Ever since we launched our first “Food Delivery Platforms in Southeast Asia” report a year ago, investors and stakeholders have been asking us whether the sector, which grew by 183% year on year in 2020, could still grow in 2021, as the initial impact of COVID-19 wears off. 

Our second annual “Food Delivery Platforms in Southeast Asia” report launched today, answers this question, and many others. You can download a complimentary copy here

In this report, we have identified the key trends that could shape the way the sector moves forward and the strategies of key players.

Some key insights from the report are below:

#1 Food delivery continued to grow in 2021 by 30%

Though the growth numbers may not seem as sensational as 2020, food delivery continued to grow in 2021 (although at a slower pace). The spike in volumes seen in 2020 sustained in 2021. Southeast Asia recorded a 30% growth resulting in a record US$15.5 billion total GMV in 2021.

This growth is proof that the pandemic had a lasting impact on consumer behaviour as urban consumers in Southeast Asia have grown accustomed to the convenience of food delivery.

 

#2 Grab retains market leadership; leads in 5 out of 6 countries

It was not a big surprise to find that the largest markets for food delivery remained the same as it was in 2020 – Indonesia, Thailand and Singapore. However, what was interesting was that Thailand and Malaysia recorded the highest year-on-year growth in 2021 – a testament to the consumption power in these two countries.

Moving to the key industry leaders, Grab contributed close to half (49%) of the region’s total food delivery GMV – estimated at US$7.6 billion. Foodpanda was the next highest contributor (22%) with US$3.4 billion, followed by Gojek (14%) with US$2.0 billion.

With regards to market share, Grab led in five out of the six major countries in Southeast Asia – Singapore, Indonesia, Thailand, Vietnam (tie with ShopeeFood) and the Philippines. Foodpanda managed to snatch the leading market share in Malaysia from Grab by a narrow margin. 

 

#3 Key players adopt different strategies

The key players in each region have a different strategy and approach to tackle the food delivery market. For instance, Grab’s superapp model works well in Southeast Asia, a region that has varying merchant density and volume across urban and outer cities. Why is it successful though?

It is because the super app model has several advantages such as lower customer acquisition and driver costs, which they can leverage for new business opportunities as well.

 

#4 F&B players leverage delivery infrastructure to innovate

The lessons and experience taught by COVID-19 in 2020 had forward-looking F&B players better prepared for 2021. They utilized this year to experiment with new models and ventures and leverage technology to their benefit.

We noticed two main trends in the way restaurants were evolving in 2021.

  1.     Restaurants utilized existing delivery infrastructure (including user base and marketing tools) to test new products and brands without significant upfront investment. 
  2.     Restaurants also expanded to cloud kitchens for better efficiency and reduced costs. There are different models of cloud kitchens, with the ones run by F&B players and platforms (rather than third parties) gaining the most traction. 

 

#5 Leading players expand into the grocery market

Grocery remains a huge underpenetrated market in Southeast Asia and most of the leading food delivery players, such as Grab, Gojek, foodpanda, Line Man etc. are trying to capitalize on this gap. The grocery market is more than 3.7 times that of food delivery but the online penetration in Southeast Asia is less than 1%.

However, it’s not as easy as it looks. It’s a whole different ball game to food delivery as the factors that affect business and customers are quite divergent.

Though most of the food delivery players are trying to capture the grocery market, each of them have a different approach to fulfilling consumer needs. Some are even experimenting with multiple approaches to cater to different target segments. Most of the players are still testing different models to see what clicks with consumers.

 

#6 Key players are increasing their services to create a deeper moat

Leading on-demand service player, Meituan, used the food delivery market to expand to other services like hotels, flights, ride hailing, etc. Grab is also trying to follow Meituan’s footsteps by establishing its base as food delivery, a high frequency segment, and then building higher margin businesses (like hotels) with the existing customer base. The success of Meituan has paved the way for players like Grab to consider adopting this approach to gain deeper control over the supply chain.

 

# Future outlook

In the past year, newer players, especially ShopeeFood and Baemin, utilized aggressive marketing and promotions to acquire new customers. However, it remains to be seen if this strategy will continue in 2022 to derive a meaningful shift in market dynamics, especially when investors start demanding rationalisation and profitability. 

To know more about the food delivery landscape and how it is poised to grow in the coming year, you can download a complimentary copy of “Food delivery platforms in Southeast Asia” here.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.