approved

The U.K,’s Competition Markets and Authority (CMA) has approved Takeaway.com’s £6.2 billion ($7.6 billion USD) takeover of British food delivery service Just Eat. The merged company also announced it had raised €700 million ($756 million) in new outside funding in the form of new shares and convertible bonds.

The deal was originally announced in July of 2019. A bidding war with tech investment firm Prosus followed shortly thereafter, which Takeaway.com won — only to have the CMA open an investigation into the deal to see if it would “result in a substantial lessening of competition” in the U.K. food delivery market. 

Takeaway.com previously operated in the U.K., but exited that market in 2016. The CMA’s investigation concerned whether the Dutch company would have re-entered the U.K. market of its own accord without the Just Eat deal. 

“In this case, we carefully considered whether Takeaway.com could have re-entered the U.K. market in future, giving people more choice,” the CMA’s mergers director Colin Raftery said in a statement. “It was important we investigated this properly, but after gathering additional evidence which indicates this deal will not reduce competition, it is also the right decision to now clear the merger.”

The approval comes just days after the CMA provisionally approved Amazon’s investment in delivery service Deliveroo, which has been under investigation for similar reasons. In the case of this deal, the approval seems more tied to the COVID-19 pandemic than anything else, with the CMA concluding that the virus is having significant enough impact on Deliveroo’s business to endanger the third-party delivery company. 

Coronavirus doesn’t appear to be the driving force behind the Just Eat-Takeaway.com deal, which was never as dangerously on the rocks as Amazon’s anyway. According to CNBC, the new funding will be used to in part pay down debts as well as pursue “strategic opportunities.”

British Authorities Open Investigation Into Just Eat-Takeaway.com Merger

Fresh off the heels of a bidding war for the acquisition of UK-based delivery service Just Eat, Takeaway.com, who also offers on-demand restaurant food delivery, faces a new opponent: British regulators.

The Competition and Markets Authority (CMA) said late last week that it is investigating the proposed Takeaway.com-Just Eat Merger to see whether the deal, worth £6 billion (~$8 million USD), would “result in a substantial lessening of competition” in the UK food delivery market, according to The Associated Press.

Specifically, the CMA is looking into whether Takeaway.com would have re-entered the UK market, which the service left in 2016, without the Just Eat deal.

This isn’t the first time the CMA has brought the hammer down on a major deal between two food delivery companies. In May of 2019, Amazon announced a major investment in Deliveroo, only to have it flagged by the Authority, who said it “presented reasonable grounds” that such a deal would make the two companies “cease to be distinct” from one another. In other words, the deal would undercut competition from other food delivery services in the UK, including Just Eat.

The Amazon-Deliveroo investigation is still ongoing, and at last check the deal was said to be in serious jeopardy.

For Takeaway.com and Just Eat, the situation seems a little less dire, at least for now. Takeaway.com said the deal would still go through but be delayed by one week. Takeaway.com said it was confident that clearance on the merger “will be obtained.”

Takeaway.com first announced its intentions to acquire Just Eat in July 2019 in an all-share deal that would create a new company, Just Eat-Takeaway.com. The company then found itself in the middle of a bidding war with Naspers-backed tech investment firm Prosus, who over the last several months has offered multiple counter bids for Just Eat.

While that bidding war was put to bed recently, it, along with this latest investigation from the CMA, underscores how fiercely competitive the food delivery market is getting, and just how thick in the middle of a consolidation process it is. With demand for off-premises orders set to drive restaurant sales for the next decade and investors applying pressure for these companies to show the third-party delivery model can be profitable, companies across the space are shutting down services, selling their operations, and, at least in the case of the big guys, gobbling up the smaller players. 

For its part, Takeaway.com said it was confident that clearance on the merger “will be obtained.” Now we’ll have to wait and see if that really does mean a simple one-week delay or if the two companies have a longer, more complicated battle on the horizon.

Week in Restaurants: WeWork Shuts Down Spacious, Just Eat Rejects Another Takeover Bid

Have I got news for you: Today is the last day you can get a free burrito from Chipotle by entering a code into Instagram. Snack on that while you also chew on a few final bits of news that happened this week in the restaurant world.

WeWork Shuts Down Spacious
Just four months after acquiring it, WeWork is shutting down Spacious, a startup that turns high-end restaurant space into coworking locations for members. The shutdown is one of many cost-cutting moves the much-maligned WeWork is making to offload businesses it has acquired over the last few years. Spacious’s whole staff — 50 employees total — have been laid off. Current Spacious customers will be given prorated refunds and discounts on some WeWork memberships, according to a statement from WeWork.

Delivery Service Just Eat Rejects a Takeover Bid — Again
Naspers-owned tech investor Prosus has once again made a hostile bid for food delivery company Just Eat. Once again, Just Eat has rejected the bid, saying its board “continues to believe that the Prosus Offer fails to reflect appropriately the quality of Just Eat and its attractive assets and prospects.” This is the third bid Prosus has made for the company in the last few months as it tries to win Just Eat away from Takeaway.com, who announced plans to acquire Just Eat in July. Prosus’ latest counter bid was for £5 billion (~$6.6 billion USD). 

Jimmy John’s Expands Loyalty Program Nationwide
Following a six-month test, sandwich chain Jimmy John’s this week did a nationwide expansion of its Freaky Fast Rewards program, which lets members build up rewards points, track them, and pay for food via the Jimmy John’s mobile app. One-tap technology in the app enables users to make in-store payments via Google Pay and Apple Pay. According to a press release, more than 1.8 million people have signed up for the program since it launched in March of 2019.

Also This Week:

  • Charlotte, NC-based chain Clean Juice has teamed up with multiple third-party delivery services to widen its off-premises reach.
  • Restaurant management platform Waitbusters integrated its online order feature with Google Search and Maps.
  • Swag alert: My friends at Nation’s Restaurant News have the definitive list of QSR-branded merchandise available this holiday season.

Food Delivery Service Just Eat Looks to Be in a $6B Bidding War

Food delivery service Just Eat just found itself at the center of a what could become a massive bidding war for the company.

The service, which is based in London and has operations in multiple countries, confirmed in July a £9 billion ($11.6 billion USD) all-stock deal to merge with Dutch delivery company Takeaway.com, saying the two companies had reached a preliminary agreement. But this week, tech investment firm Prosus, a spinoff of tech conglomerate Naspers, showed up to the party as a seemingly unwelcome third guest. Or as the Financial Times put it, Naspers “has tried to gatecrash a merger of two of Europe’s biggest food delivery groups.”

According to FT and others, Prosus had been in talks with Just Eat previously. After failing to reach an agreement, the former went to directly to Just Eat shareholders with a counter offer of £4.9 billion (roughly $6.3 million USD), in what’s called a hostile bid.

Just Eat rejected the bid, saying in a statement that it “significantly undervalues Just Eat and its attractive assets and prospects both on a standalone basis and as part of the proposed recommended all-share combination with Takeaway.com.”

Prosus offered 710 pence per share in cash for Just Eat. In comparison, Takeaway.com’s original all-stock offer from July valued Just Eat at 731 pence per share, but thanks to Takeaway’s declining stock, that number has dropped all the way down to 595 per share in the last few months.

On the surface, that would make the Prosus offer more attractive — in the short term. But Just Eat has said its decision to stand by the Takeaway deal is based on “compelling strategic rationale.” As Just Eat noted in a press release from July, when it announced the merger, the combined group has “compelling strategic logic and represents an attractive opportunity for both companies to build on the strong individual platforms of Just Eat and Takeaway.com with the potential to deliver substantial benefits to respective shareholders, customers, employees and other stakeholders.”

In other words, combining two companies who already hold a massive global presence on their own in the food delivery sector would create an entity strong enough to stand up to competition. Deliveroo raised a £450 million (~$575M USD) round this year, a sizable chunk of which came from Amazon. Uber Eats also has a massive presence across every livable continent on the globe.

Even so, shareholders still have to approve the deal. According to FT, some have “voiced opposition” to it, including Aberdeen Standard Investments and Eminence Capital, who “dismissed” the deal as grossly undervaluing Just Eat. Shareholders will vote on December 4 whether or not to approve the deal.

Prosus has stakes in multiple food delivery companies, including Swiggy and Delivery Hero, but the company isn’t yet considered a heavyweight in the food delivery sector. Its deal, while financially attractive, would likely lack the synergy Just Eat seems to think is so vital to the Takeaway merger.

At the very least, Takeaway could very well have to raise its offer price in the wake of Prosus’ counter offer, igniting a bidding war that could have a ripple effect across the industry as competition among food delivery companies heats up.

Order-Ahead Food App Ritual Expands to Europe, Hong Kong

Toronto, Canada-based mobile app Ritual, which lets users order ahead for restaurant pickup food, announced this week it is expanding service to Germany, The Netherlands, and Hong Kong.

The new markets are just the latest in what’s been a steady expansion for the company ever since it started rolling out service to the U.S. in 2017. In January, the company expanded to the UK and Australia, and said it expected to triple its restaurant count by the end of 2019.

Like many restaurant-focused mobile apps, Ritual lets users browse participating restaurants, order ahead, leave special instructions (no pickles please!), and pay within the app. On top of those fairly standard offerings, it has a few features that help it stand out from the crowd.

For one, it’s geared towards the lunchtime office crowd in a big way, thanks to a social feature baked into the app called Piggyback. Workers in the same office or location can gather within the app and decide on a restaurant. They can then choose when to order food, place their orders, and designate a person to go and pick the meal up. The app stores past orders, making it easy for teams to reorder entire meals. So if Fried Chicken Friday is a thing for your team and you want to spend less time collecting everyone’s orders, Ritual’s the app for that.

Ritual is also a way for smaller and/or independent restaurants to test off-premises ordering. The app’s pickup-only focus makes it cheaper for restaurants to participate (no drivers to pay), so they can easily gauge how much their customers want off-premises orders and which meals work best in a to-go environment.

So far Ritual has raised a total of $112.9 million, its last round being a $70 million Series C in June 2018. According to the press release, the service is now available in over 50 cities, including its new markets. The addition of Germany, Hong Kong, and The Netherlands also marks the start of the company’s goal to expand to a greater number of non-English-speaking markets in future.

Its push to European countries comes at a time when the food delivery and pickup market on that continent is seeing some serious competition. In July of this year, third-party aggregators Just Eat and Takeaway.com merged to form one of the largest restaurant-delivery services in the world. Both already had a significant presence in Europe prior to the merger. In the same month, Just Eat also acquired UK-based corporate catering marketplace City Pantry, a service that also appeals to the office crowd. And amid much competition, Deliveroo pulled out of Germany in August.

As I mentioned above, though, the simplicity of Ritual’s app could make it appealing to restaurants that can’t or don’t want to fork over fees associated with some of those other apps. The big question around Ritual’s expansion, which is yet to be answered in these new markets, is if a pickup-only app is enough to compete in today’s delivery-crazed food world.

DoorDash Heads to Montreal, Strikes National U.S. Deal With Applebee’s

It’s only the middle of the week and DoorDash has already made multiple announcements around its continued expansion up, down, and across North America.

Now that it’s service is available in all 50 U.S. states, DoorDash is heading north and expanding into its first-ever non-English-speaking territory. The third-party delivery service today announced its official launch into Montréal, a predominantly French-speaking market and DoorDash’s first in the Canadian province of Quebec.

The addition of Montreal makes DoorDash available in 78 Canadian cities, including Winnipeg, Halifax, and Saskatoon. In a press release, the company said it plans to be in more than 100 cities across Canada by the end of 2019.

DoorDash will compete in those markets with Uber Eats, which already has a strong presence in Canada. But the rideshare giant isn’t the only company DoorDash will contend with. Delivery service Just Eat has long served Canada, and its recent $10 billion merger with Netherlands-based Takeaway.com creates one of the world’s biggest online food delivery services.

Back in the States, DoorDash continued its U.S. takeover this week by striking a national partnership with Applebee’s. While Applebee’s franchisees have independently worked with the service for some time, this new partnership is an official deal between DoorDash and Applebee’s parent company, Dine Brands Global Inc.

More importantly, the partnership addresses a growing concern among restaurant chains: retaining customer data and preserving brand integrity. DoorDash will power Applebee’s delivery, but customers will be able to order directly through the restaurant’s website and mobile app.

The partnership is now active at 1,300 of Applebee’s 1,700 locations. It is not exclusive; franchisees will continue their relationships with other third-party delivery services.

DoorDash also added partnership this week with sandwich chain Potbelly, who operates across the U.S. and has a heavy concentration of locations in the Midwest.

All these moves come on the heels of DoorDash’s recent acquisition of delivery service Caviar, a deal that expands DoorDash’s already giant geographic footprint. And last week, reports surfaced that the company was in talks to secure a line of credit ahead of a possible IPO. While DoorDash hasn’t made that news officially public, should an IPO indeed happen, the company will face the same issues around profitability its already public competitors Grubhub and Uber Eats face.

Expanding to almost every Applebee’s in America probably won’t solve the profitability issue. But it is noteworthy that Applebee’s isn’t the first chain to pick DoorDash as a national partner based on its perceived long-term viability as a food delivery service. In June, Chili’s expressed similar sentiments when it inked an exclusive partnership with the service. Again, long-term viability and actual profitability are two different things, especially when you get to the public markets, but it’s certainly not going to hurt DoorDash to have as many major chains and regions in its back pocket should an IPO come to pass.

Deliveroo Shuts Down Service in Germany

In a move that underscores how competitive the food delivery landscape is getting, UK-based service Deliveroo announced it will pull its business out of Germany on August 16, according to TechCrunch.

In an email sent to Deliveroo users, the company noted it was “on a mission to create the very best food delivery service in the world,” adding that “where we cannot do this to the level that we expect and you deserve, we won’t operate.”

As TC notes, Deliveroo had shuttered services in smaller German cities about a year ago to focus on places like Berlin, Munich, and Frankfurt. The total exit from Germany is first time the company has completely shut down service in a country.

The move comes just a couple weeks after Netherlands-based delivery service Takeaway.com acquired UK-based Just Eat for about $10 billion, thus creating one of the world’s largest food-delivery companies with a leading presence in Germany along with Britain, the Netherlands, and Canada. The new company, dubbed Just Eat Takeaway.com, also has operations across Europe as well as Brazil, Mexico, and Australia. In 2018, Delivery Hero sold its German operations to Takeaway.com.

Deliveroo’s news today is no doubt in response to the massive merger, though the company said it didn’t rule out the possibility of returning to Germany at some point in the future. Deliveroo, which raised $575 million in May, said it would refocus its efforts on other markets in Europe and APAC.

The service will operate as normal until August 16, according to the email sent to Deliveroo users.