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Didi may shut food delivery services in China, go overseas

Some of the employees have already been transferred to Didi’s international business department. The company's overseas ambition would include Mexico and Brazil.

Feb 20, 2019 by The Passage Team
Didi may shut food delivery services in China, go overseas

After announcing large-scale layoffs on February 15, ride-hailing giant Didi may cut down its non-core businesses, among which the food delivery sector is at the forefront.

Multiple sources familiar with the matter told 36kr.com that layoffs and job transfers involving hundreds of employees are likely to happen soon in Didi’s food delivery segment in China. At the same time, Didi is eyeing overseas market to rebuild its food delivery business. Some of the employees on food takeaway have already been transferred to Didi’s international business department.

Didi started its food business in late 2017, through a research project called R-Lab, which focused on food delivery, and also incubated new products and services related to minibuses, hotels and ticketing.

Didi insiders told 36Kr that the trial countries for Didi’s overseas ambition would include Mexico and Brazil, where the density of population could bring high demand and fast growth in early stages. A Didi official has revealed that their food delivery service has been launched in certain areas in Guadalajara, the second largest city in Mexico.

However, the strategy to go overseas would mean direct competition with Uber Eats, which entered earlier and scaled larger. At the end of 2018, Dusan Vatani, general manager of Uber Eats, revealed that Uber Eats had surpassed Uber's taxi business in 19 European cities, becoming one of the fastest growing food delivery services in the world. Last year, the food delivery service recorded a revenue exceeding USD 3 billion.

Last April, Didi announced entering a “preparatory phase” for food delivery services in nine cities in China, launching first in Wucity in Jiangsu province. It entered its fifth, and likely the final, city Zhengzhou in Henna last July. Though operations have not been stopped yet for these five cities, “it is not positive how long they can last, since Didi hasn’t figured out the revenue model for its domestic food delivery services,” an insider commented, “which means the contracts with the food agencies are not likely to continue after they expire soon.”

The plan to separate its food delivery business was thought of in July last year. Another Didi insider told 36Kr that the plan was to make it an independent operation unit with independent equity relationships. They wanted to expand in 40 to 60 cities in China with the help of huge subsidiaries and then copy the model to overseas markets. The rape and murder of two of its passengers in a span of three months last year brought huge setbacks across Didi’s businesses.

Didi is now being more cautious towards businesses that burn money and fetch little in the short term. Or if we can put it this way, the cab behemoth finally has to focus on its core job in China, under various pressures from government regulation, public scrutiny and fierce completion.

The Passage Team

The Passage is committed to creating in-depth content over technology industry across Asia with a focus on emerging startups in the technology, healthcare, education, food, tech, travel & mobility segments.

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