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Western investors flock to Southeast Asia’s grocery delivery market

  • Last year, express grocery delivery had a breakthrough, with venture capitalists pumping $3.89 billion into the sector.
  • Now European and US investors are confident the trend will take root in Southeast Asia.
  • Western investors pumped $149 million into delivery startups in the region in 2021, PitchBook said.

Express delivery companies have sprung up across the US and Europe, promising to deliver groceries faster than you can get to the store and back.

Venture capitalists pumped a record $3.89 billion into startups in the sector last year, more than five times the amount invested in 2020, Pitchbook said.

Now Western investors are targeting the Southeast Asian market in the hope that the same phenomenon will take hold in the region, which is home to more than 650 million people.

Express delivery startups in the region face unique challenges compared to their Western counterparts as they seek to reshape an economy that relies heavily on wet markets.

“Europe and the US are extremely organized markets. It’s not like you have a Tesco on every street” in Southeast Asia, said Visa Kannan, a partner at Singapore’s Saison Capital, which recently invested in delivery startup Rino. of groceries in 10 minutes from Vietnam.

“Whereas in Southeast Asia, their supply side is from brands to distributors to wholesalers to customers,” Kannan continued. “Just from that perspective, the supply side is going to lead to different outcomes.”

Those unique challenges haven’t deterred Western investors, who pumped $149 million into the region last year, more than double the $63.5 million invested in 2020.

The Western enthusiasm was part of a bumper year for startups promoting fast grocery delivery in the region. Venture capitalists from around the world poured $252 million into the sector in 2021, almost quadrupling the $68.5 million raised from US and European investors in 2020. It was a banner year, second only to 2017, when the subsidiary of Delivery Hero, FoodPanda, in Singapore, raised €431 million ($452.4 million).

Lemonilo, a health food marketplace in Indonesia, raised $36 million in a Series C round in December that touted Sequoia India and Belgian investment firm Sofina among its backers. TaniHub, in Jakarta, which supplies agricultural products to consumers, secured a $65.5 million Series B backed by US firms Vertex Ventures and UOB Venture.

Investors see great potential in Southeast Asia due to the “large population size” and the ability to make “industry breakthroughs with the e-commerce model,” Kannan said.

But Southeast Asia is a diverse region, and this affects how delivery startups can scale.

Grab, backed by SoftBank, one of the most recognizable brands in the region, went public through an investment of nearly $40 billion.


SPACE

deal in December. In 2018, Grab acquired


uber eats

SEA, a competitor, after it failed to gain a foothold due to “nonexistent” regional market adoption, said Alexander Felde, co-founder of FoodPanda Thailand.

This created a gap in “understanding the differences and challenges of developing countries in contrast to developed markets,” Felde added.

Grab has continued to wrestle since his public debut. The company’s share price has plunged nearly 80% and was hurt by its latest financial results, which showed it had splurged on customer incentives to increase active users.

There are also “inherent technology gaps” in Southeast Asia that investors should be aware of, said Wayne Soh, vice president of US venture capital firm Plug and Play, which has backed a number of on-demand delivery startups in Indonesia. . including Sayurbox and RaRa Delivery.

“Precise mapping and routing capabilities, especially in high-traffic regions in these emerging markets, could affect quality of service,” Soh said. “If there could be improvements and new companies to address these areas, then the growth of this sector would be very exciting.”

Saison’s Kannan also warned that hyper-localized eating habits also pose obstacles for investors.

“What people eat, like meat or vegetables, as well as fresh produce, staple foods, determines the margins and profits of the market,” he said. “And eating habits differ in Southeast Asia.”

Demographic and lifestyle changes are also affecting the profit margins of startups. The rise of the middle-class population across the region has “increased the demand” for on-demand delivery, as well as “expectations of the customer experience,” Soh said.

Appetite for fast delivery increased last year as the region also saw an increase in the number of female workers, along with higher labor costs, said Unnat Varma, general manager of Pizza Hut APAC, during the Dealstreet Asia panel on the future of food delivery. .

2022 is already gearing up to be a fruitful year, with VC pouring $163 million, which includes Sayurbox’s $120 million Series C, into startups in the first quarter, Dealroom said.

“More and more startups will emerge to tackle this space in the region, so the question is how to identify a winner,” Soh said. “Or there could be multiple winners in this region.”