Riyadh Debut

Meituan (3690:HK), headquartered in Beijing, is preparing to introduce its international food-delivery platform to Riyadh, Saudi Arabia's capital, marking its inaugural venture beyond China as growth decelerates in its domestic market.

According to sources familiar with the matter, the company is actively developing its KeeTa app for the Middle East market, with Riyadh selected as its initial destination. Meituan has been evaluating expansion opportunities in the Middle East for several months, as disclosed by the sources who preferred anonymity due to the sensitivity of the information. The launch is anticipated to take place within the coming months, as stated by one of the sources.

Global Expansion

This global expansion by Meituan reflects a broader trend among Chinese companies seeking growth opportunities overseas amidst fierce competition domestically and a slowdown in consumption. The entry into Riyadh, known as one of the most affluent cities in the region, follows the company's successful expansion into Hong Kong in 2023.

The move positions Meituan in direct competition with local contenders such as Jahez International Co., Talabat and HungerStation owned by Delivery Hero SE, and Careem, backed by Uber Technologies Inc. On Friday, Delivery Hero's shares experienced a notable decline of over 9%, marking their most significant single-day drop in approximately two months.

Meituan's decision coincides with Saudi Arabia's ambitious economic plans, aiming to invest trillions of dollars to transform into a prominent tourism and commercial center within the region. A debut in Riyadh could signify a more extensive expansion into a region that Chinese companies increasingly view favorably, particularly as their domestic economy faces challenges.

The introduction of KeeTa is poised to intensify competition for incumbents such as Delivery Hero, whose significant revenue stream originates from Saudi Arabia, as stated by Marcus Diebel, an analyst at JP Morgan. According to Bernstein's estimation on Friday, the country contributed over €3 billion ($3.2 billion) in Gross Merchandise Value (GMV) for the company.

Diebel noted, "It also emphasizes the ongoing competitiveness of the industry, with new, well-funded players entering the market relatively late."

A Subsidy Heavy Approach

Meituan's strategy in the Middle East is expected to leverage a familiar subsidy-heavy approach to attract both users and delivery workers initially. Similar to its rollout in Hong Kong, KeeTa is likely to be introduced in phases, targeting specific districts initially. The company has already posted at least a dozen job openings for KeeTa in Riyadh on platforms like LinkedIn and its official website, including positions for user acquisition and business development.

Despite months of planning, Meituan's expansion plans remain subject to change, and the company may opt to pause or alter its strategy. In the interim, Meituan has explored opportunities in other Middle Eastern markets. Representatives for Meituan did not respond to requests for comment via email.

KeeTa was launched in May and quickly ascended to the second position in Hong Kong, surpassing Deliveroo in a matter of months, according to independent research. This success was viewed as a precursor to a broader global expansion strategy as Meituan aims for growth, especially amid competition from rivals such as ByteDance Ltd.'s Douyin, which are eroding its profit margins.

The company's most recent expansion coincides with Chief Executive Officer Wang Xing's decision in February to assume direct control over its overseas operations, underscoring the significance of its international aspirations.

During the company's earnings call in March, Wang emphasized Meituan's active exploration of international expansion opportunities, highlighting the utilization of its cash reserves and cash flow from domestic operations to facilitate entry into new markets.

Aligned with industry trends, Meituan, like its counterparts, has been seeking growth beyond its domestic market amidst China's economic downturn, including contemplating the acquisition of Delivery Hero's business in Southeast Asia at one point.

An increasing number of Chinese tech companies are eyeing a deeper presence in the Middle East, anticipating relatively lower political scrutiny compared to regions like the US and Europe. Besides widely known global platforms like TikTok and Shein, social apps of Chinese origin such as Yalla Group Ltd. and Joyy Inc.'s Bigo Live have garnered significant followings in the Middle East.

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