The ride-hailing company, Grab, is capitalizing on its food delivery business, Grab Food, for long-term growth and profitability.
Grab started with its food delivery business in 2016. In the last year, it grew extensively in the Southeast Asian region after it took over Uber’s regional operations and this included UberEats.
At the beginning of 2018, the service was only available in two Indonesian cities. However, at present, it can be found in more than 200 cities across the Indonesian archipelago.
GrabFood is also available in other Southeast Asian countries like the Philippines, Malaysia, Thailand, and Vietnam.
“We’ve seen tremendous growth in our food business. We did have pockets of food delivery businesses throughout Southeast Asia already, but not across the region,” said Kell Jay Lim, co-chief of staff to the CEO and regional head of GrabFood.
According to Grab, GrabFood’s gross merchandise volume (GMV) or the total sales dollar value of goods sold, increased by 900% on-year in June 2019. Based on the same period, the volume of its delivery also grew seven times.
Covering the same period, Grab said that GrabFood now accounts for 20% of the company’s total GMV. In 2018, GrabFood contributed to less than 5% of Grab’s GMV.
With the increasing figures, food delivery can still grow tremendously in Southeast Asia primarily because it is still in the process of developing.
Food delivery is not something new most especially to Southeast Asia. However, it’s the way food orders are being carried out that has changed. In this case, it is through mobile apps or online.
In the SEA region, food delivery apps gained popularity quite fast. In the past, only about 10% to 20% of the population urban cities in the region used the apps. Now more than 50% of the population are using these apps.
According to the global emerging markets leader for consumer industries at EY, Chandan Joshi, this just means that there is so much room for growth in this market. These food delivery services, through their apps, offer speed, convenience, and choices to customers.
As for Grab, there are important considerations they look into to maximize its presence in the market. On its platform, it offers customers a variety of food merchants. It uses data analytics and AI to personalize the experience of the customers while using the app. This includes putting more personalized restaurant recommendations in different markets.
“Based on what your order behavior was, we then show the relevant merchants. We have over 200,000 merchants on our platform across the region, we want to show the relevant ones to the relevant people,” said Lim.
In June 2018, the Swiss investment bank, UBS, reported that it estimated by over the next decade or so, the food delivery market will grow 10 times. From $35 billion in 2018, it is predicted to grow up to $365 billion by the year 2030.
In the report, it seems that the food delivery market will have a bright future ahead. For its growth, it should be driven by strong demographics, lower production costs, and improved logistics. The report also indicated that in the future, more home-cooked meals will be replaced by deliveries.
Grab has yet to disclose the total number of orders placed on its apps. However, it reported that it receives about 300,000 orders in Vietnam daily. In Thailand, around four million orders were made in the first four months of this year.
“We do see that the food industry has better margins than ride-hailing. We believe that the food business is going to really fuel our growth and get us to profitability in the long run,” Grab’s Lim said.
In the region, Grab is competing with other businesses like Gojek. Indonesia’s Gojek competes with Grab in terms of food delivery, payment, and ride-hailing but this also depends on the different markets in Southeast Asia.
According to Gojek, the size of its food business in the Southeast Asian region has doubled in the past eight months alone. Gojek says it services more than 50 million orders a month from 400,000 merchants in three countries from the region.
Apart from Gojek, Grab is also competing with established companies like Deliveroo and Foodpanda as well as with food delivery services that have been around the region for a while now but have yet to make their mark in the market.