Amazon invests in GrubHub, it will now add food delivery to its Prime services

In a deal announced on Wednesday, Amazon agreed to purchase a share in Grubhub in exchange for a one-year membership for subscribers to its Prime service.

All American Amazon Prime subscribers will receive a year of free access to Grubhub+, a $10/month membership service that enables users to place food orders with no delivery expenses, according to Grubhub's Dutch parent company Just Eat Takeaway.

Just Eat anticipates that the agreement will increase Grubhub+'s user base without affecting the business's cash flow for the current year.

Unless one of the two companies decides to cancel it, the agreement between Amazon and Just Eat will automatically renew each year.

According to the European food giant, the collaboration gives Amazon the chance to purchase a 2 percent ownership in Grubhub. Depending on specific performance indicators, such as the amount of new customers recruited, Amazon may be able to expand its overall ownership in Grubhub to 15%.

Following the deal's official announcement, Just Eat's shares, which are listed on the Amsterdam Stock Exchange, have increased significantly in value; during early afternoon trade, they were up 18.84%.

Shares of other delivery service providers fell after news about the agreement. In pre-market trade, shares of DoorDash tumbled as much as 8%, and Uber's stock dropped more than 3%.

Amazon is adding more benefits to its Prime membership program, which has more than 200 million subscribers and already offers several advantages connected to food, such as Whole Foods grocery store discounts. With some Grubhub orders, Prime members will no longer be charged for delivery, and they will also have free access to other perks of Grubhub's loyalty program.

According to Amazon, there are hundreds of thousands of restaurants offering free delivery as part of Grubhub Plus in more than 4,000 US cities. Grubhub will automatically begin charging $9.99 per month for continuous access when the year is out. The deal is still available to current Grubhub Plus members and will be implemented at the beginning of their subsequent billing cycle. Grubhub Plus is also immediately cancelled when Prime subscription is cancelled.

The transaction comes as Netherlands-based JustEat, under pressure from stakeholders to grow its business, considers selling Grubhub. The value of Just Eat's stock has decreased by more than 60% this year.

Amazon had already experimented with giving Prime members access to food delivery benefits. It launched a partnership with European delivery service Deliveroo in September of last year, giving Prime members in the UK and Ireland a year's worth of access to Deliveroo Plus.

This would not be Amazon's first attempt at the food delivery business. In 2015, the company launched Amazon Eateries, a service that let Prime members in a number of American cities purchase food delivery from nearby restaurants. However, the business was unable to compete with services like Grubhub, Uber Eats, and Postmates, and was ultimately forced to close in 2019.