Baemin-Yogiyo Merger Stalls... Delivery App Market Enters Era of Warring States

Deliberation at the Fair Trade Commission Plenary Meeting on the 23rd... Aftershock Intensifies if 5 Trillion Won Big Deal Moves to Busan
Startup Investment ↓ Competitiveness Weakens... One Year of Controversy, Latecomers Rapidly Grow

[Asia Economy Reporter Kim Cheol-hyun] The delivery application (app) market, which has become an everyday service for the public, is shaking up. This comes ahead of the Fair Trade Commission's (FTC) final decision on the merger between Baedal Minjok (Baemin) and Yogiyo, the industry's first and second largest players. Regardless of the outcome, the impact on the industry as well as the overall startup ecosystem will be significant. If the FTC takes a strong stance and the M&A deal worth 5 trillion won falls through, the aftershocks are expected to be considerable.

According to related industries on the 21st, the FTC will review the corporate merger case between Delivery Hero (DH) and Woowa Brothers at the plenary meeting scheduled for the 23rd of this month. Previously, the FTC had conveyed structural corrective measures requiring DH to sell Yogiyo, but DH has expressed that it cannot agree to these conditions, so a fierce battle is anticipated. The industry expects the FTC's conclusion to fall into three main scenarios: ▲ DH accepts the Yogiyo sale condition and acquires Woowa Brothers ▲ DH rejects the Yogiyo sale condition and the deal collapses ▲ other structural corrective measures are proposed instead of selling Yogiyo.

◆Aftershocks if M&A fails = Industry analysis suggests that DH is unlikely to accept the FTC's condition to sell Yogiyo. This is because they would have to shut down existing businesses despite investing 5 trillion won, eliminating the synergy expected from the merger. If the FTC insists on the Yogiyo sale condition and the M&A fails, significant aftershocks are expected. Woowa Brothers, which was pushing for global market expansion, will be immediately hampered. Woowa Brothers had planned to enter 11 Asian countries through a joint venture (JV) with DH called 'Woowa DH Asia,' but if the merger fails, they will have to pursue this independently.

Furthermore, the entire startup industry could face reduced investment and weakened ecosystem competitiveness. Exit (capital recovery) is crucial for the virtuous cycle of the startup ecosystem, and if the FTC's sanctions cause the M&A to fall through, domestic investment from global capital is bound to shrink, which is a common perception in the industry. Venture capitalists (VCs) who had invested in Baemin may also fail to recover their funds, negatively impacting domestic venture investment. Jung Mina, Policy Director at Korea Startup Forum, said, "In a situation where industries are converging, preventing companies from engaging in startup M&A will ultimately have a negative impact on the entire market."

Industry players including Baemin hope the FTC will back down with other structural corrective measures that DH can accept. While it is difficult to predict the conclusion, many believe this issue will not drag on beyond this year. An industry insider pointed out, "The approval process has been dragged out for a year, during which DoorDash has rapidly grown and gone public in the global market, showing how fast things are changing."

◆Latecomers' rise... Rapid changes in the domestic market = Another variable is that the domestic market landscape has drastically changed during the roughly one year between the M&A announcement and the FTC's final decision on the corporate merger. A year ago, the market structure dominated by Baemin and Yogiyo was solid, but now latecomers like Coupang Eats and WEMAKEPRICE O have intensified their offensive.

According to Mobile Index by big data platform company IGAWorks, the number of delivery app users (MAU) on Android smartphones reached 13 million in November this year, a 15.8% increase compared to last year. This means about 2 million new users started using delivery apps over the past year, which was marked by COVID-19. Notably, Coupang Eats has made significant progress. While it had 185,000 users on Android last November, this year it increased to 1,264,000 users. More than 1 million new users have joined Coupang Eats, a more than sixfold increase compared to the previous year. Baemin's users increased by 19% during the same period, but Yogiyo's users decreased by 2.5%, and Baedal Tong's users dropped by 53.7%. An industry insider said, "Although Baemin and Yogiyo still hold a large share, intensified competition could cause the market landscape to change even faster."

This content was produced with the assistance of AI translation services.