Meituan KeeTa in Hong Kong’s food delivery race; analysts are skeptical

Chinese food delivery giant Meituan has launched a sister app in Hong Kong, its first outside of mainland China — but some analysts are skeptical it can quickly achieve significant market share.

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

The food delivery service — called KeeTa — launched on May 22 in two residential areas: Mong Kok and Tai Kok Tsui.

A month later, KeeTa announced it was expanding into the Sham Shui Po and Yau Tsim Mong districts of Hong Kong after its initial market launch “exceeded expectations,” it said in a press release shared with CNBC.

KeeTa plans to cover the entire Hong Kong market by the end of this year, Mitwan said at the time of its release.

The expansion comes as Meituan faces growing competition from new players like sister TikTok Douyin in its home market, and as hopes of a strong post-Covid recovery in China fade.

Meituan is the market leader in the food delivery sector in China Almost 70% of the market share In mainland China, data from industry research firm ChinaIRN showed.

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

The company “will continue to provide takeaway service and expand its services to other parts of Hong Kong as soon as possible,” the spokesperson said.

Kai Wang, senior equity analyst at Morningstar Asia, doesn’t think the expansion into Hong Kong will have a significant impact on the company’s earnings.

He said KeeTa’s Hong Kong expansion “only gains 7 million additional potential users” compared to Meituan already has more than 678 million users in China.

“I don’t think (KeeTa) has a significant impact on Meituan’s revenue,” Wang said.

Mituan declined to comment on analyst opinions.

“I think Meituan wants to find a market that is culturally close to mainland China, (build) a team and talents and try to see if they can also get some market share in overseas markets in the long term,” said Yang of Blue Lotus. . He was referring to Hong Kong as a test bed for Meituan which may eventually expand internationally.

Currently, about 10% of the overall restaurant industry makes use of food delivery services That’s compared to an average of 21% across China two years ago, according to arSubmit a report from the research firm Momentum Works.

This is because “ordering food delivery is not as common a habit in Hong Kong as it is in mainland China,” the report said, adding that the Asian financial hub has a high density of food and beverage establishments on every street corner.

Foodpanda and Deliveroo currently dominate the food delivery market in Hong Kong, owning shares of 64% and 36% respectively in May prior to the launch of KeeTa, according to data provider Meashable AI. The data takes into account delivery and pickup requests.

KeeTa does not currently offer food pick-up services, only delivery services.

Uber Eats exited Hong Kong at the end of 2021 after five years in the territory. It had about 5% market share at the time of its exit, according to the organization Meashable AI.

“If there are really two or three major players in this market, it is very difficult to change consumers’ mindsets, unless they do a lot of support campaigns,” said Yang of Blue Lotus Research.

″ (KeeTa’s expansion into Hong Kong) should lead to more coupons and discounts for consumers. “It should benefit consumers in the long run,” Morningstar’s Wang said.

separately , Hong Kong launched an investigation into anti-competitive behaviour From Deliveroo and Foodpanda. This means that players cannot engage in practices such as restricting restaurants or penalizing them for switching to partnering exclusively with other platforms.

This may mean that smaller players like KeeTa may be able to build up market share.

In an effort to gain new users, KeeTa is Provide free HK$300 ($38.30) coupons for every new user which can be used to offset meals and delivery charges. The company plans to “launch more diverse marketing activities in the new area” such as free delivery for all, as well as referral discounts and food deals.

KeeTa also offers set meals starting at HK$60 including delivery fee to address the issue 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 scan.

To attract more customers, KeeTa has launched a “On Time Pledge” policy for all users. Customers receive compensation in vouchers if their order is more than 15 minutes behind the original estimate.

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

“In such a competitive market landscape, building strong customer traction is a key success factor,” said Lai.

“In our opinion, the entry of a new player into the domestic delivery space reflects the untapped growth potential of this industry in the market,” he said, adding that Foodpanda will continue to better serve its customers.

On the newcomer, a Deliveroo Hong Kong spokesperson said, “Since Deliveroo first entered the Hong Kong market seven years ago, we have always been optimistic about the prospects for the local food and grocery industry and, as such, see competition as the driving force for innovation.”

Recently, the platform has also launched a “On Time Promise” policy for paying users – which compensates them with coupons if their orders are delayed by 15 minutes or more.

However, Hong Kong’s food delivery market “remains tepid,” according to the report, which noted that even during the pandemic, growth rates were moderate.

The research firm said KeeTa can benefit from its parent company’s expertise in China.

“As long as Meituan has identified the leadership, selected the right people, and effectively organized its internal structure, there is no need to worry about competition from the two incumbents.”