Is Grab’s Foodpanda buyout a potential disruption?

In Southeast Asia’s thriving food delivery scene, Grab Holdings, a prominent regional tech company and owner of super app Grab, is reportedly considering the acquisition of Foodpanda, a widely-used food delivery platform. According to reports, Germany-based Delivery Hero, the owner of Foodpanda, intends to divest its operations under the Foodpanda brand in Singapore, Cambodia, Laos, Malaysia, Myanmar, Thailand, and the Philippines.

As it stands, Grab already enjoys a dominant position in the Southeast Asian food delivery sector, with tech research firm Momentum Works reporting that it holds 54 percent of the region’s gross merchandise value (GMV). In contrast, Foodpanda lags behind at 19 percent, with Indonesia’s Gojek accounting for 12 percent.

Delivery Hero, on the other hand, has faced challenges in sustaining its growth. According to reports, the company has not achieved profitability since its establishment in 2011. In the first half of this year, it recorded a net loss of 832.3 million euros, an improvement from the previous year which reported a loss of 1.495 billion euros.

But while the potential merger may spell a positive business development for Delivery Hero, this has raised concerns among analysts and experts, given its potential to impact competition, consumer choices, and pricing.

According to a report by Technode Global, CGS-CIMB analysts Ong Khang Chuen and Kenneth Tan noted that antitrust approval stands out as a significant hurdle for Grab’s acquisition plans. According to them, this could disrupt the existing competitive landscape and potentially lead to monopolistic control in the food delivery sector. The analysts further stated that Grab will have more than 90 percent market share in online food delivery in Singapore, Malaysia, and the Philippines.

Such a situation could have far-reaching implications for consumers, delivery riders, and merchants, particularly in the Philippines, where Grab has previously faced legal challenges related to alleged anti-competition practices.

Filipinos have experienced the consequences of Grab’s dominance in the transport network vehicle service (TNVS) sector. Critics have accused Grab of high prices, especially in areas like Manila, where the commuting system is notoriously chaotic, especially during rush hour. My family and I experienced this first hand last year when we could not hail a ride at the airport after arriving from Palawan.

The Philippine Competition Commission (PCC) has also reportedly fined Grab Philippines on multiple occasions for various violations, including failing to timely deliver on refund orders, and for “providing incorrect and misleading information in the compliance reports that the company submitted with respect to refund orders”.

Despite the presence of other players in the market, none have been able to effectively challenge Grab’s dominance. Even the accreditation of other transport-hailing companies has failed to undermine Grab’s market position. This situation is indicative of Grab’s stronghold and the difficulties competitors face in penetrating its market.

The potential merger between Grab and Foodpanda is a matter of significant concern, particularly for consumers and industry stakeholders in the Philippines and even across Southeast Asia.

The looming possibility of stronger control in the food delivery sector underscores the importance of preserving healthy competition, which is vital for delivering better deals, discounts, and innovations to benefit the end-users. Grab’s growing influence in the market further underscores the need for vigilant oversight and regulatory scrutiny to safeguard the interests of Filipino consumers and industry players.

As we envision the future of the food delivery industry, it is imperative that we place a strong emphasis on fostering fair competition and safeguarding the well-being of consumers.

The fate of Foodpanda and any impending market transformation should be studied with careful consideration to ensure, first and foremost, that the livelihoods of delivery riders, the concerns of merchants, and, above all, the accessibility and affordability of food delivery services for consumers are protected.

The experiences gained from the transport network vehicle service sector serve as a stark reminder of the need to uphold competition to get the best benefit in terms of pricing within this ever evolving industry.