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

Chinese foods delivery giant Meituan has released a sister application in Hong Kong, its very first roll-out outside of mainland China — but some analysts are skeptical it can promptly carve out a major market share.

“I’m not quite optimistic about Meituan’s expansion in Hong Kong,” Shawn Yang, taking care of director of Blue Lotus Study Institute, told CNBC. “I don’t believe the marketplace is large plenty of wherever Meituan will devote a whole lot of sources into.”

The foodstuff supply company — named KeeTa — launched on Might 22 in two household locations: Mong Kok and Tai Kok Tsui.

A month later on, KeeTa introduced it was increasing to Sham Shui Po and Yau Tsim Mong districts in Hong Kong after its first market place start “exceeded expectations,” it claimed in a push release shared with CNBC.

KeeTa ideas to protect the overall Hong Kong sector by the conclusion of this year, Meituan said at the time of its start.

The expansion comes as Meituan faces improved level of competition from new players this sort of as TikTok’s sister Douyin in its house sector, and as hopes of a strong post-Covid recovery in China fade.

Meituan is the marketplace leader in China’s foods delivery sector, taking almost 70% of the marketplace share in the mainland China, knowledge from industry research agency ChinaIRN confirmed.

“We have received a huge amount of enquiries and appeals from diners and dining establishments outside Mong Kok and Tai Kok Tsui, which has greatly strengthened our assurance in further increasing the location,” a KeeTa spokesperson told CNBC.

The business will “continue to supply the takeaway company and grow its services to more parts of Hong Kong as quickly as attainable,” the spokesperson stated.

Kai Wang, senior fairness analyst for Morningstar Asia, would not imagine the growth into Hong Kong will have a substantial effects on the firm’s earnings.

He said KeeTa’s growth into Hong Kong is “only attaining a further 7 million in people possibly” compared to more than 678 million consumers Meituan by now has in China.

“I you should not feel [KeeTa] impacts Meituan’s revenues pretty a great deal,” explained Wang.

Meituan declined to comment on the analysts’ sights.

“I think Meituan wishes to obtain a current market that is culturally shut to mainland China, [build] a team and talent and try to see if they can also consider some industry share in abroad marketplaces in the very long operate,” explained Yang from Blue Lotus. He was referring to Hong Kong as a tests bed for Meituan which may ultimately develop internationally.

The penetration price of food stuff shipping and delivery in Hong Kong is not particularly significant.

At the moment, about 10% of the total restaurant industry taps on food stuff shipping expert services — that is when compared to an average of 21% throughout China two decades back, in accordance to a report from exploration firm Momentum Is effective.

That is simply because “ordering foodstuff shipping and delivery is not as typical a routine in Hong Kong as it is in mainland China,” said the report, introducing that the Asian economical hub has a substantial density of food items and beverage institutions on each individual street corner.

Hong Kong’s food items delivery current market is at the moment dominated by Foodpanda and Deliveroo, which held shares of 64% and 36% respectively in May prior to KeeTa’s launch, in accordance to facts company Measurable AI. The information can take into account the two supply and pickup orders. 

KeeTa does not at this time offer food pickup solutions, only shipping and delivery companies.

Uber Eats exited Hong Kong at the finish of 2021 immediately after five a long time of running in the territory. It held about 5% market place share at the time of its exit, according to Measurable AI.

“If there has previously been like two or three major players in this market place, then it can be really incredibly tricky to adjust consumers’ mindsets, except they do a great deal of subsidy campaigns,” claimed Yang of Blue Lotus Analysis.

″[KeeTa’s expansion into Hong Kong] ought to lead to a lot more vouchers and discount rates for individuals. And it must benefit individuals in the very long term,” claimed Wang from Morningstar.

Independently, Hong Kong has introduced a probe into anti-competitive conduct from Deliveroo and Foodpanda. That suggests players are unable to engage in procedures this kind of as limiting restaurants or penalizing them for switching to partnering exclusively with other platforms.

This could suggest smaller players this kind of as KeeTa may be capable to create market place share.

In a bid to receive new consumers, KeeTa is offering 300 Hong Kong pounds ($38.30) truly worth of free of charge vouchers for each new user that can be utilized to offset foods and shipping fees. The company “designs to additional launch numerous internet marketing routines in the new district” these types of as free shipping for all, as properly as referral savings and meals bargains.

KeeTa is also supplying established meals from HK$60 such as delivery fees to address the painpoint of customers who dine by itself. Foodpanda and Deliveroo’s bare minimum order specifications generally range from HK$50 to HK$80 excluding supply costs, in accordance to a CNBC check.

To entice buyers further, KeeTa released an “on-time guarantee” plan to all end users. Consumers get compensated in vouchers if their orders are more than 15 minutes later on than the first estimate.

Ryan Lai, handling director of Foodpanda Hong Kong, told CNBC that shorter-time period promotions are not ample to set up customer loyalty in the for a longer time operate.

“In such a aggressive sector landscape, we uncover that making potent consumer stickiness is a crucial accomplishment element,” mentioned Lai.

“In our opinion, the entry of a new participant in the regional shipping house demonstrates the untapped expansion opportunity of this industry in the sector,” he said, adding that Foodpanda will carry on to provide its customers superior.

On the new entrant, a Deliveroo Hong Kong spokesperson explained, “Considering the fact that Deliveroo very first entered the Hong Kong current market 7 years in the past, we have constantly been optimistic about the prospects of the local food stuff and grocery field, and as this kind of, we see competitors as a driving force for innovation.”

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

Nonetheless, the foodstuff supply current market in Hong Kong “continues to be lukewarm,” claimed Momentum Performs in the report, which pointed out that even for the duration of the pandemic, advancement charges were moderate.

But KeeTa can tap into its parent firm’s abilities in China, reported the investigate agency.

“As extensive as Meituan has determined leadership, selects the appropriate men and women, and organizes its internal framework properly, they should really not fret about level of competition from the two incumbents.”