Restaurant delivery juggernaut claims it would collapse without Jeff Bezos’ money
Having previously blocked Amazon’s proposed investment in Deliveroo pending an investigation into its impact on food delivery competition, the Competition and Markets Authority (CMA) has provisionally approved Jeff Bezos’ funding. The U-turn comes after Deliveroo claimed it would need to “exit the market” — translation: collapse — without the $575 million (£460,816,500) investment round, according to the Verge. That investment has depreciated by around £15 million since its initial announcement in May 2019.
The full text of the CMA’s provisional decision, with confidential figures removed, says that, initially, “the Competition and Markets Authority (CMA) was concerned that the deal could damage competition by discouraging Amazon from re-entering the online restaurant food market” — and, in turn, consolidating Deliveroo’s strength alongside Uber Eats and Just Eat.
In the wake of the novel coronavirus (COVID-19) pandemic, however, the CMA says that despite Deliveroo being “in many respects, a highly successful company,” it remains “particularly reliant on continued investment to be able to support its operations” and “recently informed the CMA that the impact of the coronavirus pandemic on its business meant that it would fail financially and exit the market without the Amazon investment.” That impact is cited as “the closure of a large number of the key restaurants available through Deliveroo, and a significant decline in revenues.” The company, however, reported that over 3,000 restaurants had signed up since the outbreak in March, which, according to figures cited in the CMA decision, would represent around 10 percent of its global restaurant network.
Deliveroo’s most recent available accounts up to the end of December 2018 reported revenues of £476,167,954. It made a loss of £232,011,608 in the same period, with its model attracting investors on the promise of disrupting an entire industry despite, like Uber, existing through hundreds of millions of losses with or without a pandemic. The CMA tacitly acknowledges this question of genuine viability in its decision: “We have concluded that none of the alternative investments [new investors; existing shareholders; loans] to the Amazon investment available at that time would have put Deliveroo in a viable position to survive the Coronavirus (COVID-19) disruption,” it said.
As the orchestrator of healthy market competition, the CMA concludes that Deliveroo’s absence would cause less competition in the delivery market, even if — when the impact of COVID-19 subsides — this investment may cause the very flattening of competition that the CMA feared in the first place. Its approval remains provisional, and will not be formally decided until 11 June, by which time the situation may have evolved once again.
And in other news...
- One summation of COVID-19’s deleterious impact on the U.K. food supply chain — and how it reveals the inefficiencies and inequalities that it requires to function. [Independent]
- Oh, it’s doing the same for global food systems too. [Wired]
- Farmshops and producers with vending machines are seeing benefits from a situation in which people seek contact-free methods of purchasing. [Guardian]
- The government’s narrow list of “highly vulnerable” people told to stay at home for 12 weeks is missing hundreds out and leaving them without access to food. [Guardian]
- PETA is sending the Queen a vegan Fray Bentos pie for her 93rd birthday, which feels like a dose of normality right now. Cold War Steve, come on down.
- Good tweet:
I think it might be time for a Campari soda and a hula hoop or two— Nigella Lawson (@Nigella_Lawson) April 18, 2020