With the likes of Deliveroo dominating the food landscape in the developed world, China and India are also looking to expand their food delivery systems.
by FEDERICA TEDESCHI
Posted 27 APRIL, 2021 AT 08:51
Restaurants have pivoted to become takeaway outlets in the developed world, with the likes of Just Eat and Deliveroo capitalising on this disruption.
But, is this the case for developing as well as the developed world? Citywire + rated Andrew Dalrymple, who runs several funds at the boutique, has seen appetite increase for takeaway stocks in China and India.
In the Aubrey Global Emerging Market Opportunities fund, for example, Dalrymple has a 7% exposure to Asia-based takeaway stocks, as at the end of March 2021.
‘We are investors in Meituan in China, which is much more sophisticated than Deliveroo and whose food delivery segment brings in 60% revenues, followed by hotel &travel booking and other lifestyle services,’ Dalrymple told Citywire Selector.
Meituan is a leading player in the lifestyle services category, and during the pandemic it became popular for delivering groceries, including coffee and ice cream, and most of its business is concentrated in larger urban areas.
Aubrey Capital also invests in InfoEdge in India, a company which owns an 18% stake in Zomato, one of the leading food delivery players in the country: ‘The investment portfolio has been successful through the Zomato position as the industry has consolidated and profitability has improved particularly during Covid.’
Dalrymple is already eyeing the next countries to invest in by analysing growth opportunities over years rather than months.
‘Indonesia is in the sweet spot of eCommerce development and its increasing smartphone adoption will drive traffic to the leading super app players GRAB and GOJEK. These can provide food delivery, as well as financial services, online shopping and travel booking.’
While the major food delivery players continue to grow and dominate the market, consumers are becoming more sophisticated and demanding, especially over food safety, quality, and brand, said Chartwell Capital’s chief investment officer Ronald Chan.
Chan, who also founded the Hong Kong-based boutique, invests in many food and restaurant companies in China through his value-focused funds.
‘When selecting restaurants or food brands, we look at their expansion plan and whether they have the potential to cater nationwide. After all, regional food habits vary a lot within China. For example, Northern provinces prefer dumplings and noodles, while rice and dim sum are more popular in the South and the Western provinces enjoy spicy foods.’
Chan told Citywire Selector the Greater Bay Area, with its 70m people and a $1.5tn GDP is still where the firm mainly operates at present. However, Chinese food delivery services registered close to 500m users at the end of 2020 and a further expansion is expected, while the industry evolves into an all-service internet-based ecosystem:
‘Moving food delivery online is going to take business away from small owners, which may lead to anti-trust issues. This is an inevitable transition as China evolves into a more sophisticated economy, although the pace of change will be controlled by the central government.’
Chan said millennials and Generation Z are the largest users of online food delivery and prefer companies with strong brands, innovators and those more likely to maintain high market share. In this context, diversity, entertainment, and social media are all converging, Chan said.
‘Not only can companies tailor their customer experience, but many big chain brands are offering their own ready-to-eat, pre-prepared or semi-cooked food products to answer to all lifestyles. This leads to multi-channel marketing platforms to boost sales in innovative ways, like offering live cooking sessions with a star chef.’