How Amazon's Deliveroo Takeaway Depends On Dark Kitchens (And Not Breaching Competition Rules)
Amazon’s investment in Deliveroo and an expanding network of “dark kitchens” will be subject to a full investigation for potential breach of competition rules, authorities have decided.
After a summer spent digesting the response to a consultation on whether to investigate the Amazon buyout of Deliveroo, the UK Competition and Markets Authority has decided to launch a full inquiry.
Amazon took away the largest slice of a £450M Deliveroo funding round in May.
The relationship with Amazon turns on the scope to expand Deliveroo’s “dark kitchen” network in London.
Deliveroo opened its Deliveroo Editions kitchens in May 2017. There are fewer than 20 in the UK, predominantly in London. The 2.5K SF units are in locations chosen to keep pace with demand, and to meet the food choices of each locality (roughly a 2-mile radius from the kitchen).
Amazon’s contribution to the Deliveroo funding round is expected to mean an expansion of the modest Deliveroo dark kitchens network. That Deliveroo is expert in last-mile delivery, something that is often expensive for Amazon, suggests some obvious synergies over both businesses.
The sector is now attracting £20B investment from tech investors such as SoftBank and Naspers in the expectation that dark kitchens can yield serious efficiencies in a fast-growing sector. Former Uber chief executive Travis Kalaick has set up his own company in the sector.
The CMA is investigating the acquisition by Amazon.com NV Investment Holdings LLC of certain rights and a minority shareholding in Roofoods Ltd. (trading as Deliveroo). A decision on the first phase enquiry under the Enterprise Act 2002 is due by 11 December. This will establish whether there is a “substantial lessening of competition”.
Amazon purchased the Deliveroo stake after a short-lived experiment with its own takeout food service. The Amazon Restaurants concepts traded for two years, closing in December 2018.
"We believe this minority investment will enable Deliveroo to expand its services, benefiting consumers through increased choice and creating new jobs as more restaurants gain access to the service,” an Amazon spokesperson said, The Caterer reports.
Deliveroo insisted there is already competition in the food delivery sector.
The main UK competitors are Just Eat and Uber Eats. The three main players have stimulated demand for so-called “dark kitchens” used to prepare takeway food, chosing 2K to 5K SF units in inner urban areas.
Speaking to ShD Logistics in July JLL's Head of Industrial Research Jon Sleeman said: "This level of expansion by Deliveroo and its rivals is not insignificant. There could be far more significant users of industrial floorspace in the future."
