Food delivery kings: How Deliveroo, Foodpanda, and Uber Eats rule Hong Kong’s meals on wheels

Hong Kong’s food delivery scene is cookin’. While barely existent a few short years ago, branded scooters ferrying meals back and forth across town are now an unavoidable sight. Yet, rather than a score of contenders, control of the market rests securely in the hands of three brands – Deliveroo, Foodpanda, and Uber Eats. Rick Boost has put each to the flame to find out if this seemingly tenuous balance can be sustained or if the situation will inevitably boil over.

Game of thrones

Hong Kong’s food delivery kingdom has three potential rulers, with equally valid claims.

There may be slight differences in the exact number of riders sporting their livery, and restaurants waving their banners. They manage fleets of around 3,500 delivery staff, while the quoted number of partnered restaurants for each lies somewhere between 2,500 and 6,000. But in reality, these are just the base mechanics. For Deliveroo, Foodpanda, and Uber Eats, service awareness, brand recognition, and customer loyalty are the measurements that count. But achieving any of these has up until recently been an uphill battle in untested territory.

“The penetration is not extremely sufficient in Hong Kong compared to other markets in Asia,” says Alex Law, head of marketing at Foodpanda Hong Kong.

Launching locally in 2014, it was the first food delivery service of its kind to hit the Hong Kong scene, a stranger in a strange land.

Law explains: “We were quite an undeveloped market. And we were making a lot of changes to consumer mindsets and behaviour, introducing this new model.”

A year later in 2015, competition arrived in the form of Deliveroo’s local launch. But even though Foodpanda had begun the groundwork in educating the public on new food delivery services, its new rival wasn’t going to find things easy, as it was entering a dining culture that had evolved in an unconventional fashion.

“Other markets traditionally had that marketplace exist for like five or even 10 years. So those markets were more developed from the perspective that people were already used to the idea of food delivery, which was previously being executed by the restaurants themselves and Hong Kong never really had that,” explains Brian Lo, general manager for Hong Kong and Taiwan at Deliveroo.

“In Hong Kong, I think we skipped that step when we started doing food delivery ourselves on top of having that listing of multiple restaurants in the marketplace.”

Uber Eats was the last to hit the scene in 2016 and even by then, local habits were still relatively unchanged, with only around 5% of the city’s estimated food experiences being via delivery.

Raj Beri, head of Uber Eats for Asia Pacific, Europe, Middle East, and Africa, explains: “When you look at the percentage of the city that probably uses food delivery on a regular basis, it’s probably smaller than other cities in Asia.”

But he is optimistic, adding: “When you look at all the options available to people I actually think the size of food delivery in two to three years in this market is gonna be much much bigger than it is today as well.”

And though it was a tough start, Law lays out how rapidly things have changed.

“Three or four years ago, we all had about 1,000 restaurants, but right now we’re all heavily penetrating into the market and getting more restaurants on board, and therefore, more customers.”

Heavy weighs the crown

Awareness has not been the only issue delivery platforms have had to overcome. One major cultural hurdle all three agree has taken work has been to shift Hongkongers’ perceptions towards even the concept of ordering in, reserved usually for celebrations.

“It used to be something for a special meal, like ordering pizza once a week for the family,” Beri says.

“You’re now seeing more disposable income in markets such as Hong Kong going towards food that is not cooked at home.”

The first customers to actually embrace the idea of ordering food on a regular basis were office workers.

“People are pressed for time and work the longest hours in Hong Kong. The weather isn’t exactly pleasant to walk out in especially in the summer. And in many areas at lunchtime, restaurants are packed,” Lo says.

“The early adopters of the service were professionals pressed for time who were more digitally savvy and who might be more open to eCommerce. I think that group lends itself to people who would try out online food delivery services a bit more.”

Those early adopters wedged open the door to making the practice acceptable. But it’s still a ways to the ultimate goal of all three services: to have customers regularly ordering breakfast, lunch, and dinner through the service daily.

Yet, there has already been a major shift away from workday lunches being the big earner, as Law explains: “Young families are ordering a lot during weekends. We have seen demand during weekends rise amazingly.”

But Law believes reluctance towards ordering in has another potential cause, Hong Kong’s extremely high number of eating establishments within walking distance. As Law says: “People will still use their mobile phones to call the cha chaan teng downstairs.”

Beri agrees that it’s a factor, saying: “The city is very dense, people are used to going out their front door and having hundreds of options available to them. I think things like pickup are just very common here as well.”

That pickup pattern certainly contributed to the adoption of a pickup service option by all three providers. But Lo strongly disagrees with the others that proximity has had anything to do with pushback.

He explains: “The reason why people traditionally haven’t ordered in the past is not because they’re too close to restaurants, it’s because on the platforms themselves people can’t find the restaurants they want.”

On that note, the trio of platforms tell Marketing how they have been rapidly expanding their menus to incorporate a more diverse range of cuisines. And some of those palate additions are themselves already having a knock-on effect on ordering habits.

Law provides one example, after including more street food options: “People didn’t expect bubble milk tea would play a significant role in food delivery, but right now we’re seeing a lot of growth in people ordering it during the day at around 3pm for their colleagues or families at tea time.”

Royal decrees

Adapting menus to meet demand is also the reasoning behind one of several innovations for Hong Kong’s delivery platforms, virtual brands.

Beri provides his own bubble tea flavoured analogy: “If you’re a hotpot restaurant and you also want some insights into some other cuisines that you can offer just for delivery that are maybe popular in the Mong Kok area, then we would provide some data and insights and we can help restaurants be like, I’m gonna spin up this bubble tea brand that I can have just for delivery, utilise my kitchen space and get extra revenue.”

According to Lo, Deliveroo’s own virtual brands have been proven to increase revenue for operators by 50% to 80%. Initiatives like this are part of a larger strategy by the platforms to support their listed restaurants.

Lo says: “We see ourselves as a partner to restaurants, not just a service provider. Where, aside from helping restaurants deliver food, we think of how to enhance their brand. We think about how to share some of the risks and expansion of their business. We help them think about other revenue increases beyond just putting their food on the delivery platform.”

The huge amount of data on hand from thousands of user interactions means that in addition to advising what to serve, the delivery platforms can provide invaluable information on the thought processes behind customer choices and their journeys to a final purchase.

Furthermore, they can advise restaurants on changes to their services based on factors like time of day (such as providing breakfast options or extending opening times) and even pricing.

Law tells Marketing how Foodpanda has encouraged some outlets to provide budget options that will constitute a full meal.

“Imagine an average Hongkonger, they may be looking at meal options that just cost 50 to 60 dollars. Rather than focus purely on premium options, we’re trying to make sure the seven million people in Hong Kong, or at least the 4.5 million adults, are getting delivery as accessible as possible.”

Upcoming advancements and expansions for these platforms include more radical changes from what’s normally expected of a food delivery service.

For instance, all three services have been embracing walkers in addition to riders to reach every nook and cranny of Hong Kong’s terrain. But, in a bolder move, in December 2018, Deliveroo opened its Food Market in Sai Ying Pun, a brick and mortar eatery that also acts as a satellite kitchen for multiple restaurants to expand their delivery range. And Foodpanda is planning to open one of its own similar Central Kitchens later this quarter.

Another planned launch for Foodpanda’s next quarter is something Uber Eats is also putting in motion, grocery delivery. It’s a bold step for an industry in a town that only recently needed convincing just to get online and order.

Defining the Uber Eats customer of tomorrow, Beri says: “I envision it as someone who wants a seamless experience with food and so they’re not really concerned with, ‘Hey this is a restaurant, this is groceries, this is me dining in, this is me picking up’. They just want everything at their fingertips."

Splitting heirs

The question remains: moving forward is this town going to continue to be big enough for the three of them to comfortably operate in?

“The fact that there are a lot of players in this space in Hong Kong to me is a good thing,” Beri says.

“It shows that this market is gonna be pretty large, as will its potential, so we always see competition as a good thing.

“We think it’s so early days for food delivery in Hong Kong that there is room for multiple players to exist. What we’re excited about is that we do believe we bring a unique value proposition for customers and restaurants that over time will also bring great traction here in Hong Kong.”

Law concurs with that assessment, saying: “I would say there’s room to grow for any companies in the market and opportunities for everyone. There’s definitely room for two or three. But we’re building a more sustainable business model for momentum beyond that.”

He adds: “We were first in the market and because of that we temporarily lost our focus on user experience and service quality, but then Deliveroo and Uber Eats arrived so now it’s intense and we’re focused. They’re not our biggest competitor. Our biggest competitor will be the market itself as we get more and more customers and they order more.”

Likewise, Lo agrees they can all share the sandpit, if with a slightly cheeky motive: “We love it because from our perspective these guys are trying to help us educate the broader market about the pros and cons of food delivery. It actually helps us introduce people into first-time users of food delivery as a category itself and it’s helping us expand the pie.”

He concludes: “While other people pay for the acquisition cost of these customers into the food delivery category, these customers will end up using Deliveroo!”