Insiders say $2 billion startup Deliveroo is frustrated its Amazon funding is under lengthy competition scrutiny even as it helps fight COVID-19
- UK food delivery unicorn Deliveroo is frustrated that it is still undergoing a competition probe, even as it volunteers its help to the UK government to tackle COVID-19.
- Deliveroo has been under investigation since 2019, after Amazon led a $575 million investment into the company. The probe is expected to conclude in June 2020.
- The company is separately in discussions with the government about using its network of delivery riders to drop off care packages for the elderly and vulnerable as the UK remains under lockdown.
- One senior source said they were amazed the competition probe is being conducted as though the COVID-19 crisis isn't happening.
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$2 billion food delivery company Deliveroo is feeling the tension of trying to help the UK government during the COVID-19 crisis, while also being investigated by it.
Deliveroo is a London-headquartered startup which offers local food and grocery deliveries via an app, competing with Just Eat and Uber Eats in Europe and Asia. It has courted takeover interest from Uber and Amazon and, in May 2019, secured a $575 million round of funding led by Amazon.
That investment was frozen after the UK's competition watchdog, the CMA, decided the deal could reduce competition in the food delivery sector. Its in-depth probe is set to continue until June 2020 - a timeline that Deliveroo feels is too long and hampers its operations.
Insiders say the company is frustrated that it is undergoing a lengthy competition probe, even as it volunteers to help the government tackle the COVID-19 crisis.
Deliveroo is in active discussions with various UK government departments about stepping up to help during the COVID-19 crisis, though nothing has been formalized.
In particular, the company is looking at making use of its network of food delivery riders to deliver care packages to the elderly or vulnerable, sources confirmed.
"It's remarkable you still have the CMA... running the investigation as if nothing was happening," one senior source said. "We're like, 'Guys, we're trying to have riders deliver food and medicine to vulnerable people.'"
The person characterized the CMA as examining the food delivery market in isolation from the ongoing COVID-19 crisis.
"The disconnect is striking between the urgency of the [pandemic] situation for the industry, and the CMA's pace and lack of understanding. It feels like this is an exceptional time," the person said.
It isn't clear what the alternative is. The CMA's probe is independent of the government's COVID-19 discussions with Deliveroo and other tech firms. There is some hope internally, however, that Deliveroo's actions during the crisis may be taken into consideration by the CMA. And prior to the crisis, lobby groups argued that the UK chancellor should intervene to stop lengthy probes that might kill off burgeoning startups.
The CMA declined to comment on the Amazon-Deliveroo investigation, but indicated it will try and meet its own deadlines. The watchdog will also give businesses under investigation more time to provide any information it has requested.
A Deliveroo spokesman said: "Deliveroo has been working closely with the CMA and will continue to do so.
"We are confident that we will persuade the CMA of the facts that this minority investment will add to competition, helping restaurants to grow their businesses, creating more work for riders, and increasing choice for customers. Deliveroo is a British company operating right across the country and this investment will be particularly beneficial to the UK economy."
Deliveroo faces a financial squeeze if restaurants close and it continues to operate without the new funding
The UK is currently in lockdown, meaning most people are not supposed to leave their homes except to pick up essentials or to exercise.
That's both an opportunity and a threat to services like Deliveroo. People may turn to delivery apps to source groceries or takeaway food.
But some big restaurants have yanked their services from takeaway apps entirely as they close for lockdown. McDonald's and Nando's are among the big names that have shuttered operations entirely in the UK, including takeaway services.
Deliveroo continues to operate, delivering food from the restaurants that are still cooking up food for takeaway and from its own pop-up "dark kitchens." But the firm must continue paying staff, delivery riders, and its own operating costs - even as its funding from Amazon is frozen. The firm's most recent financials, for 2018, show that it is still unprofitable.
There are signs, too, that demand for food delivery is unstable.
Sky reported, and a source confirmed to BI, that Deliveroo CEO Will Shu wrote to the government asking it to provide financial support to restaurants. He argued that restaurants that stay open to provide takeaway services won't make enough money to make up for the costs of continuing operations.
Shu also warned that a public misconception that COVID-19 could be transmitted through food was hurting orders. "This concern is impacting on restaurant orders and putting further pressure on supermarkets as they are viewed as the only safe place to get food, despite the risks of contracting the virus being higher in a crowded supermarket than via takeaway food," he wrote.
Research suggests Shu is correct - there are no reported cases of the virus being transmitted through food.
