The food delivery market in southeast Asia is facing a multitude of challenges in the post-pandemic market and consolidation is looming, reported the Japan Times. The pandemic caused a surge in food delivery services globally. In southeast Asia, the food delivery services market grew 183% in 2020 and in 2021 increased 30%, according to Singapore-based Momentum Works. However, by 2022, the overall growth declined to 5%, including in markets like Thailand, Singapore and Indonesia.
Southeast Asia’s food delivery providers may be facing logistical challenges relating to staffing, overdemand pressures and market homogenization, according to a 2022 Frost and Sullivan Report.
“Foodpanda scaled back its Asia operation in September, cutting headcount amid sale discussions, while Southeast Asia’s largest ride-hailing firm, Grab, laid off more than a thousand employees in June,” reported the Japan Times.
Foodpanda, which confirmed in September that is negotiating a potential sale of its business in southeast Asia markets, has not announced the potential buyers, said the Japan Times. However, the media names Grab as a potential candidate.
“With the current trends in the market where Grab is not only gaining market share but also holding a much larger war chest, the situation is untenable for Foodpanda and its parent,” said Jianggan Li, CEO of Momentum Works.
“Consolidation talks are inevitable, the question is whether both parties can agree on a price,” he said.
As the companies move towards consolidation, there are implications for customers.
“A larger customer base gives these operators more influence over businesses and merchants who rely on their services,” Jeff Tan, director of Frost & Sullivan’s Asia-Pacific supply chain and logistics practice said. “This could lead to potential consumer benefits, such as improved service quality and a broader range of offerings.”
However, as food delivery operators gain greater control, they could possibly raise prices for customers.
“This could result in consumers paying more for food delivery services in the future, especially if consolidation leads to less price competition,” Tan said.
Industry leaders will get an immersive look into the future of convenience retailing at the 2024 NACS Convenience Summit Asia in Seoul, South Korea March 5-7. Register to attend the event here.