AsianFin -- Didi, China's leading ride-hailing giant, has officially announced the relaunch of its food delivery business in Brazil under the "99 Food" brand.

The company aims to provide an integrated service combining local transportation, payment, and food delivery, targeting the lower-tier markets in Brazil.

This move follows Didi's initial attempt to establish a foothold in the Brazilian food delivery sector in 2019, when it launched 99 Food under its acquisition of the local ride-hailing platform 99.

However, the Brazilian food delivery market was already saturated with strong competitors like iFood, UberEats, and local players Rappi and Loggi, which left Didi with a modest 5% market share by 2020.

Now, nearly three years later, Didi is looking to capitalize on opportunities in Brazil's second and third-tier cities, where market penetration remains under 5%. These cities present a growing opportunity, as Brazil's food delivery market is projected to expand by 23% year-on-year by 2024.

With this in mind, Didi has already formed partnerships with over 30,000 merchants in Brazil and is targeting smaller cities with high-density coverage and differentiated services to avoid competition with iFood's dominant position.

In contrast to the fierce competition in larger cities, Didi faces its main competitor in the smaller towns—aiqfome, a subsidiary of Magazine Luiza, which has already penetrated 700 cities in Brazil.

With annual turnover of 1.4 billion reais and over 2 million monthly deliveries, aiqfome is a formidable challenge for Didi's efforts in the underserved regions.

Despite the competitive pressure, the rapidly growing market space in Brazil, with a 50.8% growth rate from 2019 to 2023, offers a potentially lucrative opportunity.

While the food delivery market in Mexico has proven more stable and mature, Didi is confident that the lessons learned from its successful operations in Mexico will enable it to gain traction in Brazil's highly competitive food delivery sector.

Didi's food delivery service in Mexico, branded as DiDi Food, utilizes a "mobility + delivery" dual-engine model that reduces the average cost per order by 15%, helping boost user retention rates to 68%. This strategy has allowed Didi to capture more than 50% of Mexico's food delivery market, with daily orders exceeding 300,000. Didi plans to leverage this success as it refocuses its efforts on Brazil.

In Brazil, Didi's 99 mobility service has already expanded to 3,300 of the country's 5,570 municipalities, covering nearly 60% of the market. To meet local demand, Didi has introduced 99Moto, a shared motorcycle service designed for small municipalities. With 50 million active users and 700,000 active riders in Brazil, the company is well-positioned to leverage its vast user base.

Didi's payment infrastructure also plays a crucial role in its strategy. The company has launched "99Pay," a digital wallet to cater to Brazil's complex payment ecosystem, which includes cash payments, installment payments, and instant payments via the PIX system. Didi's acquisition of Brazilian fintech giant BePay in 2023 further strengthens its capabilities, offering a broad range of services from transportation to finance and delivery.

Looking ahead, Didi plans to expand its delivery services to all state capitals in Brazil within the next three years and establish a cross-border delivery network with Argentina and Chile. The company also aims to accelerate the pilot operation of autonomous delivery vehicles in São Paulo to reduce costs through intelligent solutions.

While the competition remains fierce, Didi is optimistic that its well-established transportation and payment networks, combined with its experience in Mexico, will provide the foundation for success in Brazil’s burgeoning food delivery market. Whether Didi can avoid another setback or replicate the success of its Mexican operations remains to be seen.