$Grab Holdings(GRAB)$  

I have been reflecting on the ongoing food delivery war in China between JD.com $JD.com(JD)$   and Meituan $MEITUAN-W(03690)$  , which has led to a staggering $70 billion drop in their combined market value due to aggressive price-cutting and subsidies. If a similar situation unfolded in Singapore, where Grab and foodpanda dominate with a 91% market share, I believe the impact would be significant. Grab, holding 63% of the $2.5 billion market, and foodpanda could slash prices, offering discounts like the 4-yuan Luckin Coffee or 8-yuan branded lunches seen in China. While this would initially delight consumers with cheaper meals, I worry about the long-term effects, as history shows price wars often end with hikes once a company secures dominance, leaving consumers to bear the cost.

The failed merger between Grab and foodpanda in 2024, which prompted an investigation by Singapore's competition watchdog, highlights the delicate balance in this market. If these two giants started a price war, I think it could further consolidate their dominance, potentially squeezing out smaller players and reducing competition. This might lead to a near-monopoly, much like what some fear in China if either JD.com or Meituan wins. In Singapore, where the market is already concentrated, a price war could initially lower costs for consumers, but I suspect it would eventually result in higher prices and fewer choices once the dust settles. The intense competition might also strain delivery workers and merchants, as seen in past price wars, with platforms possibly cutting commissions or increasing fees to recover losses.

Looking at the broader picture, I question whether food delivery is a sustainable business model for investment. JD.com aims to keep its food delivery profit margin below 5%, while Meituan operates at around 3%, and both are burning cash to gain market share. This reminds me of Amazon's $Amazon.com(AMZN)$  failed venture into food delivery with Amazon Restaurants, which shuttered in 2019 after struggling against specialized competitors like Grubhub and Uber Eats. The U.S. tech giants, such as the Magnificent Seven, have largely avoided local services like food delivery, focusing instead on more scalable businesses. This makes me wonder if investing in companies like JD.com, Meituan, or Grab, which are heavily reliant on low-margin, cash-intensive operations, is truly worthwhile in the long run.

When considering competition versus monopoly, I lean toward the idea that fierce competition better serves consumers. A monopoly, as seen in historical price wars like the 2014 ride-hailing battle between DiDi and Uber, often leads to price hikes once a winner emerges—DiDi and Uber reportedly lost over 20 billion RMB in 2015 alone, only to raise fares later. In Singapore, keeping Grab and foodpanda in competition could prevent such an outcome, ensuring consumers benefit from sustained innovation and lower prices. However, I also recognize that prolonged competition can lead to unsustainable losses, potentially harming the industry's stability and affecting service quality, which might hurt consumers indirectly.

Ultimately, I am hesitant to invest in food delivery companies like JD.com, Meituan, or Grab at this stage. The cash-burning strategies, low profit margins, and historical precedent of price hikes after market consolidation make me cautious. While these companies might offer short-term growth by capturing market share, the long-term profitability remains uncertain, especially when compared to more diversified tech giants. I believe investors might find better opportunities in sectors with higher margins and less intense competition. For now, I will be watching how this delivery war plays out, both in China and potentially in Singapore, before making any investment decisions.

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