Dive Brief:

• European food delivery company Delivery Hero has entered into an agreement to buy the South Korean delivery provider Woowa Brothers for $4 billion, according to a press release.
• Delivery Hero said in the release that the acquisition is part of Delivery Hero’s strategy to expand into Asia and become the largest global food delivery provider outside of China by share of orders. 
• Woowa is the largest food delivery service in South Korea and generated 100 million orders as of Q3 2019, according to the release. As part of the transaction, a joint venture with Woowa will be created in Singapore and Woowa’s founder and CEO Bongjin Kim will manage operations for Delivery Hero in Asia Pacific.

Dive Insight:

The Asia-Pacific region is by far the hottest area for delivery, but is also the most competitive, which is why Delivery Hero took the transaction route to strengthen its position in the region and build dominance globally. As of October, the company, which has a presence in 40 countries, delivered over 71 million orders around the world with Asia as its second largest region, generating 15 million monthly orders during fiscal year 2018. But even with its delivery prowess, expanding into new countries in the region is extremely difficult and expensive, involving more upfront spending on advertising to convince consumers to try a new provider, according to The Wall Street Journal.

South Korea still has a lot of room to grow, with a bulk of consumers still ordering by phone, according to the press release — which is likely why Delivery Hero started there first. The total addressable market for food services is about $93 billion.​

The food delivery scene across the region, especially in China, is more mature than in the U.S. and provides a preview of what could happen in the American market. Asia Pacific already has well over half of the global delivery market share, according to Adriot Market Research. It also generates the most revenue at $34.3 billion in 2017 with the expectation that it will have $91 billion in revenue by 2023.

Consolidation is also ramping up in Asia Pacific, with several brands being absorbed by larger companies or shuttering operations. Uber sold its Southeast Asia business to rival Grab in 2018. In the last five years, foodpanda acquired Just Eat’s India business, TastyKhana in India, Room Service in Malaysia, EatOye in Pakistan and four brands in Hong Kong to gain dominance in each of these countries. Foodpanda's Indian unit was acquired by Delivery Hero in 2016, but was then bought by Indian delivery company Ola a year later.

With U.S. companies facing scrutiny over lack of profits, it may be a matter of time before major transactions such as this one occur with larger global providers. Consolidation has already begun in the U.S. with DoorDash acquiring Caviar for $410 million this year.