Southeast Asia’s total food delivery spend on platforms grew a modest 5 percent year on year to reach $17.1 billion in 2023, mirroring the growth rate observed in 2022, Momentum Works said Tuesday.

According to its fourth annual “Food Delivery Platforms in Southeast Asia” report, the growth was driven primarily by the region’s smallest food delivery market, Vietnam (+27 percent), followed by Malaysia (+9 percent).

Thailand and Indonesia registered low single digit growth, while Singapore’s topline remained flat.

With continuous pressure to achieve sustainable profitability, the report noted most incumbent players have continued to rein in food delivery subsidies and adopt differentiated strategies to compete.

As of end 2023, Grab is estimated to account for 55 percent or $9.4 billion of the region’s food delivery gross merchandises value (GMV), a 6.8 percent increase from the year before.

Foodpanda and Gojek are estimated to contribute 15.8 percent ($2.7 billion) and 10.5 percent ($1.8 billion) of the region’s GMV, a 12.9 percent and 10 percent year on year decline respectively.

Shopee and Lineman showed notable growth, and are estimated to contribute 8.8 percent ($1.5 billion) and 8.1 percent ($1.4 billion), respectively, to the region’s GMV.

With continuous pressure to achieve sustainable profitability, the report highlighted that most incumbent players have continued to rein in food delivery subsidies and adopt differentiated strategies to compete.

“With robust food and beverages (F&B) consumption, low food delivery penetration and ongoing consolidation, there is a lot of room for growth for food delivery platforms in the region,

“While focusing on their core capabilities, leading players also need to keep an eye on potential market changes and emerging challengers.” said Jianggan Li, Chief Executive Officer of Momentum Works.

The report also showed premium F&B brands face challenges despite regional spending on F&B recovering.

According to the report, F&B spending in Southeast Asia finally recovered to surpass pre-pandemic levels ($125.2B in 2023 versus $115.7 billion in 2019).

However, many premium brands (notably in Singapore) found the year tougher than 2022, with many resorting to cost cutting measures amidst macro uncertainties and inflation, which may have heightened price sensitivity among the middle-class diners.

Meanwhile, entry of Chinese F&B brands en masse intensifies competition.

According to the report, 2023 saw an acceleration of Chinese F&B brands’ entry and expansion into Southeast Asia.

This trend is exemplified by Luckin Coffee’s 30 stores in Singapore and Mixue’s close to 4000 outlets across Southeast Asia.

However brands in multiple categories and sizes have also established presence in the region.

They have brought in their knowhow in store operations, marketing, user operations and franchise management. The report expect more in 2024.

Meanwhile, the report showed major players have achieved some sort of profitability.

According to the report, most major platforms have either achieved or are on track to attain adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) breakeven, with some targeting to achieve positive free cash flow in 2024.

But, as Meituan and Uber experiences have shown, profitability might not be a constant state – platforms need to constantly balance growth with sustained profitability.

The report also showed food delivery players continue to diverge in strategy, leveraging advertising for revenue expansion.

According to the report, major food delivery players have continued leveraging advertising products to lock in more merchant investments.

Platforms are expanding their advertising product portfolios to cater to the distinct needs of various brands, including large F&B chains, small F&B merchants, and FMCG brands.

The report also showed room for growth in user base and operational optimization in the region.

According to the report, Southeast Asia’s leading player Grab only has 5 percent of the region’s population of 600 million as monthly transacting customers.

Amid a flat sector topline, untapped populations in major cities, expansion into smaller cities, and catering to tourists present further growth opportunities for food delivery platforms.

Platforms can and should also continuously optimize operations to reduce costs and grow their bottom line, said the report.

Southeast Asia ecommerce achieves $ 99.5B GMV in 2022, says Momentum Works