E85 – The Impulso Podcast – Delivery Hero losing grip?

When Delivery Hero acquired Baemin in 2021, the company was financially strong. However, Baemin is now struggling, losing market share to Coupang Eats and dealing with the resignation of its CEO, Lee Gyuk Hwan. What does this mean for Baemin’s parent company, Delivery Hero, which relies on Baemin to subsidise other loss-making markets?

Baemin is not the only platform under Delivery Hero facing intense competition. The company’s global portfolio, including operations in the Middle East, Europe, and Southeast Asia, is also under significant pressure.

Tune into this latest episode as we dive into the challenges Delivery Hero is facing in its key markets and the shifting dynamics of the food delivery industry:

Also available on Spotify and Apple Podcast.

Featured materials:
Food delivery in Southeast Asia 2024, Momentum Works
Momentum Works Immersions: F&B innovations
EP62: What is the “right price” of Foodpanda for Grab?, The Impulso Podcast
Should Meituan acquire Foodpanda?, TheLowDown
Foodpanda sells its most valuable asset to Uber, TheLowDown
Meituan becomes top food delivery player in Hong Kong, TheLowDown
Will Meituan beat DeliveryHero in Saudi Arabia?, TheLowDown

[AI-generated transcript]

[00:00:00] Sabrina: Can you put your phone down first? It’s very distracting. Phone? Interesting. No, it’s distracting. Okay, I’ll use my hands. Yes. Okay. . 

Hello everyone, and welcome back to episode 85 of the Impulso Podcast by Momentum Works. So today, we’re going to be talking about what’s been happening in the food delivery scene in Korea, as well as an overall view of the competition that Delivery Hero is facing in multiple of the markets that they operate in.

[00:00:25] Jianggan: Yes, South Korea to be specific. 

So these are the two major food delivery platforms in Korea at the moment battling each other. Before that, you obviously had multiple competitors, but the situation now is, I think, since 2021, Delivery Hero, the Germany based food delivery group, acquired Baemin, or its parent company, Wuwa Brothers, which was the number one in Korean market.

And recently you have The leading player the leading e commerce player in South South Korea, Coupang are moving aggressively into the food delivery space. 

So these two are battling, and the situation is shifting, which we think is interesting, and that’s why we’re bringing this podcast to you.

[00:01:05] Sabrina: Yes, so this is what has been happening in Korea recently. 

Baemin has actually been increasing its delivery costs, unlike its competitors.

Even delivery fees. Delivery fees, yes. Charged to the Charged to the customers. Charged to the customers. And I think the merchants as well. Based on some of the comments that we’ve read, right? And of course, their CEO, Lee Gyuk Hwan, also recently Do you speak Korean? I can read Korean. You can read Korean?

Yeah, I can read Korean. It’s an easy language to read. Yeah, I can read that. Because it’s an alphabet. Yeah, later I’ll read it for you. 

So, the former CEO, Lee Gook Hwan, also announced that he was retiring. So, we’re not sure if he Retired or if he was fired or was 

[00:01:47] Jianggan: voluntary or involuntary.

Yeah Okay, 

[00:01:49] Sabrina: so that’s what has been happening in korea. And of course their customers are unhappy so These are some comments that we took online. So of course customers technically 

[00:02:00] Jianggan: you can read the whole thing as well 

[00:02:01] Sabrina: I can but you 

[00:02:02] Jianggan: just don’t know what it means. 

[00:02:03] Sabrina: Yeah, I can’t comprehend it But we have google translate.

So 

[00:02:07] Jianggan: that’s how I read greek nowadays 

[00:02:09] Sabrina: So, of course consumers are complaining that They are taking money away from consumers. And of course, this is very different from what Coupang is doing, right? Which is why they’re also switching to Coupang Eats. 

 

[00:02:20] Jianggan: So Baemin was an interesting business, and was a good business. So Delivery Hero actually released Baemin’s results a year prior to the acquisition.

I think, they needed to do that because they’re a publicly listed company. So we can see on this slide that I mean, their food delivery business in Korea was profitable. They made EBITDA of 156 million. Million euros in 2020. So it was it was a sound business. 

The company also made a decision to enter vietnam in 2019 And those of you in southeast asia, you might be familiar that In 2019 lots of korean investors went to vietnam and invested in lots of assets and and businesses in vietnam So you will see that vietnam was a drag for the whole performance of baemin Because obviously you can explain that you’ll see early stages.

They needed to invest You But but I think if you look at, even if you look at the loss in Vietnam, the whole group was still very, very profitable. And I think Delivery Hero got a good asset in East Asia. And 

[00:03:18] Sabrina: I think one of the reasons for the success of Baemin in Korea definitely was that they had a very strong founding team, 

so these are five of the, I guess, 

[00:03:26] Jianggan: the key, 

[00:03:26] Sabrina: key members initially in Baemin. 

[00:03:29] Jianggan: So we had an opportunity to meet some of them. And I would. I would say that they are shrewd operators and businessmen. So the founder, Boon Jin interestingly had a design background. So that company had a unique culture infused with unique design, which we will see.

Yeah. 

[00:03:44] Sabrina: Which we will see that. So this is the logo and sort of mascot of Foodpanda before and after Baemin was acquired by Delivery Hero. 

[00:03:52] Jianggan: So basically they came I think they formed this Delivery Hero, Baemin, whatever Asia Holdings company. So, so the Koreans became large shareholders. , and one thing they did is that they reformed the whole food panda look and feel.

So the cute panda with, you know, the clear like ka Pau pau right name is Pau Pau. Yeah. With clear ish hair is the work of the people, the team they brought in, I think, I mean, compared to the pseudo Kung fu panda in the past, I think it’s a huge, huge. Improvement in terms of cuteness 

[00:04:21] Sabrina: and I think you can see the difference when you are looking at delivery heroes Asian platforms compared to their platforms in like europe america or the middle east 

[00:04:29] Jianggan: which don’t really 

[00:04:30] Sabrina: have mascots Or mascots are not cute.

Yeah Not as like 

[00:04:35] Jianggan: the business in asia need to have cute mascots because otherwise You’re not cute. 

[00:04:39] Sabrina: Yes Branding branding so we need a mascot too 

So of course, in addition to Baemin and Foodpanda, like we mentioned, Delivery Hero actually has a whole suite of platforms under them, , for example, they have Talabat and Hunger Station in the Middle East.

And they also have Glovo, Foodora in Europe, and P What’s the name of this company? Pleb? 

[00:05:03] Jianggan: Doesn’t matter. There’s some business in there. 

[00:05:05] Sabrina: It has a complicated name. 

[00:05:06] Jianggan: That’s interesting because they are in the businesses in America’s but not in Mexico and Brazil, the two largest markets. I think Columbia, they are.

Not in Colombia either. They in Venezuela. Interesting. Yeah. So basically in Latin America, they’re not in three largest markets, which I think it’s explainable because the whole strategy is to become number one in each market they’re in. So through acquisition, through development, they wanted to have the leading market share in each market that they are in.

And obviously that kind of explains why not not in the three largest markets in Latin America because they have strong local players and it’s a bit harder to defeat them. And what are their markets in Asia? Oh, yeah. I think not in the largest market in Southeast Asia either. So they are not in Indonesia, but they are in Singapore, Malaysia, Thailand.

Is that Myanmar? Yeah, Myanmar. And the Philippines, Laos, Cambodia, Pakistan and Bangladesh. Yeah, so I can read maps. And they are in South Korea, of course, that’s Beimin. Yeah, so these are the markets in I think they briefly entered Japan. They very quickly withdrew. Japan is a difficult market for foreign tech companies to crack.

[00:06:24] Sabrina: And I think, of course despite their ambitions, . They have not been doing very well, right? I mean, we know the market. 

[00:06:31] Jianggan: Crash 

[00:06:31] Sabrina: crash. But in 2024, a lot of tech companies have started recovering, but we don’t really see 

[00:06:37] Jianggan: until until a few days ago. But yeah, so, 

[00:06:40] Sabrina: but you know, we don’t really see delivery hero.

So 

[00:06:43] Jianggan: different hero crashed, but it didn’t recover. So obviously I think that has something to do with the investors confidence in their abilities to remember number one, while building a profitable company in all those various diverse set of markets that they are in. So you guys probably know that Momentum Works, we publish annual assessment of Southeast Asia food delivery market share.

And you can see that I think Grab kept expanding their, their market leadership while Foodpanda, it’s dropping in terms of both market share as well as the absolute GMV in the region. And you will not see this level of detail in their financials because they lump everything in Asia, including Korea, which is.

Obviously, there, I think we did some breakdown a few years ago, two or three years ago. I think Korea was like 70 or 72 percent of the entire Asia market in terms of GMV. 

[00:07:29] Sabrina: If you guys are curious about food delivery in Southeast Asia in general, you can check out our Food Delivery Platforms in Southeast Asia report, which we release every year.

So I’ll link it in the show notes below, we’ve also seen that Foodpanda has made some mistakes along the way, right? So, they used to be the market leader in Thailand. 

[00:07:45] Jianggan: They used to be the market leader in Thailand. And, at some point of time, right, I mean, if you are in Thailand, you basically use Foodpanda.

And I think they were the first one to expand their business to all the 77 provinces. But I think was that 2021? Yes. Some of you might be familiar with the politics in Thailand. It’s like constant struggle between different factions, and they made at that time. I don’t know how they made that decision.

Basically, they fired some employee which participate in some protests, and I didn’t let they would protest those terrorists. So immediately there was a boycott. I mean, people wanted to sort of delete Food Panda app. And Honestly, I mean, me included most of the industry stakeholders and observers will think that.

Okay, sure. I mean, people protest. I mean, after a week we give people like 10 voucher, they’ll come back, but they didn’t come back. So it shows that some people are seriously offended by that. And it’s a market share, which they used to lead and which they never managed to to recover. Now in Thailand, the leading players are grab and Lineman Wong nai so I think they have roughly equal market share at the moment. 

[00:08:48] Sabrina: So, and we know that Delivery Hero has been trying to diversify its Southeast Asian market assets, right? Divest, oh yeah, divest. Yes, so it 

[00:08:59] Jianggan: probably means something similar. So, I think a while ago the CEO of Niklas Osterberg so made a pledge to the investors that they would divest markets where they could not see a clear path to become market number one. And all profitability or both. Right. So obviously most of Southeast Asia and most of Asia, aside from Korea, maybe another one which we’ll talk about in a bit would fall into this category. So over the last year and a half that they’re being in talks with different players to try to explore options to sell their Southeast Asian business.

Or part of their Southeast Asian business. There were rumors in 2022 saying that they were selling their business in Thailand to Lineman Wongnai. And of course, if I were Lineman Wongnai, I wouldn’t see a need. Why would I buy it? So last year, I think towards the end there were discussions with Grab.

There were discussions with Meituan. And I have some friends who told me that they had very serious discussions about it and they decided not to Acquire, I think we talked about in the previous podcast. 

[00:09:56] Sabrina: Yes I 

will link it in the show notes below as well. 

[00:09:59] Jianggan: Okay, cool. Thanks. You’re like library And and grab I think I think they had serious discussions Until the moment that grab coo alex hungate came to the earnest call and said And said very clearly.

No, we’re not acquiring food panel in southeast asia You I think some people know that. Okay, there was some saga happened, right? I mean, the group CEO food panda told his then or ex or whatever. I mean, girlfriend that this discussion was going on that then or ex or current or should you not cat girlfriend posted on social media and everyone knew about it.

But this kind of news, once everyone knows it becomes hard to manage and that person was replaced. And I think the deal was eventually canceled over price. I do hear rumours saying that I think I think Grab got a lot of information about the business and then decided not to acquire it. 

[00:10:50] Sabrina: We do have an article about this.

I think it’s called The Right Price for Foodpanda or something that I will link below. So it was something that Grab mentioned during their earnings call. Yeah. But of course, one market that Foodpanda did successfully manage to divest is their Taiwan operations, 

[00:11:06] Jianggan: which is kind of funny because for almost three years we’ve been telling everyone that we meet who cares about food delivery or who wants to know something about food delivery that maybe delivery heroes should sell all their assets in Southeast Asia and focus on Taiwan for a number of reasons.

First, I think Taiwan’s affluent market. So you will see. I think this economy is more than half of that in Indonesia. Think about it. 23 million people in Taiwan, 272 million people in, in Indonesia. So, so, and also, I mean, the population of Taiwan is half that of Korea, and Korea is 70 percent of Delivery Hero’s whole business in Asia.

And Foodpanda 

[00:11:45] Sabrina: has been the market leader in Taiwan. 

[00:11:47] Jianggan: Yeah, 52 percent market share. So they have been doing pretty well. So if you, and also, I mean, I will not mention the reason, you guys will probably know it, that the Chinese players like Meituan will never be able to compete against them directly in Taiwan for obvious reasons. 

[00:12:01] Sabrina: But of course, I mean, we don’t know if this merger would actually be approved, right? Because there are only two players. 

[00:12:07] Jianggan: Yes. And And I’m sure like, you know, Uber and Deliver Hero, they are from Europe and US. They have the best lawyers, the best accountants, best consultants available to help them do the assessment.

 I think the consults will probably tell them that there’s a reasonable chance that this will be approved by the regulators. I’ve spoken to about 20, 25 friends in Taiwan in the tech industry and also in various parts of ecosystem. Nobody believes that the regulator would ever approve it.

Approve it. So this is interesting because If everybody in the institution doesn’t believe that regulators would approve it That probably there’s probably some pressure for the regulators as well, too I mean, even if they They incline to approving the transaction. So we don’t know. I think singapore is reviewing the grab.

Grabs acquisition of transcript. It has been years so I do think that this might take some time To know the results In the meantime, it’s probably business as usual. They run each of their own businesses.

[00:13:01] Sabrina: Actually, if Taiwan is such a profitable market or good market for food delivery, why do you think there are only currently two players in the market?

So currently there’s only Foodpanda and Uber Eats, right? Because 

[00:13:11] Jianggan: Taiwan is a relatively isolated market. It’s difficult for, obviously Chinese players will not be there. And and it’s Chinese speaking. So which means that for whichever player to be there, I mean, it’s like, you know, it’s like a Korea, right?

So for a foreign player to enter, it’s a huge barrier, language, culture, et cetera. And but at the same time it’s relatively isolated. So you develop, I mean, it’s not like you go to Latin America, develop a Spanish speaking capabilities. You can go to multiple countries. It’s 23, 23 million people smaller than Malaysia. affluent, but it’s difficult nut to crack. I think that happens with most of the East Asian markets, like in mainland China, Taiwan, Korea, Japan. It’s difficult for outsiders to crack. 

So obviously We can see that. The most relevant and the most profitable markets of delivery hero that they have accumulated across the globe are probably under some threat. We talked about Korea, right? And the other two markets, which are very relevant for them. are the two leading markets in Middle East, Saudi Arabia and United Arab Emirates, UAE.

So you can see that these three markets together form almost like 45 percent or even half of the total revenue. And these three markets, as I know it, are profitable for them. So , what kind of threat are they under? So we already talked about Korea. Meituan’s Keeta. After having overtaken food panda in Hong Kong as the number one in terms of orders, according to our friends at measurable AI data tracking firm, they are actively entering Saudi Arabia as we speak.

 So why is 

[00:14:45] Sabrina: Meituan looking towards Saudi Arabia? 

[00:14:49] Jianggan: So obviously Middle East is interesting market for Meituan. And for a couple of reasons, I mean, first people there are relatively, I mean in a Gulf countries are relatively affluent. So their basket size is probably quite high and because of the weather or whatever. So there’s lots of demand, which is, you know, I mean, going out has been not very pleasant in most of that region.

 And also they have no shortage of of foreign labor to, so we don’t have worry about the cost of, of riders and stuff being too high. So I think Meituan is going to Saudi Arabia and it’s natural to assume that, okay, if they manage to crack that market, next for them will be UAE, which is highly urban, highly affluent, and it’s a significant market.

And yeah, they also have some local players in Saudi Arabia. The, the one owned by delivery here, which is hunger station. They are profitable. And you also have a local player, Jahez, which is publicly listed. And of course you can see their financials and they’re profitable So these two two players how good are they and obviously they’re leading players in in the region But if you go, but of 

[00:15:50] Sabrina: course despite their profitability, they don’t have the best reviews hunger station has It’s very good 4.

[00:15:58] Jianggan: 6 but 

[00:15:59] Sabrina: when you look closer at the comments you see that a lot of them are just one star I 

[00:16:03] Jianggan: have scrolled through a few pages. I only see one star reviews and it’s Very interesting they have lots of five star reviews But they don’t have any like two star or very few three star reviews.

So it’s not really like distributed in a normal way. So I’m curious where are the five star reviews coming from. But anyway, so Jahez didn’t even bother to manage them. This 

[00:16:26] Sabrina: is 18. 9k reviews and they have 1. 7 stars. 

[00:16:31] Jianggan: Yes, so they didn’t even bother to manage. So I do think that if I were decision makers of Meituan, I see a lot of Potential in this market, I mean, recap, so consumers are affluent, there’s natural demand for food delivery, people have been educated, there’s probably enough demand, enough supply, and the labor cost is low, and of course the existing players who are profitable are not doing a good job, so obviously you, it becomes a very interesting market, and So I might ask a question, why not Southeast Asia first?

I do think that if I were to Meituan, when I go to a market, I look for a market where I have a sure win. Because that will give me enough confidence, my investors enough confidence that I can go to another market, one after another. Because these things are complicated to build. 

[00:17:18] Sabrina: And I think we’ve mentioned before in, I think, either the food delivery event or another podcast that the Southeast Asian market generally is just very fragmented.

In certain markets like Thailand, you have a lot of players, which makes it even harder for you to come in and take the win, 

[00:17:32] Jianggan: which 

[00:17:32] Sabrina: might be why they are 

[00:17:33] Jianggan: Thailand has one fewer player now, Robinhood shut down, I think, end of this month. And Foodpanda now has a single digital market share, so I’m not sure how they are going to turn this around and whether there’s a way for them to turn this around.

So 

[00:17:46] Sabrina: we’ve been talking a bit about the sort of competition that Delivery Hero has been facing, and I think another problem that Delivery Hero has been facing as a group as well is that a lot of the founders of the companies that they’ve acquired are leaving, or were made to leave the company. 

[00:18:00] Jianggan: So obviously I think Somebody we talked to, which is head of strategy of a competitor of theirs, and he made a, I think, kind of blatant comment about DeliverHero. He said, DeliverHero is a large private equity group. Trying to combine everything together and the self financial story, and it doesn’t have operational synergy across the different markets.

I think his opinion was obviously biased, but there’s some truth in it, right? You acquire so many companies in so many different markets, which have have very different circumstances. I mean, how do you which part of the the business, which part of the operation, which part of the product, which part of the technology you centralize while you still maintain certain sort of flexibility across the different markets for them to make decision making.

So it’s not really straightforward. And I do think that The founders of these companies which built, which were built to a significant scale before they were acquired by Deliveroo Hero. They are of strong personalities. I mean, would they fit into a macro narrative directly from Germany?

I think it’s a question mark. I mean, knowing many founders myself it’s very hard for them to work under someone else. So, so I think it’s kind of natural. 

[00:19:11] Sabrina: And I think this is something that we talk a lot about, especially with regards to the PopL leadership, 

[00:19:15] Jianggan: So these are the issues which was determined.

I mean, how a company or tech company or any company is likely to succeed or not in their global expansion. And here we have example of company which has a global footprint across multiple markets. And yeah, we just keep emphasizing that leadership people organization product in that order. So lots of people put lots of emphasis on product.

But that’s downstream of in terms of success factors for your global expansion. 

[00:19:43] Sabrina: Just since we’re talking about leadership and maybe going back to the reason why we’re doing this whole podcast as well is that obviously the Baemin CEO left, right? Yeah. I mean the, what we mentioned at the start of the podcast.

Yeah. So how do you think this change in leadership will affect how Baemin is reacting to what’s happening with Coupang in Korea? 

[00:20:01] Jianggan: I think I think the payment CEO for me is already not a leadership discussion. It’s a people discussion, because it seems that now, I mean, since the founder, Boonjin left last year and all the strategic decisions are pretty much made in Germany.

And I do not know how much operational details that the people who make decisions in Germany would not understand about what’s happening in Korea. So obviously, the consumers, the merchants are not happy and you have a strong competition. How can someone in Germany make a decision for that?

I mean, will you be able to find Someone in the local market who has strong ownership of the company, not ownership in terms of like shares, but ownership in terms of the mentality, right? And also make the decisions and how to allocate resources this way, especially I think Baemin is made to subsidize other markets which are loss making.

So obviously I think as founders will not be happy about it. So I would say it’s a tough situation. 

[00:20:54] Sabrina: So since we’re talking about food delivery and all shameless promotion here, Momentumworks is actually planning a F& B innovation immersion to China in November this year, 

so we’re planning to go to Guangzhou and Changsha. 

[00:21:08] Jianggan: So we are initially planning for that to happen in September or early October, but we got strong protest from the locals there saying that it might be very hot. And obviously when you go there, I mean, in addition to the, the food innovations, the supply chain innovations, you are also be exposed to lots of spicy food.

So hot day and spicy food, local favorite, but for foreigners, I’m not sure whether that combination will work out very well, but anyway, so we will check out The leading F& B concepts look at, I mean, how they innovate in terms of brand, franchise management, central kitchen, delivery platforms, operations, supply chain, et cetera.

I do think it will be interesting. So if you’re in a space, do join us. The 

[00:21:48] Sabrina: link will be linked in the show notes below. You can register. And of course, we’ll reach out to you to share more information. So thank you guys for tuning into another episode of the Impulso podcast. We hope that you enjoyed today’s episode.

And if you did do like and subscribe to our YouTube channel. Or Spotify, Apple Podcasts, or your preferred podcast platform to stay up to date on the latest happenings and trends in e commerce, tech, new retail, and the broader digital economy. 

 Thank you. Bye bye. Bye.