Meituan's KeeTa takeaway covers the whole of Hong Kong ahead of schedule, but it is suffering from "one of two choices"

Interface News Reporter | Xiao Fang

Interface News Editor |

Recently, Jiemian News learned from people familiar with the matter that KeeTa, a food delivery platform launched by Meituan in Hong Kong, has completed the coverage of the entire Hong Kong region ahead of schedule at the end of October this year. In the future, KeeTa will carry out more refined operations and provide a richer variety of dishes.

In May this year, Meituan launched a new food delivery platform KeeTa in Hong Kong. According to Meituan's plan, KeeTa will adopt a gradual expansion strategy in Hong Kong, with the densely populated Mong Kok and Tai Kok Tsui areas as its first stops, and complete the territory-wide coverage within this year. At present, the KeeTa team is about 100 people, headed by Qiu Guangyu, and reports to Wang Puzhong, senior vice president of Meituan and president of Daojia Business Group.

KeeTa was able to achieve full coverage ahead of schedule thanks to Meituan's experience in fierce competition in the mainland market, and it is competing with two other food delivery platforms in Hong Kong, Foodpanda and Deliveroo, in terms of merchants, users and riders.

Hong Kong's restaurants are very dense, and it is also convenient for consumers to dine downstairs, and they have little Xi of take-out until the three years of the epidemic. Foodpanda and Deliveroo grew rapidly during the pandemic and captured the vast majority of Hong Kong's food delivery market.

On the user side, Foodpanda and Deliveroo have high average order value and delivery fees. Among them, the delivery fee that each order user needs to pay reaches 15-20 Hong Kong dollars. After KeeTa was launched, it used this as a starting point to attract new users, such as launching the "Billion Rewards" program, which gave each newly registered user a HK$300 newcomer gift package, including a number of large discount coupons and free shipping coupons. At the same time, KeeTa also launched operational activities such as "$35 Hong Kong", allowing users to order takeaway at a price of HK$35.

According to Jiemian News, one of KeeTa's more successful new customer attraction activities in Hong Kong is to launch a 29 Hong Kong dollar package with a chain of rice noodle merchants, and the normal price of this package is about 70 Hong Kong dollars. After KeeTa and the merchant jointly subsidized the subsidy, all the merchant's stores in Central exploded, and the number of KeeTa users and orders also increased rapidly. According to the above-mentioned people familiar with the matter, this event is a turnaround node for KeeTa, and since then, KeeTa's order volume and number of users have grown relatively well.

On the delivery side, KeeTa replicated Meituan's "involution" capability in the mainland market in Hong Kong. Foodpanda and Deliveroo average delivery times are around 30 minutes, but it often takes an hour or two to deliver. KeeTa has compressed the delivery time to about 27 minutes, which is said to be based on refined operations and effective subsidy strategies. According to the calculation of KeeTa's rewards to riders, motorcycle riders earn about 35,000 Hong Kong dollars per month, which is slightly higher than other platforms, which helps to increase the motivation of riders.

However, KeeTa is currently facing a big challenge in terms of merchant expansion, mainly due to the "either/or" pressure from Foodpanda and Deliveroo to merchants, which is also where KeeTa cannot replicate the experience of mainland China in a new market environment. According to Jiemian News, most of the merchants' willingness to settle in KeeTa is more positive, after all, one more platform can have more income, but a dumpling merchant revealed that their previous commission rate for entering Foodpanda was 25%, and recently they have encountered pressure from Foodpanda because of the launch of KeeTa - either offline from KeeTa, or the commission rate on Foodpanda will be increased to 30%~40%.

Jiemian News also learned from other merchants that some small and medium-sized merchants even choose to use different names on different platforms in order to avoid the pressure of "choosing one of the two" between Foodpanda and Deliveroo.

It's just that this approach is not a long-term solution for KeeTa. On the one hand, KeeTa needs to control the qualifications and quality of the tenants, otherwise there may be many merchants who exploit loopholes, which will affect the overall service quality, and on the other hand, KeeTa also needs to expand a large number of brand merchants, which are unlikely to change the name of the restaurant to enter KeeTa.

As KeeTa's order volume and user count grew rapidly, so did the pressure on merchants to choose one or the other from Foodpanda and Deliveroo. According to Jiemian News, a large number of restaurants receive notices every day that they are required to be removed from KeeTa, and if they are not taken off the shelves, the commission rate will be increased by these two platforms.

According to one F&B employee, both Foodpanda and Deliveroo are currently asking restaurants to "work exclusively", and this is done in the form of a contract.

At present, Hong Kong does not explicitly prohibit such practices as the mainland, and the absence of a prohibition means that the "either-or" option is legal. It is understood that KeeTa has also repeatedly communicated with the Hong Kong regulatory authority, the Competition Commission, about the harm caused by the "either-or" to takeaway platforms and catering merchants. In several rounds of consultation with the Commission, Foodpanda and Deliveroo suggested that, in principle, the use of exclusivity clauses would still be allowed in the case of the two dominant companies, with the exception of food delivery platforms with a market share of 10% or less in Hong Kong.

In a television programme in November, the Chairman of the Hong Kong Competition Commission, Mr Chan Ka-yan, said that he preferred to accept the proposed commitments put forward by the two food delivery platforms, believing that this method was more efficient and could achieve acceptable and reasonable results in the short term, but he also hoped to understand the views of the public and decide whether to maintain the acceptance of the proposed commitments after reviewing the views obtained in the consultation.

Asia International Restaurant Group, competition law economists and others have expressed concerns about whether the provisions can actually promote competition. If this clause is implemented, it will have a very adverse impact on small and medium-sized platforms. For example, KeeTa, as a platform starting from scratch, can only avoid the pressure of "choosing one or the other" when the market share is less than 10%. Once the market share exceeds 10%, the other two larger food delivery platforms will be able to legitimately "choose one or the other". In this case, the continued growth of small and medium-sized platforms will face challenges, and the interests of all parties such as catering businesses will also be affected.

This is also a risk point that Meituan must face when preparing for more countries and regions in the future. Compared with Internet companies such as games, short videos, and e-commerce, the overseas delivery business involves more local service capabilities and operations, and the challenges from user Xi, culture, competitive environment, and regulation are also more complex.

As the first stop of the pilot of food delivery overseas, Meituan's risk in Hong Kong is relatively controllable, because the plate of food delivery in Hong Kong is small, and the impact on Meituan's overall revenue and profit is negligible.

In terms of data, the overall market of Hong Kong's catering industry in 2021 was HK$92.7 billion, and the GMV of Foodpanda and Deliveroo was HK$4.8 billion and HK$2.9 billion respectively, accounting for 8% of the F&B market. In 2021, Hong Kong's total population was 7.4 million, of which about 4 million were potential users of food delivery (Internet users aged 16-60). The monthly active users of the two platforms are 1 million and 700,000 respectively, and the total number after deduplication is about 1.3 million. At present, the total order volume of food delivery on the dual platforms of Foodpanda and Deliveroo is 45 million orders per year, equivalent to an average of 123,000 orders per day, which is only comparable to the number of daily orders in some cities in Beijing, Shanghai, Guangzhou, and Central China.

In Meituan's first-quarter earnings call, Meituan CEO Wang Xing also mentioned this. He said that while actively exploring the Hong Kong market, he will also maintain prudent investment, so the impact of this part of the business on the company's earnings performance is very limited.

According to a KeeTa employee, Meituan's investment in Hong Kong is relatively detailed, and it does not spend any money that should not be spent, and has a clear ROI in user subsidies, which does not have the feeling of large-scale money burning in the mobile Internet field in the mainland in the early years. "Meituan doesn't have any private offices in Hong Kong, and only rents a few desks at WeWork. ”

As for the future overseas strategy, Jiemian News learned from Meituan that the current clear plan of Meituan's management is mainly aimed at how to gain more market share in the Hong Kong market in the next step, and there is no clear internal conclusion on the overseas plan for the next five or ten years, as well as the countries and regions that will go overseas.

According to 36Kr reports, in May this year, Zhu Wenqian, head of Meituan's overseas investment department, together with Meituan CEO Wang Xing, Meituan Daojia Business Group President Wang Pu, and many other core executives visited the Middle East to inspect the local business policies and competitive environment, and considered the first pilot city in Riyadh, the capital of Saudi Arabia, but then this action was shelved.

A Meituan insider told Jiemian News that food delivery is a very heavy business, and Meituan's internal plan to go overseas needs to be fully demonstrated.