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Foodpanda and Deliveroo scale up for street battle over Hong Kong food delivery

Euromonitor International estimates the food delivery market in Hong Kong covering non-seating outlets will be worth HK$423.2 million this year

PUBLISHED : Thursday, 02 June, 2016, 6:01am
UPDATED : Thursday, 02 June, 2016, 8:17am

Online food delivery companies foodpanda and Deliveroo plan to continue to expand their coverage of Hong Kong neighbourhoods, as tighter funding hits the on-demand food industry in overseas markets.

Rocket Internet-backed foodpanda and London-based Deliveroo said they are expanding in Hong Kong and were sufficiently funded to weather problems faced by start-ups in other markets which have seen mergers and closures as venture capital financing has slowed.

“For us, we raise money, every round is our last round. That’s how we view it, so that’s not a consideration for us,” said William Shu, co-founder and chief executive of Deliveroo.

Food technology companies raised US$684 million in the first quarter of 2016, the lowest quarterly funding total since the fourth quarter of 2014, according to CB Insights.

CB Insights defines the sector as including online ordering platforms, meal kit delivery, grocery delivery as well as new types of food sources such as insect protein companies.

High competition, large marketing budgets and steep discounts to lure in new customers have seen some food delivery start-ups burn through cash.

In May, India’s food delivery start-up TinyOwl merged with hyper local delivery company Roadrunnr.

Deliveroo’s latest funding round was secured at the end of 2015 when the company raised US$100 million.

Benjamin Bauer, co-founder and chief marketing officer for foodpanda said the company does not currently need to raise funding after it raised US$200 million last year.

“The good thing is we still have most of that on the balance sheet,” Bauer said. “We have some countries that are already profitable and others are on the way to profitability.”

Foodpanda, which focuses on emerging markets in Southeast Asia, Eastern Europe and the Middle East launched its Hong Kong service in June 2014. It was joined by Deliveroo late last year.

Euromonitor International estimates the food delivery market in Hong Kong covering non-seating outlets will be worth HK$423.2 million this year.

In interviews at the RISE conference in Hong Kong, both companies said they have expanded the areas they serve in Kowloon but said competition in the market was not an issue of concern.

Shu said Deliveroo, which operates in 12 countries, is focusing its efforts in on the customer. In May, the company started offering ordering services in Hong Kong in Chinese and released the Android version of its app.

“What we focus on is having the best restaurant supply and getting the food to people in half an hour,” Shu said. “And I think provided we’re doing those two things and hitting our budgets then everything takes care of itself.”

Deliveroo targets the premium market, while foodpanda has a wider remit, which Bauer said allows it caters to the varied tastes of Hong Kong residents.

“Every competitor helps us to raise awareness and then we have a much broader positioning,” Bauer said. “It’s extremely important to us that the consumer has the choice on what kind of delivery he wants to have, what kind of price point he wants to have.”

In March foodpanda acquired the Hong Kong operations of food delivery firm delivery.com.

Still, foodpanda sold its food delivery businesses in Spain, Italy, Mexico and Brazil to London-based rival JustEat for US$140 million in February to focus on its other markets.

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