Meal delivery is changing rapidly and growing exponentially due to the online-to-offline revolution, which offers easy online ordering, customized offerings and speed.
Thinking Curry (微想咖喱) operates out of a back alley on Wuxing Road, not far from Taipei 101. Providing the option of three curry flavors – Indian, European, or Japanese – it was so popular that finding a seat on weekday evenings was a challenge. Nowadays getting seated is the easy part. It’s the ordering that takes a while because of all the delivery meals being prepared, bagged up, and sent on their way.
Such is the new reality of the restaurant trade. It’s not so much butts on seats as meals delivered by a fleet of motorbike riders employed by tech companies.
Part of the online-to-offline (O2O) revolution, these companies don’t shop for ingredients, cook food, or own any restaurants. Technically, they don’t even employ drivers. Instead they are driving the “gig economy,” paying deliverers per mission accomplished.
Typically, these companies provide a website or app, from which the customer can choose a restaurant or type of cuisine. The customer places the order by clicking on items – including options such as salad dressing – and then agrees to a payment method.
By providing an easy-to-use digital platform, convenience, speed, and customized offerings based on customer data, third-party food delivery has rapidly become a huge and intensely competitive business.
There are two main kinds of operations. The first type involves direct restaurant-to-consumer delivery. A typical example is Domino’s Pizza, which handles its own deliveries after orders are taken via the company website or over the phone.
Second is the platform-to-consumer delivery model, which enables restaurants that do not necessarily offer food delivery themselves to expand their market. Third-party operators handle the ordering and delivery process, sharing revenue with their restaurant partners and delivery personnel.
In Taiwan, five major players are vying for dominance in the delivery sector:
- Foodpanda (空腹熊貓), founded in 2012 in Germany, was bought out in 2016 by the publicly listed, Berlin-based food delivery service Delivery Hero. The company typically operates its own delivery logistics.
- Uber Eats is the overachieving offspring of the ride-hailing service Uber, which is based in California and was launched in 2014. It has aggressively expanded into 250 cities and is reportedly growing at the rate of 200% annually.
- Honestbee (誠實蜜蜂) is an online grocery and meal delivery service that operates out of Singapore. Launched in 2015, it started meal delivery services in 2017.
- Yowoo (有無快送), which operates in most areas in Taipei, is the only locally based market entrant and is a partnership between two subsidiaries of local companies, Xinyi Real Estate and Taiwan Taxi’s Global Express. It charges the least for food delivery.
- Deliveroo (戶戶送) is the latest player to enter the market. Based in England, it was started in 2013 by Taiwanese-American entrepreneur Will Shu. The Taiwan service began in September last year and is currently available in only four Taipei districts.
Food delivery is an incredibly febrile market, in which the companies and their business models change quickly. Typically, customers are charged for delivery at a set rate (NT$24 to NT$60), but the companies also take a cut of up to 30% of the restaurant’s revenue, in addition to charging extra for a preferential listing.
At Foodpanda, which enjoys a first-mover advantage, marketing and PR manager Lisa Chen describes growth over the past six years as constantly improving. Though declining to divulge revenue figures, she says the company has a 55% market share, works with more than 7,000 restaurants all over Taiwan, and in 2018 increased “daily ordering numbers” by 10 times over the previous year.
The company employs 1,500 drivers, who are paid according to the number of meals they deliver. Chen says that a key reason for Foodpanda’s success is the training it gives drivers, who have to pass oral and practical driving tests. “We also teach them how to how to interact with restaurants, customers, and with other road users,” she says. “They are provided with SOPs (standard operating procedures) on how to check the meals and receipts, and how to talk and behave with customers.”
Besides Taipei, where it offers 24-hour delivery in the Central Business District and other busy areas, Foodpanda also operates in New Taipei, Kaohsiung, Taichung, Taoyuan, and Hsinchu, and is starting up in Tainan and looking at other cities.
“In the beginning we struggled a bit because it was early days for food delivery,” says Chen. “The situation is more stable now, and we’re educating people that ordering food is something you can do daily – it’s not just a treat. Yes, other competitors have entered the market, but to our mind this actually makes the market bigger and the service better, as more people are used to it and use it.”
The competitors
It didn’t go well for Uber when it tried to disrupt the taxi business in Taiwan starting in 2014. Due to vehement opposition from the politically powerful taxi industry, Uber Taiwan was shut down by the authorities in February 2017. It re-entered the market in April that year with a new business model based on partnering with licensed rental car companies, but is still straining to gain traction.
Uber Eats, however, is a totally different story. From its start in Taiwan in November 2016, the company has developed quickly, cooperating with 3,000 restaurants in its first year of operation. Unlike the ride-hailing service, Uber’s food delivery has been welcomed with open arms.
A market survey conducted by the company last year found that Taiwanese dishes, particularly popcorn chicken, were the most popular delivery foods, followed by Japanese and Italian cuisine. Milk tea was the most requested beverage.
With its strong name recognition, deep pockets, and software and O2O expertise, Uber Eats has become one of the world’s food delivery titans. As such, it is expected to further consolidate its hold on the Taiwan market in the near future, possibly through acquisition of other companies.
When Deliveroo was contacted for this article, it initially agreed to answer a series of questions but then pulled out without explanation. The reason could well have been the possible takeover by Uber Eats, first reported by Bloomberg in September.
That was around the same time that Deliveroo CEO Will Shu was quoted in The Telegraph as calling the company’s move to Taiwan a “personal milestone,” given that his parents were born here. “Taiwan is the market with my favorite food in the world. From a personal standpoint, it’s an amazing feeling to launch Deliveroo in Taiwan.”
Though valued at US$2 billion and working with 50,000 restaurants and the same number of delivery riders in 13 markets, including Taiwan, Deliveroo is still operating in the red. The Telegraph reported that the company’s losses increased by 43% in 2017 to nearly US$234 million.
Deliveroo has also had legal problems in the United Kingdom with its gig-economy approach to food delivery, which provides drivers with fewer rights and benefits. There have also been complaints in the UK about low pay and lack of union recognition that have gone to court.
Judging from my own unscientific survey, Foodpanda drivers seem the most satisfied with their work, conditions, and pay. One Foodpanda driver who asked not to be named said, “We are paid per delivery, so the money goes up and down, but I have been making about NT$20,000 a month, which helps a lot because it fits around my schedule for looking after the kids.”
As for the proposed takeover of Deliveroo, analysts believe that since food delivery is growing faster than ride hailing, it has become a priority for Uber and a buyout would help consolidate its grip on the market. Furthermore, Uber, including Uber Eats, is expected to go public in the second half of next year on the New York stock exchange and buying up Deliveroo would make its IPO more attractive.
Long before apps, Taiwan had a thriving restaurant industry that relied in part on providing takeaways or delivering meals. Good food, choice, and convenience have always been the most important considerations.
In a sense, these features are what the O2O revolution provides in spades when it meets food delivery. “Uberization” disrupts traditional business models and generates huge business opportunities via the digital marketplace, fulfilling consumer demand by offering immediate access to goods and services.
In a speech he gave in 2016, Will Shu expressed the conviction that because people are “inherently lazy,” if food is delivered fresh and hot, quickly and at a decent price, they will get hooked and use the service again and again.
He seems to have a point.
Uber Eats’ Top 10 delivery foods in Taipei
- Popcorn chicken from Popcorn Chicken King (台灣鹽酥雞)
- Chicken over rice from Hala Chicken
- Chicken soup from Yusangbao Soup (御膳煲養生雞湯館)
- White bubble milk tea from Good Day Select (日日良選)
- Vietnamese beef Pho from Thanh-Ky (誠記越南麵食館)
- Salted chicken from Chibfood (雞房重地鹹水雞)
- Beefburger with bacon and cheese from Take Out Burger & Cafe
- Grilled chicken drumstick with rice from Sanshuichiang Rice(三水江烤肉飯)
- Congee with pork and century egg from Nanchang Congee (南昌廣東粥)
- Honey bubble milk tea from One More (一抹 旅行世界的好茶專家)
Can’t Cook, Won’t Cook
In a 2018 report entitled “Is the Kitchen Dead?” investment bank UBS noted a worldwide “megatrend”: people are not cooking at home as much as they used to, nor are they dining out as frequently. The reason for this is meal delivery, which is already a US$35 billion industry and projected to grow more than 10-fold by 2030 to take 10% of the world’s total food services market.
By that time “ghost” or “dark” kitchens operated by robots may be cooking up most of our dinners. Right now, the report states, we are at the “first stage of industrializing meal production and delivery.”
UBS attributes this generational shift in eating patterns to “increasingly time-starved and asset-light millennial consumers.” Millennials typically don’t learn to cook, so they order out instead. Furthermore, because of the time factor and economies of scale, the cost of a home-cooked meal can add up to more than a meal that is delivered.
“Online ordering has started to become the norm, thanks to the convenience, accuracy, and ability to integrate payments,” the report states. “Ubiquitous on-demand and subscription delivery of prepared food could potentially spell the end of cooking at home.”
By far the biggest market worldwide is China. In his book AI Superpowers: China, Silicon Valley, and the New World Order in China, Taipei-born author Lee Kai-fu, describes the incredibly profitable food delivery companies that have grown up in China, such as Meituan Dianping and Ele.me. Meituan Dianping alone is valued at US$30 billion.
“The first O2O service other than ride-hailing to truly take off [in China] was food delivery,” Lee writes. “Crowds at Chinese restaurants thinned out, and streets filled up with swarms of electric scooters trailing steam from the hot meals they carried aboard.”
“Payments could be made seamlessly through WeChat Wallet and Alipay. By the end of 2014, Chinese spending on O2O food delivery had grown by over 50% and topped 15 billion RMB (US$2.2 billion). By 2016, China’s 20 million daily online food orders equaled ten times this total across the United States.”
Lee also quotes a 2016 study by consulting firm McKinsey & Company, which showed that 65% of Chinese consumers said the ease of using an app led them to spend more money on dining.
“Globally, we are still at a very early stage of the on-demand culture and economy,” says Bodo von Braunmühl, head of corporate communications at Delivery Hero, by email. “Even in markets that have seen strong growth for many years, we see continued increase of demand, while technology evolves and fundamentally changes consumption habits.”
For Von Braunmühl the big picture is: “Delivered food will not only become more affordable, but also deliveries will become faster and food choices will grow. Under these conducive conditions, who still wants to cook every day?”
