Amazon gives Uber a 'sucker-punch' in the UK

Amazon (AMZN) is breaking into a new business, and it’s making Uber investors nervous.

The e-commerce giant led a $575 million investment into the London-based food delivery service, Deliveroo.

Investment firms T. Rowe Price and Fidelity also contributed to the funding round, but there is no word on just how much Amazon contributed to the investment.

Deliveroo does not have a presence in the U.S. but operates in 14 countries across Europe, Asia-Pacific and parts of the Middle East.

Amazon is banking on growing consumer demand for food delivery, which is estimated to be a $50 billion industry in the next decade.

The investment also puts Amazon in direct competition with Uber Technologies and its Uber Eats platform. Investors were quick to dump shares of both Uber (UBER) and the London-based food delivery company, Just Eats .

"We've just had Uber's disastrous IPO," says Oscar Williams Grut, Senior City Correspondent for Yahoo Finance UK. "Deliveroo is a major competitor to Uber Eats in the U.K., so Amazon joining the party, throwing their cash behind their competitor, that's going to be bad for Uber. It’s a sucker-punch to the stomach.”

This is not Amazon’s first foray into food delivery. In 2018, the company closed its Amazon Restaurant U.K. takeout business because of competition from Deliveroo and Uber Eats. The service is still operational in the U.S.

Amazon didn’t reveal how it plans to use this new relationship with Deliveroo, which it could make a part of its Prime membership.

“Amazon has been an inspiration to me personally and to the company, and we look forward to working with such a customer-obsessed organization,” said Deliveroo CEO and founder Will Shu in a statement.

Since its founding in 2014, Deliveroo says it has raised $1.53 billion and was last valued at around $2 billion in 2017.

Uber was nearly 1% lower in afternoon trading on Friday, while shares in other European food delivery companies including Delivery Hero (DHER) and Takeaway.com (TKWY) were also lower.

Read the latest financial and business news from Yahoo Finance

Alexis Christoforous is co-host of Yahoo Finance’s The First Trade. Follow her on Twitter @AlexisTVNews.

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