Amazon AMZN is gearing up to disrupt the booming online food delivery market as suggested by its investment in London-based company, Deliveroo.
The e-commerce giant’s acquisition of a minority stake in Deliveroo marks its comeback to the U.K.’s food delivery space from which it exited in November 2018 by winding up the operation of Amazon Restaurants in the country.
The global online food delivery market has significant potential driven by the fast-paced lifestyle that has created demand for food delivery apps and services. Further, growing proliferation of Internet and smartphone usage is aiding the adoption rate of these services globally.
Consequently, the latest initiative of Amazon holds promise as the market is expected to witness a CAGR of 9.3% over a period of 2019 to 2023, per Statista. Further, revenues are anticipated to reach from $94.4 billion in 2019 to $134.5 billion by 2023 with strengthening restaurant to consumer delivery offerings worldwide.
Amazon: A Strong Contender
Amazon’s strong retail and cloud computing footprint provides it a steady source of revenue and profits. Further, the company’s strong cash flow generation ability is expected to help it to expand rapidly in the online food delivery, where it will need to invest significantly to gain market share.
Notably, the online food delivery market is currently dominated by the likes of Uber Technologies’ UBER division Uber Eats, Grubhub GRUB, Postmates, Takeaway.com, Delivery Hero, DoorDash and Just Eat, to name a few.
Further, the search giant Alphabet GOOGL has also forayed into this market with its delivery arm, Wing, and food delivery apps.
We believe Amazon’s distribution strength is a major growth driver that will pose significant threat to incumbents in this fast growing market.
How is Google, Grubhub and Uber Placed?
Alphabet which carries a Zacks Rank #3 (Hold) is making every effort to bolster presence in the global online food delivery space on the back of its innovative technologies.
Recently, its unit, Wing, received permission from Civil Aviation Safety Authority in Australia and launched the food delivery service through drones in the country, marking the first of its kind in the world. Currently, the service is available in Canberra which delivers takeaway food, coffee and medicines.
Further, Google’s Areo app in India expanded to more cities in the country last year. Areo is a food and services delivery app.
Additionally, Grubhub recently added 5,000 enterprise locations by expanding relationships with Dunkin' Brands, Pizza Hut, NTNs and Jersey Mike's, among others. The company also inked new partnerships with Smoothie King, Halal Guys, Golden Corral and Smokey Bones. However, this Zacks Rank #3 stock faces strong competition from Amazon Restaurants and Uber Eats.
Meanwhile, Uber has gained traction in the food deliver market with Uber Eats which has a huge network of restaurants across more than 500 global cities. Currently, Uber carries a Zacks Rank #3.
Nevertheless, the robust restaurant network of Deliveroo and Amazon Restaurants positions it well to provide significant competitive pressure to the above-mentioned companies. Deliveroo delivers meals from more than 80,000 takeaway outlets across 14 countries. Hence, Amazon is well-poised to rapidly penetrate the global online food delivery market.
Currently, Amazon carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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