Will GrabFood devour Singapore's food delivery companies?

Uber EATS will move into GrabFood’s platform soon, and some think foodpanda, honestbee, and Deliveroo should be worried.

As part of Grab’s acquisition of rival Uber’s Southeast Asian operations, Uber EATS’ delivery services and restaurant partners will move to the GrabFood platform. GrabFood will initially expand its services to Singapore and Malaysia and then have them available to all major Southeast Asian countries in the first half of 2018. Like with the ride-hailing landscape, Grab is poised to dominate the food delivery scene, and some think foodpanda, Honestbee, and Deliveroo should be worried.

Tech in Asia chief editor Terence Lee noted that, previously, Uber EATS competed strongly against its rivals, having snagged McDonald’s as a partner restaurant chain. “It’s ranking especially well in the app stores in Singapore and Malaysia. foodpanda, Honestbee, and Deliveroo should be worried,” he said.

In an interview with Singapore Business Review, Lee said the food delivery services could have a chance to survive through a merger and acquisition (M&A), but the window may have closed for a few reasons.

“First, Grab's chances of success of becoming Southeast Asia's de-facto mobile platform has improved significantly with the Uber deal, which means investors may be spooked about backing a lesser competitor. Second, even if an acquirer is interested, the stock of these competitors may have dropped since then, which means they won't be able to get favorable terms,” he said.

Golden Gate Venture principal Justin Hall noted that most good investors would have been spooked regardless, so the distinction is pretty useless. “Competitors would have struggled to raise funding regardless of the merger. Food delivery is not about food; it's about logistics, and the technology required to economically and quickly deliver goods (in this case, food) from point A to point B. And at the end of the day, Grab has a stranglehold on consumer logistics, especially high-volume, consumer-facing logistics,” he said.

Meanwhile, JFDI Asia CEO Hugh Mason noted that in this scenario investors would be wise to stay wary of any startup that is totally reliant on a single platform like Grab, or is trying to compete with it. “Just as they should be wary of any startup whose business model is totally dependent or trying to compete with Facebook,” he added.

Moving forward, Lee noted that the next best thing the other food delivery companies can do is to invest directly into making their own products. “Instead of just delivering food from restaurants, they can set up their own kitchens and capture more of the revenue for themselves,” he said.

foodpanda managing director Luc Andreani noted that foodpanda is the only food delivery company to achieve nationwide presence and have a dine-in satellite kitchen based in Woodlands. “As such, our edge lies in our strong infrastructure and efficiency in managing huge volumes of orders, superior customer service and by far the largest restaurant offering in Singapore. We are the only platform catering to all tastes, from shiok hawker center dishes to famous chains and more premium restaurants,” he added.

Also read: Crouching Panda, hidden Roo: Who is getting the hop on Singapore's food delivery market?

Meanwhile, Deliveroo’s general manager Sid Shanker said they have plans to invest and expand in Singapore over the next few years. “Deliveroo in Singapore is going from strength to strength as our rivals sell up and move out… From our teams to our technology - we are all about food. The demand from customers to have great food delivered straight to their door continues to grow - and at Deliveroo we're excited about our plans to invest and expand in Singapore over the next few years,” he added.

honestbee Singapore’s managing director Chris Urban noted that they are maintaining a competitive edge in the island nation. “We are the first to provide on-demand hawker food delivery service in Singapore, and our customers can order from multiple stalls within a hawker centre, and check-out with just one basket. Today, Singaporeans can have their favourite local delights delivered right to their doorstep, without ever having to leave the comfort of their homes or office,” he said.

Mason is more negative about the potential of these smaller companies to compete against giants. “Chinese startups tell us that the only strategy that works in their market is to stay super secret for as long as possible, launch and try to grow as fast as possible, accepting that they will get swallowed very quickly, long before they have time to build the independent value you deserved to build given the strength of your idea. It does create a flood of rapid innovation but every time one of the giants sucks up a young startup it consolidates the power of the giant still further,” he added.

However, Hall said that has always been the case in Singapore. “I considered this [Singapore] a grossly competitive, difficult market even before Grab and Uber, and that feeling remains the same after the latter's departure,” he added.

Mason made a comparison between startups in Singapore and China and said the threat to entrepreneurs is that they end up with a situation like China where a small number of sprawling octopuses act like gatekeepers between customers and entrepreneurs. “If you have an idea and you want to test it, you have to work with one of a very few very big internet companies to reach customers. Immediately they will start skimming off cash from what you do through their payment systems and be in a position to watch your revenue and every customer interaction... so they can see if you have something interesting and new that is scaling fast. Before you know it, a giant octopus arm suckers you up and pulls you to its mouth, whispering: ‘So - do you want to sell at the price I am offering, or shall I set my other 7 arms working to copy you down to the last pixel? I already know all your key numbers and customers because we have been tracking every single one of their payments to you’,” he said.

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