Meituan’s KeeTa joins Hong Kong’s food delivery race — but analysts are skeptical

Chinese meals supply big Meituan has launched a sister app in Hong Kong, its first roll-out outdoors of mainland China — however some analysts are skeptical it might shortly carve out a major market share.

“I’m not very optimistic about Meituan’s expansion in Hong Kong,” Shawn Yang, managing director of Blue Lotus Research Institute, informed CNBC. “I don’t think the market is large enough where Meituan will invest a lot of resources into.”

The meals supply service — named KeeTa — launched on May 22 in two residential areas: Mong Kok and Tai Kok Tsui.

A month later, KeeTa introduced it was increasing to Sham Shui Po and Yau Tsim Mong districts in Hong Kong after its preliminary market launch “exceeded expectations,” it mentioned in a press launch shared with CNBC.

KeeTa plans to cowl the whole Hong Kong market by the top of this yr, Meituan mentioned on the time of its launch.

The enlargement comes as Meituan faces elevated competitors from new gamers akin to TikTookay’s sister Douyin in its house market, and as hopes of a powerful post-Covid restoration in China fade.

Meituan is the market chief in China’s meals supply sector, taking nearly 70% of the market share within the mainland China, knowledge from business analysis agency ChinaIRN confirmed.

“We have received a large number of enquiries and appeals from diners and restaurants outside Mong Kok and Tai Kok Tsui, which has greatly strengthened our confidence in further expanding the region,” a KeeTa spokesperson informed CNBC.

The firm will “continue to offer the takeaway service and expand its services to more parts of Hong Kong as soon as possible,” the spokesperson mentioned.

Kai Wang, senior fairness analyst for Morningstar Asia, does not assume the enlargement into Hong Kong could have a major affect on the corporate’s earnings.

He mentioned KeeTa’s enlargement into Hong Kong is “only gaining another 7 million in users potentially” in comparison with greater than 678 million customers Meituan already has in China.

“I don’t think [KeeTa] affects Meituan’s revenues very much,” mentioned Wang.

Meituan declined to touch upon the analysts’ views.

“I think Meituan wants to find a market that is culturally close to mainland China, [build] a team and talent and try to see if they can also take some market share in overseas markets in the long run,” mentioned Yang from Blue Lotus. He was referring to Hong Kong as a testing mattress for Meituan which can ultimately increase internationally.

The penetration charge of meals supply in Hong Kong shouldn’t be significantly excessive.

Currently, about 10% of the general restaurant business faucets on meals supply companies — that is in comparison with a mean of 21% throughout China two years in the past, in response to a report from analysis agency Momentum Works.

That’s as a result of “ordering food delivery is not as common a habit in Hong Kong as it is in mainland China,” mentioned the report, including that the Asian monetary hub has a excessive density of meals and beverage institutions on each avenue nook.

Hong Kong’s meals supply market is at the moment dominated by Foodpanda and Deliveroo, which held shares of 64% and 36% respectively in May earlier than KeeTa’s launch, in response to knowledge supplier Measurable AI. The knowledge takes under consideration each supply and pickup orders. 

KeeTa doesn’t at the moment provide meals pickup companies, solely supply companies.

Uber Eats exited Hong Kong on the finish of 2021 after 5 years of working within the territory. It held about 5% market share on the time of its exit, in response to Measurable AI.

“If there has already been like two or three major players in this market, then it’s actually very difficult to change consumers’ mindsets, unless they do a lot of subsidy campaigns,” mentioned Yang of Blue Lotus Research.

″[KeeTa’s expansion into Hong Kong] ought to result in extra vouchers and reductions for shoppers. And it ought to profit shoppers in the long run,” said Wang from Morningstar.

Separately, Hong Kong has launched a probe into anti-competitive conduct from Deliveroo and Foodpanda. That means players cannot engage in practices such as restricting restaurants or penalizing them for switching to partnering exclusively with other platforms.

This could mean smaller players such as KeeTa may be able to build market share.

In a bid to acquire new users, KeeTa is offering 300 Hong Kong dollars ($38.30) worth of free vouchers for each new user that can be used to offset meals and delivery fees. The company “plans to additional launch numerous advertising actions within the new district” such as free delivery for all, as well as referral discounts and food deals.

KeeTa is also offering set meals from HK$60 including delivery fees to address the painpoint of customers who dine alone. Foodpanda and Deliveroo’s minimum order requirements typically range from HK$50 to HK$80 excluding delivery fees, according to a CNBC check.

To entice customers further, KeeTa launched an “on-time promise” policy to all users. Customers get compensated in vouchers if their orders are more than 15 minutes later than the original estimate.

Ryan Lai, managing director of Foodpanda Hong Kong, told CNBC that short-term promotions are not enough to establish customer loyalty in the longer run.

“In such a aggressive market panorama, we discover that constructing robust buyer stickiness is a key success issue,” said Lai.

“In our opinion, the entry of a brand new participant within the native supply area displays the untapped progress potential of this business available in the market,” he said, adding that Foodpanda will continue to serve its customers better.

On the new entrant, a Deliveroo Hong Kong spokesperson said, “Since Deliveroo first entered the Hong Kong market seven years in the past, we now have all the time been optimistic concerning the prospects of the native meals and grocery business, and as such, we see competitors as a driving pressure for innovation.”

Recently, the platform also launched the “on-time promise” policy for paid users — which compensates them with vouchers if their orders are late by 15 minutes or more.

However, the food delivery market in Hong Kong “stays lukewarm,” said Momentum Works in the report, which pointed out that even during the pandemic, growth rates were moderate.

But KeeTa can tap into its parent company’s expertise in China, said the research firm.

“As lengthy as Meituan has decided management, selects the proper folks, and organizes its inside construction successfully, they need to not fear about competitors from the 2 incumbents.”