Meituan, China’s largest food delivery and quick commerce platform, entered Saudi Arabia through its overseas brand Keeta in September this year.
Back then, we were discussing with a few friends that Meituan’s Arabian venture would not stop at food delivery, because online grocery and on demand ecommerce in Saudi Arabia are very attractive prospects as well.
This morning, Chinese media reported that Meituan is indeed bringing Xiaoxiang Supermarket, its 1P dark stores with on demand fulfilment, to Saudi Arabia.
1P dark stores are essentially frontend warehouses (akin to a mini supermarket or a convenience store) operated directly by the platform to fulilfil on demand online orders.
The Saudi expansion of Xiaoxiang will be led by company veteran Liu Wei, according to the article. Liu Wei, nicknamed “Big Sister Wei” internally, has led teams across several units in Meituan since its early days, including B2B supply chain, community groupbuy and “to store”.
The article also mentioned that the Xiaoxiang overseas expansion team currently has 100+ product and tech people, as well as dozens of business executives. “The team is already sizeable, but in early days it has been very cautious and confidential,” the article quoted a source as saying.
Xiaoxiang Supermarket riders in Shanghai
We have been mentioning the ‘cautious’ nature of Meituan in multiple commentaries. It is interesting to note that many observers outside China still believe that Meituan’s formula is just vouchers and subsidies, without seeing the bigger strategy behind.
Meituan is not the only one
And Meituan is not the only Chinese 1P quick commerce player entering Saudi Arabia. Shanghai-based and NYSE-listed Dingdong Maicai is also preparing to launch its on-demand ecommerce operations in Saudi Arabia in early 2025.
Why would the Chinese players go to Saudi Arabia? A combination of factors: affluent consumer base, conducive climate (for delivery), unlimited labour at reasonable prices, and limited options currently available for consumers.
More importantly, in the current geopolitical environment, Saudi Arabia and other GCC countries are relatively friendly towards large Chinese tech companies, as long as they bring value to the local ecosystem.
How Saudi Arabia welcomed President Xi Jinping in his state visit in 2022
Meituan vs DeliveryHero
This news came at the opportune time of the IPO of DeliveryHero subsidiary Talabat, the leading food delivery platform in Dubai.
DeliveryHero’s subsidiary Foodpanda was caught off guard by Keeta’s entry into Hong Kong last year. According to data firm Measurable.AI, Keeta has already overtaken Foodpanda in order volume in Hong Kong, within less than a year.
To defend against Keeta’s further expansion, in Saudi Arabia and elsewhere, DeliveryHero has prepared its subsidiaries with product tools including one person meal. We explained this in one of our podcast episodes:
However, that might be missing the point. One person meal was a tactic Keeta used to attack an underserved market segment specific to Hong Kong. The situation in Saudi Arabia and other markets might be drastically different, requiring Meituan to use other tactics to break through.
Is DeliveryHero undervalued?
Last month, DeliveryHero CEO Niklas Östberg told media that he thought DeliveryHero was undervalued, because the value of Talabat shares it holds is quite close to DeliveryHero’s own market cap. DeliveryHero owns 80% of Talabat.
However, that is not uncommon. The market cap of Prosus, the holding company of all the tech investments of South African group Naspers, has been lower than the value of Tencent shares it holds.
Prosus market cap versus the value of its Tencent stake (chart drawn by ChatGPT)
In other words, investors are attributing negative value of all the holdings: including OLX, PayU, iFood and DeliveryHero.
Since IPO on 10 December, Talabat has lost about 12% of market value, dragging DeliveryHero’s share price down as well.
Talabat share price movement since IPO (chart drawn by TradingView)
Although Meituan’s market cap has yet to fully recover from the Chinese tech stock slump, in terms of market cap it is still more than 10 times that of DeliveryHero, and therefore are able to mobilise far greater resources if it is to focus on fighting in any particular market.
Baobao Eat Better
We also mentioned in our previous commentary about Keeta’s Saudi entry that “Meituan’s drones, whose development Wang Xing also personally oversees, might prove more practical in Saudi Arabia”. One of Momentum Works community friends recently spotted the Keeta drones in Dubai, UAE, approved by Dubai Civil Aviation Authority and apparently working in collaboration with KFC:
Btw, did anyone notice the actual operating entity of xxxx – “Beijing Baobao Eat Better Food and Dining Management Co., Ltd”. What a cute name:
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