SF Express, one of China's largest delivery company, officially broke into the food delivery and catering sectors, as an increasing number of restaurants in the country expect to expand their delivery business to make up for the decline in dine-in customers due to the COVID-19 pandemic.
SF Express's newly established Fengshi (丰食) platform aims to provide food catering services for businesses, filling a hole on the corporate catering scene. Small and middle-sized companies usually can't afford their own cafeterias. Their employees typically rely on app-based take out orders for lunch and dinner when working overtime.
The new service will be carried out by the team that run SF Rush, the company's intra-city fast delivery network, with the collaboration from WeChat, and Candao, a food delivery management system. Payment would be processed on SF Express' own solution, named Kuanyi.
"Centralized and contactless delivery services can effectively offer workplace lunches to employees during the pandemic and ensure the safety of them," said SF Express in a statement.
The new platform has signed close to a hundred well-known brands, including KFC, McDonald's, Pizza Hut, Dominos, etc, and introduced 5 million RMB in subsidies to attract new merchants and users.
The restaurant industry suffered tremendously in the shadow of the COVID-19 pandemic. The National Bureau of Statistics reported for the first quarter that the the industry's revenue stood at 602.6 billion RMB, a 44.3% slash.
Despite corporate catering being a niche market, SF Express is nonetheless challenging Meituan Dianping, China's largest food delivery company with approximately 65% market share.
Meituan's exclusivity clause in its contracts with restaurants would likely constitute a hurdle to SF Express' roadmap in pushing Fengshi into corporate offices.
SF Express is known for the best quality among China's dozens of delivery providers. Its SF Rush service is already available in 134 cities across China, delivering over a million orders from over 100,000 SMEs that include restaurants, flower shops and patisseries to 7 million registered users on a daily average, according to Gan Ling, SF Express' Secretary of the Board of Directors.
Nationwide speaking, corporate catering business in China is still in a highly fragmented state. According to the China Culinary Association, 99% of participants in the industry have annual revenue of fewer than 100 million RMB, and the top ten companies only account for 5% of the total market share. However, the 1.5 trillion RMB industry already accounts about 30% of the entire food/restaurant industry and is expected to increase by 12.67% to 1.69 trillion by the end of 2020.
The entry barrier for the food delivery business is relatively low. Besides, users have almost no platform loyalty, as long as the food is delivered within a reasonable time. Meanwhile, eateries are constantly looking to expand their delivery channels in order to boost sales.
Maintaining the absolute leading position in food delivery is not easy for Meituan, as it's dealing with merchants' frustration due to increased commission, and the challenge from Alibaba's Eleme and the deep-pocketed SF Express, at the same time.
Meituan warned that a revenue decrease and significant operating loss for 1Q20 due to the uncertainty from the pandemic. Meanwhile, SF Express disclosed in its 2019 financial report that its operating income stood at 112.2 billion RMB, net profit at 5.79 billion RMB, both reaching record high. SF Rush's business increased by 96.12% in the past year.