Didi halts domestic food delivery expansion, eyeing overseas market instead

Didi might be launching food delivery service in Latin America.

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Two of the largest super apps in China, Didi and Meituan, appear to have reached a truce in the home market, at least for now. The two unicorns, respectively the largest in their own domain, ride-hailing for Didi and food delivery Meituan, were aggressively launching attacks on each other by dipping toes into each other’s territory.

However, Beijing-headquartered Didi on Monday reportedly is scaling back its food delivery expansion in China, which was initiated since last year-end, with speculations that the ride-hailing giant is considering to pivot its food delivery arm beyond the shore of China.

The retreat move might lie with a two-pronged consideration.

Firstly, in the wake of two tragic killings of its riders amidst public backlash, Didi Chuxing is apparently under pressure to make tweaks to its businesses, “removing growth-centric targets” as well as increasing security efforts, moves that will further weigh down the company’s revenue prospect.

And keep expanding into the food delivery sector, which currently dominated by Meituan, calls for a large trove of investments whilst bears a dim picture in terms of revenue, would be a burden for Didi given it now has to cut back on carpooling service, which is the only revenue churning business for the company so far.

Secondly, Alibaba and SoftBank recently announced to merge Ele.me and Koubei with more than US$3 billion funding pledge to give birth to a serious challenger to Meituan. The food delivery market in China is only getting more and more challenging, it makes little sense for Didi to keep investing in such an already highly-competitive sector where no one else is turning a profit yet.

Although Didi is dialling down domestic food delivery activities, there was news surfacing indicating that Didi might be thinking about taking the business abroad. The company’s food delivery execs team reportedly went on a road trip to Latin American countries – including Brazil and Mexico – to feel the pulse.

A Chinese report, citing people familiar with the matter, claims that Didi might fold food delivery business into its international team that is tasked with taking Didi’s ride-hailing business abroad. The Chinese ride-hailer earlier this year acquired Brazil’s 99 and was also seeking to drive into Mexico. It could be that Didi is taking a cue from Uber’s successful extension from ride-hailing to Uber Eats.

A Didi spokesperson declined to comment on the firm’s overseas food delivery program when approached by KrASIA.

Editor: Ben Jiang