If Grab and Foodpanda Start a Price War, Will Users Truly Benefit or Pay the Price Later?

China’s ongoing food delivery war has dominated headlines recently. According to Bloomberg's estimates, the mutual price-cutting and rivalry between $JD.com(JD)$ and $MEITUAN-W(03690)$ have wiped out around $70 billion USD in combined market value.

To compete for users, JD.com and Meituan have launched a variety of discount coupons and subsidy campaigns, leading to a noticeable drop in average food delivery prices. Promotions like 4-yuan Luckin Coffee and 8-yuan branded lunches have become increasingly common. This week, Meituan even offered a free $Luckin Coffee Inc.(LKNCY)$ campaign to its members — TC just got a free cup in Beijing today[666][666]

Despite the stock price drops, consumers are welcoming the cheap delivery meals. The last time we saw such intense subsidy wars was about a decade ago.

In 2014, the ride-hailing war erupted, and subsidies were also the main weapon. In just 2015 alone, data from $DiDi Global Inc.(DIDIY)$ and $Uber(UBER)$ indicated that their combined losses had exceeded 20 billion RMB.

These cash-burning strategies do help gain market share, but the side effects are obvious. Most importantly, every price war has historically ended with price hikes, as capital eventually demands a return.

That’s why some warn that if JD.com or Meituan wins this war, it will ultimately be consumers who foot the bill. They argue that keeping the giants in fierce competition is the best outcome for consumers.

What if a similar situation happened in Singapore?

According to a report from research firm Momentum Works, $Grab Holdings(GRAB)$ and foodpanda control about 91% of Singapore’s $2.5 billion USD food delivery market, with Grab alone holding a 63% share.

In 2024, the planned merger between Grab and foodpanda fell through, and Singapore’s competition watchdog concluded its investigation. What will happen if the two giants start a price war in Singapore?

Food delivery isn’t a good business: is it still worth investing in companies like JD.com, Meituan, or Grab?

Looking beyond this delivery war, we see that such intense business battles are rare in other markets.

For example, none of the “Magnificent Seven” U.S. tech giants have local services as their core business. Even under the previous FAANG classification, local lifestyle services were never part of the picture. The only e-commerce giant is Amazon, and it has not ventured deep into food delivery either.

Actually, $Amazon.com(AMZN)$ launched Amazon Restaurants in 2015, but repeatedly struggled against specialized competitors like Grubhub, DoorDash, and Uber Eats, ultimately choosing to exit the food delivery business entirely in 2019.

Amazon to shutter Amazon Restaurants

At the beginning of the war, JD.com stated that it aims to keep the profit margin of its food delivery business below 5%, while in fact, Meituan’s food delivery profit margin has always been around 3%.

• Is burning cash to gain market share really worth it?

• Competition vs. monopoly — which model better serves consumers?

• Are food delivery companies like JD, Meituan, and Grab still worth investing in?

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