Chinese food delivery giant Meituan has launched a sister app in Hong Kong, its first outside of mainland China, but some analysts are skeptical that it will capture significant market share quickly.
“I’m not very optimistic about Meituan’s expansion into Hong Kong,” Sean Yang, managing director of Blue Lotus Institute, told CNBC. “I don’t think the market is big enough for Meituan to invest significant resources.”
Dubbed KeeTa, the food delivery service was launched on May 22 in two residential areas in Mong Kok and Tai Kok Tsui.
A month later, KeeTa announced it would expand to Hong Kong’s Sham Shui Po and Yau Tsim Mang districts after its initial market launch “exceeded expectations,” it said in a press release shared with CNBC. .
KeeTa plans to cover the entire Hong Kong market by the end of this year. Midan said. At the time of release.
I do not think so [the launch of KeeTa] Meituan only potentially gains another 7 million users, which already has 700 million users in China, which will have a significant impact on Meituan’s revenue.
Kai Wang
Senior Equity Analyst, Morningstar Asia
The expansion comes as Meituan faces increasing competition in the domestic market from new players such as TikTok sister Douyin, and hopes of a strong post-coronavirus recovery in China are fading. It was conducted.
Meituan is the market leader in China’s food delivery sector, Nearly 70% market share in mainland China, according to data from industry research firm ChinaIRN.
A KeeTa spokesperson told CNBC, “We have received numerous inquiries and complaints from eateries and restaurants outside of Mong Kok and Tai Kok Tsui, which greatly boosts our confidence in further expansion in the region.” .
The company “will continue to offer takeaway services and will expand services to more parts of Hong Kong as soon as possible,” a spokesperson said.
Kai Wang, a senior equity analyst at Morningstar Asia, doesn’t think the move to Hong Kong will have a big impact on the company’s earnings.
He said KeeTa’s foray into Hong Kong “will only potentially bring in another 7 million users” compared to Hong Kong. Meituan already has over 678 million users in China.
When there are already 2-3 big players in this market, it’s actually very difficult to change consumer mindset without massive subsidy campaigns.
Sean Yang
Managing Director of Blue Lotus Research Institute
“I do not think so [KeeTa] It will have a big impact on Meituan’s earnings,” Wang said.
Meituan declined to comment on analysts’ views.
“I think Meituan wants to find a market that is culturally closer to mainland China. [build] Blue Lotus’s Yang said, “We want to put together a team and talents and see if we can get some market share in overseas markets in the long run.” He mentioned Hong Kong as a test bed for a Meituan.
fierce competition
The penetration rate of food delivery in Hong Kong is not that high.
About 10% of the entire restaurant industry now uses food delivery services. — This compares to an average of 21% across China two years ago, according to ar.Reported by research firm Momentum Works.
That’s because “ordering food delivery is not as common a practice in Hong Kong as it is in mainland China,” the report said, adding that every street corner in Asia’s financial hub is packed with eateries. added.
Hong Kong’s food delivery market is currently dominated by Foodpanda and Deliveroo, which held 64% and 36% stakes respectively in May before KeeTa’s launch, according to data provider Measurable AI. The data considers both delivery and pickup orders.
KeeTa does not currently offer food pick-up services, only delivery services.
Uber Eats will exit Hong Kong at the end of 2021 after operating there for five years. According to Measurable AI, the company held about 5% market share at the time of exit.
Hong Kong’s food delivery market remains sluggish even during the pandemic, with slow growth.
“When there are already a couple of big players in the market, it is really very difficult to change consumer mindsets unless you run massive subsidy campaigns,” said Yang of Blue Lotus Research. It’s difficult,” he said.
”[KeeTa’s expansion into Hong Kong] It should lead to more coupons and discounts for consumers. And it should benefit consumers in the long run,” said Morningstar’s Wang.
Separately, Hong Kong launches investigation into anti-competitive behavior From Deliveroo and Foodpanda. This means players cannot restrict restaurants or penalize them for switching to exclusive partnerships with other platforms.
This could mean that smaller companies like KeeTa could potentially build market share.
subsidy payment
Aiming to acquire new users, KeeTa Free coupons worth HKD 300 ($38.30) for every new user Can be used to offset meal and delivery charges. The company will “launch more marketing activities in the new district,” including free delivery for everyone, referral discounts and food discounts.
To address the pain points of solo dining customers, KeeTa also offers set meals starting at HK$60, including delivery charges. Minimum order requirements for Foodpanda and Deliveroo typically range from HK$50 to HK$80, excluding shipping charges, according to CNBC Check.
To further attract customers, KeeTa has launched a “Punctual Promise” policy for all users. If the order is more than 15 minutes late than originally scheduled, the customer will be compensated with a voucher.
Foodpanda Hong Kong managing director Ryan Lai told CNBC that short-term promotions alone are not enough to build customer loyalty in the long run.
“In such a competitive market environment, we have found that building strong customer stickiness is a key success factor,” said Lai.
“In our opinion, the new entry into the local delivery space reflects the untapped growth potential in the market for this industry,” said Foodpanda, which will continue to better serve its customers. added.
Regarding new entrants, a Deliveroo Hong Kong spokesperson said, “Since Deliveroo first entered the Hong Kong market seven years ago, we have always been optimistic about the prospects of the local food and grocery industry, and therefore we are open to competition. I see it as competition,” he said. Be the driving force of innovation. “
Recently, the platform also launched a “punctual” policy for paying users. This will compensate you with a voucher if your order is delayed by more than 15 minutes.
However, Momentum Works said in a report that Hong Kong’s food delivery market “remains lukewarm” and that growth has been modest even during the pandemic.
But KeeTa could leverage its parent company’s expertise in China, the research firm said.
“As long as Meituan establishes leadership, selects the right people, and organizes its internal structure effectively, there is no need to worry about competing with the two incumbents.”