Meituan officially launches in Hong Kong, will they overtake Foodpanda and Deliveroo?

Since last year, we have been hearing news about Meituan’s preparations to enter the food delivery market in Hong Kong. More recent reports also reveal that the company has been aggressively recruiting delivery riders with competitive salaries. 

On Monday (22 May 2023), Meituan announced the official launch of its local food delivery platform, KeeTa, in Mongkok and Tai Kok Tsui areas, with plans to expand and provide coverage across the entire Hong Kong region by the end of this year.

According to reports, KeeTa’s initial roster of partner restaurants includes famous local and international chain restaurants such as McDonald’s, Meixin, Yoshinoya, Pacific Coffee, as well as local eateries like Hung Fook Tong and Nam Kee Noodle Shop. Additionally, Meituan is also in active talks with other international restaurant groups for collaboration.

On its first day of operations, KeeTa launched aggressive promotional activities. Firstly, they introduced a HKD 1 billion subsidy programme to attract new users. Each new user who registers can receive HK$300 (US$38.3) worth of coupons and waived delivery fees. KeeTa also has a lower minimum order requirement compared to other platforms, typically ranging from HK$50 to 60. 

In addition, KeeTa has introduced a special “On-Time Guarantee (準時保)” service as part of its differentiation strategy. Delivery delays are quite common in Hong Kong and can sometimes last up to 2 hours. However, with KeeTa’s system, if the delivery is more than 15 minutes late, users can receive a HK$10 coupon as compensation. The longer delays, the higher the compensation. 

Although many local users have yet to experience the app due to the initial geographical limitations, the general feedback gathered from social media indicates a positive response to KeeTa’s services.

Let’s take a look at the current state of the food delivery market in Hong Kong:

Currently, there are two major food delivery platforms in the local market: Foodpanda, part of Delivery Hero Group headquartered in Germany, and Deliveroo, headquartered in the UK. 

According to statistics from our friends at Measurable AI, in the first half of 2022, Foodpanda held about 63% market share, while Deliveroo accounted for the remaining 37%. Uber’s food delivery business exited Hong Kong on December 31, 2021. 

Both Foodpanda and Deliveroo have been facing certain challenges in the region. Deliveroo, for instance, exited the Australian market last November and scaled back its operations in Singapore to focus on a more upscale market. Delivery Hero relies heavily on profits from its South Korean subsidiary Woowa Brothers to subsidize operations in other countries.

These two major players dominate the relatively small food delivery market in Hong Kong: the penetration rate of food delivery in Hong Kong is not particularly high, with food delivery transactions accounting for about 10% of the overall restaurant industry, compared to 21% in mainland China two years ago(higher in major cities on the Mainland). Ordering food delivery is not as common a habit in Hong Kong as it is in mainland China.

From the consumer’s perspective, Hong Kong has a rich culinary culture, and a high density of F&B establishments on every street corner, so the demand for food delivery with minimal order restrictions is not high. Additionally, the cost of delivery is driven up by fuel prices and high labor costs (food delivery platforms, including KeeTa, charge around HK$25 for delivery fee). Furthermore, delayed deliveries are a common occurrence. 

Consequently,  the food delivery market in Hong Kong remains lukewarm, even during the pandemic, with moderate growth rates. It seems that the market has not reached a tipping point yet (most cities globally have not either).

Considering this context of Hong Kong’s food delivery market,, when looking at the promotions and incentives introduced by KeeTa, it is evident that they are making localised attempts to address the pain points in the market.

Despite the growing number of food delivery orders in Hong Kong,  concerns about the local consumption habits and delivery costs still remain, leading many to question if there is still room for a third player in the Hong Kong food delivery market. Some also worry about the potential impact on Meituan’s financial condition due to its investment in Hong Kong. We find this last concern quite amusing since Meituan is a publicly listed company, and one can simply look at their financial reports to assess their financial standing. 

Over the past few years, Meituan has established a strong moat in the on-demand delivery and instant grocery sectors in Mainland China. Their financial performance has been solid, and now is a good time to seek new breakthroughs in overseas markets – Hong Kong is relatively similar to mainland China and can be easily supported with available resources there, serving as a safe option for Meituan.

For a comparison of Meituan and other major platforms, you can refer to Momentum Academy’s “Apples to Apples 2.0” report, where we provide comparable analyses of key data from various internet platform companies. 

Despite the significant challenge, Meituan can leverage the accumulated experience in mainland China and tap into its advantages in technology, data, operations, and merchant expansions. As long as Meituan has determined leadership, selects the right people, and organizes its internal structure effectively, they should not worry about competition from the two incumbents. 

Venturing into Hong Kong symbolizes Meituan’s determination to explore new growth opportunities. It is said that “Keeta” is derived from the cheetah, representing speed and efficiency. However, compared to delivery operations, which require fast speed, the process of localisation after venturing into a new market can be a long and challenging one. 

This is also emphasized in our book “Seeing the Unseen: Behind Chinese Tech Giants’ Global Venturing” where we analyse the experiences and lessons of dozens of  large Chinese technology companies expanding overseas.

(The book is available on Amazon and Audible, and if you are in Southeast Asia, a signed copy can be obtained from our website. )

We will continue to monitor the performance data and user feedback from KeeTa’s expansion into new areas. Stay tuned!