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Report shows F&B spending in Southeast Asia has returned to pre-pandemic levels

Southeast Asia’s total food delivery spend on platforms grew a modest 5 per cent year-on-year to reach US$17.1B in 2023, mirroring the growth rate observed in 2022, according to a Momentum Works report.

The growth was driven primarily by the region’s smallest food delivery market, Vietnam (+US$300 million or 27 per cent y-o-y), followed by Malaysia (+US$200 million or 9 per cent y-o-y).

Also Read: How a great back-end tech helped GrabFood capture half of SEA’s food delivery pie despite being a latecomer

Thailand and Indonesia registered low single-digit growth, while Singapore’s topline remained flat, according to the ‘Food Delivery Platforms in Southeast Asia” report, which offers in-depth insights into the region’s six core food delivery markets.

With continuous pressure to achieve sustainable profitability, most incumbents have continued to rein in food delivery subsidies and adopt differentiated strategies to compete. As of the end of 2023, Grab is estimated to account for 55 per cent or US$9.4 billion of the region’s food delivery GMV, a 6.8 per cent increase from the year before.

Foodpanda and Gojek are estimated to contribute 15.8 per cent (US$2.7 billion) and 10.5 per cent (US$1.8 billion) of the region’s GMV, a 12.9 per cent and 10 per cent y-o-y decline, respectively.

Shopee and Lineman showed notable growth and are estimated to contribute 8.8 per cent (US$1.5 billion) and 8.1 per cent (US$1.4 billion), respectively, to the region’s GMV.

Key highlights

Premium F&B brands face challenges despite regional spending on F&B recovering: F&B spending in Southeast Asia finally recovered to surpass pre-pandemic levels (US$125.2 billion in 2023 versus US$115.7 billion in 2019). However, many premium brands (notably in Singapore) found the year tougher than 2022, with many resorting to cost-cutting measures amidst macro uncertainties and inflation, which may have heightened price sensitivity among middle-class diners.

Entry of Chinese F&B brands en masse intensifies competition: 2023 saw an acceleration of Chinese F&B brands’ entry and expansion into Southeast Asia. This trend is exemplified by Luckin Coffee’s 30 stores in Singapore and Mixue’s close to 4,000 outlets across Southeast Asia; however, brands in multiple categories and sizes have also established a presence in the region. They have brought their know-how in in-store operations, marketing, user operations and franchise management. Expect more in 2024.

Major players have achieved some sort of profitability: Most major platforms have either achieved or are on track to attain adjusted EBITDA breakeven, with some targeting to achieve positive free cash flow in 2024. But as the Meituan and Uber experiences have shown, profitability might not be a constant state — platforms need to balance growth with sustained profitability constantly.

Also Read: How Ridge aims to introduce AI tech to small businesses in the F&B sector

Food delivery players continue to diverge in strategy, leveraging ads for revenue expansion: Major food delivery players have continued leveraging advertising products to lock in more merchant investments. Platforms are expanding their advertising product portfolios to cater to the distinct needs of various brands, including large F&B chains, small F&B merchants, and FMCG brands.

Room for growth in user base and operational optimisation in the region: Southeast Asia’s leading player, Grab, only has 5 per cent of the region’s population of 600 million as monthly transacting customers. Amid a flat sector topline, untapped populations in major cities, expansion into smaller towns, and catering to tourists present further growth opportunities for food delivery platforms. Platforms can and should also continuously optimise operations to reduce costs and grow their bottom line.

“With robust F&B consumption, low food delivery penetration and ongoing consolidation, there is much room for growth for food delivery platforms in the region. While focusing on their core capabilities, leading players also need to keep an eye on potential market changes and emerging challengers,” said Jianggan Li, CEO and Founder of Momentum Works.

Singapore-based Momentum Works provides insights into the digital ecosystem in emerging markets through research, consultancy, community engagement, and venture building.

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The post F&B spending in SEA is back to pre-pandemic levels: Report appeared first on e27.


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