Meituan takeaway "rolled" into Hong Kong, analyst: not making money, may be to open up the international market

Food delivery giant Meituan has launched a sister app in Hong Kong, China, its first takeaway app outside Chinese mainland, but some analysts are skeptical that it will quickly take over the market.

Shawn Yang, managing director of Blue Lotus, a research institute, said: "I am not too optimistic about Meituan's expansion in Hong Kong. I don't think this market is big enough, and Meituan won't invest a lot of resources. ”

The takeaway service, called KeeTa, was launched on May 22 in Hong Kong's Mong Kok and Tai Kok Tsui neighbourhoods.

A month later, KeeTa announced that it would expand to Sham Shui Po and Yau Tsim Mong districts after the launch in these markets "exceeded expectations".

Meituan said KeeTa plans to cover the entire Hong Kong market by the end of this year.

The expansion comes at a time when Meituan is facing stiff competition from up-and-comers such as Douyin in the domestic market.

According to data from China Research Network, Meituan is the leader in China's food delivery industry, with a market share of nearly 70% in Chinese mainland.

A KeeTa spokesperson said: "We have received a large number of enquiries and appeals from customers and restaurants outside of Mong Kok and Tai Kok Tsui, which has greatly strengthened our confidence in further expansion. ”

The spokesperson said the company would "continue to provide takeaway services and expand its services to more areas of Hong Kong as soon as possible".

Wang Kai, senior analyst at Morningstar Asia, believes that entering Hong Kong will not have a significant impact on the company's earnings.

KeeTa's expansion in Hong Kong "just has the potential to add another 7 million users," he said, while Meituan already has more than 678 million users on the mainland.

Wang Kai said: "I don't think KeeTa will have a big impact on Meituan's revenue. ”

Meituan declined to comment on analysts' views.

Analyst Yang Zixiao said: "I think Meituan wants to find a market that is close to Chinese mainland culture, build a team, and in the long run, see if they can occupy a certain market share in overseas markets." "Hong Kong serves as a test bed for Meituan, and eventually it may expand internationally.

Rat race

The takeaway penetration rate in Hong Kong is not particularly high.

According to a report by research firm Momentum Works, about 10% of the entire restaurant industry now uses takeaway delivery, up from an average of 21% Chinese mainland two years ago.

"In Hong Kong, takeaway is not as common as it is in Chinese mainland," the report said. "There are plenty of food and beverage outlets on every street corner in this Asian financial hub.

According to data provider Measurable AI, Hong Kong's food delivery market is currently dominated by Foodpanda and Deliveroo, which held 64% and 36% market share respectively in May before KeeTa's launch. This data includes food delivery and pick-up orders.

KeeTa does not currently offer food pick-up service, only takeaway delivery.

Uber Eats exited the Hong Kong market at the end of 2021 after five years of operating in Hong Kong. According to Measurable AI, its market share at the time of exit was about 5%.

"If there are already two or three dominant players in this market, it is actually difficult to change the mindset of consumers unless they do a lot of subsidy activities," Yang said. ”

Wang Kai of Morningstar said: "KeeTa's entry into Hong Kong should bring more deals and discounts to consumers. This should be good for consumers in the long run. ”

Separately, Hong Kong has launched an investigation into the anti-competitive conduct of Deliveroo and Foodpanda. This means that participants cannot engage in actions such as restricting restaurants or punishing them for turning to exclusive partnerships with other platforms.

At the same time, smaller players such as KeeTa may be able to expand their market share.

Issuance of subsidies

To attract new users, KeeTa offers each new user a free voucher worth HK$300, which can be used to offset meals and delivery costs. The company "plans to launch further marketing activities in the new district," such as free delivery for all, referral discounts and food deals.

KeeTa also offers set menus from HKD 60 (including delivery fee) to solve the pain points of individual dining customers. The minimum order requirement for Foodpanda and Deliveroo is usually between 50 and 80 HKD (excluding delivery fees).

To further attract customers, KeeTa has introduced a "On Time Commitment" policy to all users. If a customer's order is more than 15 minutes later than originally planned, they will receive a coupon as compensation.

Ryan Lai, managing director of Foodpanda Hong Kong, said short-term promotions were not enough to build customer loyalty in the long term.

"In such a competitive market environment, we have found that building strong customer stickiness is a key success factor. ”

"In our view, the entry of new players into the local distribution space reflects the untapped growth potential of this industry in the market," he said. He added that Foodpanda will continue to serve its customers better.

Commenting on new entrants, a spokesperson for Deliveroo Hong Kong said: "Since Deliveroo first entered the Hong Kong market seven years ago, we have been optimistic about the prospects of the local food and grocery industry, and as such, we see competition as a driver of innovation. ”

Recently, the platform also introduced a "on-time commitment" policy for paying users – if their order is delayed by 15 minutes or more, it will be compensated with vouchers.

However, Momentum Works noted in the report that Hong Kong's food delivery market "remains cold" and has not exploded even during the pandemic.

However, the research firm said KeeTa could leverage Meituan's experience in the Chinese mainland market.

"As long as Meituan has identified leadership, chosen the right people, and effectively organized its internal structure, they don't have to worry about competition from two existing players."

Reviewer: Xiao Tang