On a Platter – Food Delivery Landscape in Southeast Asia concluded last Friday with great success. Jianggan Li and Crystal Yu gave the lowdown on the food delivery landscape and the strategies of key F&B players in the region.

We received a lot of interesting questions which we didn’t have enough time to answer during the briefing. We have laid down the answers to your many questions below. You can find the first part of the questions here.

Groceries 

13. What’s the difference between Grab, Gojek, and Shopee Food regarding their grocery strategy and operational focus? Is there any new market player in SEA grocery delivery?

Grab does a lot of experimentation across different markets – and we do believe that the Jaya Grocer acquisition in Malaysia offers a very good learning opportunity for the company; Gojek is Indonesia-focused, which limits the experimentation it can potentially undertake; Foodpanda went big with dark stores, although it also works with third parties; Shopee is now probably more focused on onboarding grocery sellers to its platform while looking at potential investment opportunities in grocery startups – if anyone figures out how to do it in a sustainable way.

As for new players, there are a lot of startups doing various things grocery related – quick commerce, community group-buy, farm to table, supply chain consolidation, etc. It is too early to tell who can eventually survive, or be acquired by the giants.

 

14. How is it that quick commerce can be a higher margin service in ASEAN? It’s hugely loss-making in some models (Glovo)
No, it can’t.
 
15. Do you think that quick commerce is the next growth driver in SEA, similar to how Getir and Jokr are in Latam and Europe now?
Grocery is, but quick commerce might not be. Someone needs to figure out how to do the intersection of both sustainably.

16. Why didn’t you consider grocers like Fairprice, which also have large delivery operations, in this report?
Because the current report focuses on food delivery while touching upon grocery as every food delivery player has identified it as the next growth driver.

We will cover more about the role of traditional grocers moving online (or omnichannel) in our grocery delivery-focused report in the coming months.

17. Would the grocery/food delivery demand in SEA countries decline once the pandemic situation gets better?

Most of the players are competing with discounts for delivery fees for the first phase, but they all eventually need to increase their delivery fees.
Increase the delivery fees or volume and density of delivery as well as operational efficiency such as average cost per delivery naturally goes down.

Whether the food delivery demand would decline in 2021 was a key question asked when we published our first Food Delivery Platforms in Southeast Asia in Jan 2021. It hasn’t – we do believe there is still room for growth, but the players will need to be more efficient than they were before, now that people have more choices offline. 

 

Growth & investment 

18. Will the growth story come to a sharper slowdown considering SEA has high “metro-concentration”- the top cities have imbalanced high demand compared with other regions. Does food delivery have high potential to penetrate rural areas?
The short answer is yes. But smaller cities and rural areas require very different operational models as they will not deliver the volume and density.

Meituan’s agency model for lower-tier cities can be a reference point. Again, it comes down to operational efficiency. 

 

19. Which part of the capital cycle are we at i.e. are we still seeing a lot more capital flowing in and players forming on the ground? How should we think about the fundamental rights to win?
Capital cycles nowadays are much shorter than they were before, and external shocks are more frequent if you take the last 2 years as a reference.

But we do see that large players like Grab are well capitalised to withstand the cycles, while early-stage investors are cash rich and will need to deploy quickly. The most painful part would probably be series B companies whose growth is slowing down. 

20. What’s next for super apps, when they face the challenge of allocating resources for so many complex businesses?
They have always been facing such challenges. This issue depends more on leadership and organization and is less strategy-driven. You can’t find answers in numbers ex-ante. 

 

21. In China, after Meituan’s market share reached more than 50%, it enters a self-strengthening process, which means it can attract more merchants and customers. Why does Grab lose market share even though its market share is more than 50%?
We do not think Grab has lost market share. However, one thing to note is that Meituan did not enter the self-strengthening process automatically; it still focuses a lot on deriving efficiency from its operations, which its competitors find hard to match.

Another thing to look at is that there is still a large segment of the market that is not yet tapped – Grab has 25 million monthly transacting users, and far more growth is needed to reach comparable levels of population penetration of Meituan. 

 

22. Will consolidations between these food delivery players in SEA be considered as a potential future trend to achieve profitability, similar to what we are currently seeing in more mature markets like Europe and the US?
Yes, we had predicted, at the beginning of 2021, that Grab and Gojek would merge. From a business point of view, that would have been the most logical outcome. However, the real world can sometimes function very differently.

The challenge with consolidation in Southeast Asia is that aside from DeliveryHero affiliates, Foodpanda and Baemin, every major player is part of a larger group/ecosystem, which food delivery forms an integral part of. 

 

23. What other factors/strategy can a food delivery platform provider leverage on besides: (1) commission rate charged to merchants;  (2) managing delivery costs; and (3) providing promo codes (either free delivery or discounts on price)
Consumer prices, delivery costs, and merchant fees (take rate, advertising etc.) are the main parts of the cost structure – and they can be further broken down into many more refined metrics. You can take Meituan’s operational metrics as a reference point.

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.