Food delivery app war in Singapore on the boil

Deliveroo Singapore in 2016 recorded a net loss of S$16.86 million, according to BizFile data.
Deliveroo Singapore in 2016 recorded a net loss of S$16.86 million, according to BizFile data. PHOTO: ST FILE

The three main players have, in just the last few years, recorded millions of dollars in funding, but also in losses. And the battle continues

SINGAPORE (THE BUSINESS TIMES) - We all have an opinion on food. But if there is one thing that food delivery apps can teach the rest of us, it is that consumers today want their food in just two ways: good and fast.

Against this backdrop, the food delivery app war in Singapore is heating up. The three main players - Deliveroo, Foodpanda and UberEATS - have, in just the last few years, recorded millions of dollars in funding - but also in losses - as they invest in promotions, technologies and even real estate to win the food fight.

London-based Deliveroo in September announced that it has raised a record US$385 million in Series F funding, giving it a valuation of over US$2 billion and helping it compete better with publicly traded rivals such as Delivery Hero (which acquired Foodpanda in 2016) and the world's most valuable unicorn, Uber (which runs UberEATS).

Foodpanda, which is based in Berlin and backed by startup incubator Rocket Internet, had raised some US$318 million in funding before its acquisition by Delivery Hero, which has a market cap of 6.65 billion euros (S$10.6 billion) today.

UberEATS, based in San Francisco, enjoys Uber's funding war chest of over US$11.56 billion and reported valuation of nearly US$70 billion.

Notably, these food delivery apps are incurring losses and could continue to do so in the next few years as they focus on customer acquisition - a most costly undertaking which usually involves aggressive promotions and unsustainable discount deals - as opposed to profits.

Deliveroo Singapore in 2016 recorded a net loss of S$16.86 million, according to BizFile data. Deliveroo Singapore general manager, Siddharth Shanker, told The Business Times the company is focused on "building a strong business" and that its recent funding will allow it to "expand even more" but the money will not be used to "fund the existing operation".

Foodpanda Singapore lost some S$3.07 million in 2014, according to BizFile data. Luc Andreani, managing director of Foodpanda Singapore, would not disclose the company's latest financials - citing the listed status of its parent company, Delivery Hero - but said that it would strike a "balanced path between market share acquisition and sustainability through efficiency".

UberEATS Singapore - data on which could not be found in BizFile - too would not disclose its financials, which is a common practice of Uber. An UberEATS spokesman said: "But, you can be assured that we're in this for the long term - building the business for the long-term."

Asked how it plans to dominate the food delivery space here, Deliveroo's Mr Shanker, said: "Our focus is on delivering the most-loved food, with the best service for both consumers and restaurants. We have invested heavily in technology, like our new despatch algorithm tool, Frank, which has reduced service times by 15 per cent."

Foodpanda recently acquired a similar tool, named Hurrier, which tracks riders' whereabouts so that it can calculate which rider can deliver an order most efficiently, and determines the number of riders it needs on the roads at different times, thus eliminating the problem of having too few or too many riders on the road at any one time.

Mr Andreani added that while technology plays a vital role, a "strong, local brand" has also helped Foodpanda compete in Singapore. "We were fortunate to be one of the first food delivery companies in the city state. We truly understand the market needs here."

For instance, Foodpanda last year launched 24/7 delivery service in selected areas in Singapore, on the back of a "growing trend of customers who were ordering supper". It is also said to be one of the few food delivery companies here to be Halal-compliant. It is now exploring drone deliveries and using chatbots to automate parts of its customer interactions.

UberEATS, despite it being the latest entrant, believes it is not disadvantaged because it is leveraging the "same convenience and reliability people have come to expect from Uber's technology", its spokeswoman said. Uber launched its ridesharing services in Singapore in 2013.

She added: "Uber's data-driven approach has helped us optimise the way food can be delivered to consumers to make eating well effortless at any time, for anyone."

For instance, UberEATS has tools such as Restaurant Manager (which lets restaurants access insights on food and service quality to improve their business), In-Menu Recommendation (which learns a customer's tastes and recommends restaurants), and Virtual Restaurants (which offers new dishes that are created based on local consumer demand and made by existing restaurants).

Technology aside, food delivery players are increasingly investing in real estate - in the form of remote kitchens. These are delivery-only kitchens from which restaurants can cook and deliver food. Deliveroo currently has one such site in Katong and said that it would open more sites in 2018, while Foodpanda said that it "plans to build a series of satellite kitchens in Singapore".

The future of food delivery may ultimately depend on logistics, which has emerged as the greatest challenge among all three players in Singapore. Mr Andreani said that stringent work pass regulations have led to a finite supply of riders, demand for whom has only increased with the launch of companies here such as Amazon. Mr Shanker said Deliveroo is now recruiting 3,000 additional riders to "reach its growth targets", after it has created jobs for over 4,000 riders in its last two years here.

The UberEATS spokesman added: "We will work hard to ensure operational reliability and efficiency. This means having enough delivery partners so that consumers would get their food quickly, before they become 'hangry'!" (hungry and angry, that is).