(March 13): Simon Miao, a Hong Kong resident, signed up for a food-delivery subscription with Deliveroo during the pandemic, but he later cancelled it because the monthly fee, which tops out at HK$98 (US$12.61 or RM55.94), didn’t bring many perks.

Now he’s hooked on a rival service called Keeta from the Chinese delivery giant Meituan. It offered broader restaurant options, generous discounts and free delivery when the platform was first launched. He said he won’t use anything else.

This week, Deliveroo said it was losing too much money in Hong Kong and called it quits after a decade of operating in the city. The retreat marks the first casualty of Keeta’s aggressive pricing tactics, subsidised by parent Meituan, which has a market value of about US$130 billion (RM576.78 billion).

As the Chinese super app expands further afield, it’s deploying similar tactics in other new markets. The company launched in Saudi Arabia last September and has been attacking the market through similar measures. It reached one million weekly active users in January, according to Sensor Tower data, matching Delivery Hero’s Hungerstation.

Keeta Drones, a subsidiary of Meituan, received operation licence in the United Arab Emirates late last year, and the Chinese company’s ambition goes far beyond the two largest economies in the Gulf.

According to Chinese media outlet LatePost, Keeta plans to expand to Qatar, Kuwait, Oman and Bahrain in the next three years. The company plans to build its overseas presence into a hundred-billion dollar business, the news site said, citing people familiar with the plans who it didn’t name. To vie for market share in Saudi Arabia, the company has set no upper limit on investment.

A representative for Meituan declined to comment.

Meituan, founded in 2010, initially built a business model with discount offerings like Groupon. In 2013, the company expanded into food delivery, and has since grown into the largest player anywhere. It clocked a gross transaction value of €136 billion (US$148 billion or RM653.71 billion) last year, almost double that of Uber Eats’s (€71 billion) and Doordash’s (€74 billion), according to a Bloomberg Intelligence report.

Keeta’s ambition points to a wider woe in the food delivery industry: after years of growth-at-all-cost expansion during the Covid-19 pandemic, fuelled by cheap interest rates, investors are asking companies to turn a profit. But price wars spurred on by rivals with deeper pockets have made it difficult for smaller players to fight back. Last month, after years of sluggish sales, Just Eat Takeaway.com NV struck a deal to sell itself to Prosus NV for €4.1 billion.  

The rapid rise of Keeta puts Delivery Hero — the German food delivery company that competes with the Chinese app in both Hong Kong and Saudi Arabia — in a precarious position after achieving positive free cash flow for the first time in late 2023.

Foodpanda, Delivery Hero’s subsidiary in Hong Kong, had dominated the market for years. But shortly after Keeta arrived, it swiftly became the largest player by gross sales volume in both food and grocery delivery in the second half of 2024, according to Measurable AI, an analytics firm that tracks receipts.

Keeta’s price war went beyond coupons and cheap delivery, it also went after the riders.

Ellery Li, a graduate student in Hong Kong, said in an interview with Bloomberg that he signed up to deliver food part time because a courier could receive as much as HK$50 per order, a much more lucrative salary than on other platforms.

“Meituan’s Chinese base can easily continue to finance the expansion of international unit Keeta over the coming years,” Clément Genelot, an analyst at Bryan Garnier said.

Niklas Östberg, the chief executive officer of Delivery Hero, told Bloomberg in an recent interview that the initial public offering of Talabat, its Middle East subsidiary which created a US$2 billion cash windfall, would put the company in a stronger position to “not be taken advantage of” by its competitors.

“You can face off Meituan without finding a bigger parent company as long as you’re profitable and cash-generative,” Genelot said. That “is the case of Delivery Hero in the Middle East”.

The rise of Keeta outside of China has echoes of Temu, the Chinese e-commerce site which sells £1 (RM5.74) milk frothers and £5 wireless headphones.

Temu, also heavily subsidised by its parent company PDD Holdings Inc, a US$160 billion online retail giant, has been a destructive force in Europe and the US. The Chinese platform spent aggressively on subsidies and advertising when it first landed, including millions of dollars on Super Bowl commercials. It soon became one of the world’s largest discount online store, taking on market share from existing giants Amazon and Walmart, and eBay.

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