With its significant financial potential, technology, and customer base,  newcomer Woowa Brothers hopes to break the dominance of GrabFood, Now, and Go-Food in the Vietnamese food delivery market. 

The number of food-hailing apps in Vietnam’s biggest cities has exploded since 2017

After lunch, Nguyen Mai Hoa and her friends often order drinks through mobile ­applications. “One year ago, I went straight to Delivery Now because it was one of the most popular apps, but now I browse all apps to find the best deal. I think customers will benefit massively from more players in the food delivery segment,” said Hoa, who is working for a private company in Hanoi.

Over the past couple of years in Hanoi and Ho Chi Minh City, youngsters like Hoa have been spending more money on fast food, drinks, and snacks. Office workers are also willing to order food online instead of going out.

According to the latest report of market research firm Euromonitor, the Vietnamese food delivery market is estimated to reach $33 million this year and more than $38 million in 2020. As a result, food delivery has plenty of room for growth, attracting numerous domestic and foreign players.

Autonomous breakthroughs

Catching up with this trend, South Korea’s Woowa Brothers Corporation, a food-tech leader that runs the country’s most popular food delivery mobile app Baedal Minjok, has acquired local food delivery company Vietnammm at an undisclosed price.

Previously, Woowa Brothers executive vice president and chief strategy officer Oh Se-yoon told Theinvestor.co.kr that the company planned to make its debut in Vietnam by launching its food delivery app in the first half of 2019.

Woowa Brothers promises to be a heavyweight contender once it officially joins the Vietnamese market because it holds great financial potential. Notably, in December last year, the company succeeded in calling additional investment of $320 million from global investors, making it the latest South Korean unicorn – a startup with a value of over $1 billion.

Commenting on the deal, Julien Brun, managing partner of CEL Consulting, told VIR, “What we are seeing with Woowa Brothers demonstrates the rise of player consolidation at regional level, but also the increasing trend of acquisitions from Chinese and Hong Kong players that have access to more capital and already have the technology. The fastest way for them to expand is through acquisition.”

Woowa Brothers has been investing in Artificial Intelligence and autonomous driving tech to develop delivery robots. The company also announced a partnership with Hyundai Movex, an affiliate of Hyundai Group, to develop delivery robots that can move between floors. The funding by globally prominent investors carries much significance for the company’s overseas expansion plans and new business.

However, in order to dominate the Vietnamese food delivery market, Woowa Brothers has to break the hegemony of existing players with their own weapons.

Senior and skilled players

According to research conducted by Kantar Worldpanel, an international company dealing in consumer knowledge and insights based on continuous consumer panels, in January, GrabFood was rated the most-used food delivery service in Vietnam with 68 per cent of respondents choosing it. Now (Foody) came in second (19 per cent), followed by Go-Food (Go-Viet) with 1 per cent, while the rest of the market is held by other services like Lixi, Loship, JamJa, and Vietnammm.

After a single year in Vietnam, GrabFood has quickly become the leading food delivery service with a footprint in 15 cities and provinces. The number of merchant-partners has increased by 10 times, and the average delivery time reduced to 20 minutes per order thanks to the company operating the largest driver network and millions of app downloads.

“The market is currently painted green (GrabFood) and red (Now, Go-Food). The advantage of Now is that it has been the pioneer and has collected Big Data from restaurants, customers, and culinary trends. This app had a full year alone on the market thanks to inheriting the database and foundation of Foody.vn,” an expert and former developer at Foody.vn told VIR.

However, he also revealed that Now is overstaffed and investment is slow to come from owner SEA Group since the second half of last year.

The expert also assessed that, “Go-Food is an unknown factor, depending on how the parent company pays attention to the Vietnamese market.”

Last year, all food delivery companies expressed their interest by pouring money into extensive promotions to draw customer attention. The number of orders per user has increased from several times a month to several times a week, and is expected to rise further. Young ­consumers are becoming increasingly busy and spending more time online, which means they are willing to pay for ­comfort and purchase food ­online.

Ralf Matthaes, managing director of Infocus Mekong ­Research, a mobile phone market research provider, said, “The demand for delivery will continue to ­increase, driven by millennials and increased income and ­selection. The real challenge will be maxing out technology to decrease operational costs as both completion and, above all, delivery time decline due to ­increased infrastructure ­congestion.”

Becoming the winner In food delivery, the game might ride more on partnerships than on service quality.

“When it becomes integrated to what you want to buy, how you want to pay, what promotion you are interested in, it starts to be very handy for consumers,” said Brun of CEL Consulting. “So the competition would be probably more around how these delivery services will integrate with other services seamlessly. It is vital to succeed sustainably in this market.”

Vietnammm was providing food delivery services even before Now, under a different model. Unfortunately, models like Vietnammm, such as Eat.vn and ChonMon.vn, have already thrown in the towel.

Vietnammm focuses on high-income customers, especially foreigners. Thereby, the average value of an order on this website could be double or triple of those on GrabFood and Now.

“However, the website has yet to build a delivery team, so transportation is a shortcoming for Vietnammm. It cannot compete with other players in terms of delivery time and quality,” said Ngo The Vinh, manager of a food delivery project.

Meanwhile, in South Korea, Woowa Brothers developed Baedal Minjok to the monthly peak of 20 million orders last year and very high annual growth rate of 90 per cent. With the experience of success, the investment of Woowa Brothers will improve the capacity of Vietnammm to develop and stand on par with other players.

“To compete, Vietnammm needs a team that understands the market and food delivery sector, a point of sales (POS) ­system to develop a complete production chain, and ­especially a team of shippers to reduce delivery speed,” said Vinh.

VIR