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Business deals

KDDI to invest in Japan's third largest food delivery app Menu

Carrier hopes $45m deal will boost use of its mobile payment in growing market

Japanese telecom operator KDDI will take a 20% stake in the country's No. 3 food delivery service, hoping to boost is mobile payments business. (Source photo by Kaisuke Ota)

TOKYO -- Japan's KDDI is set to invest in the country's third-largest food delivery service, Menu, as the telecom operator seeks to expand its mobile payment platform by making use of delivery data amid flat growth in the telecommunications business.

Uber Eats Japan and Demae-can are the two largest food delivery companies in Japan, but the latest move illustrates the heightened competition prompted by an expanding market and increased demand for deliveries brought on by the COVID-19 pandemic.

KDDI will invest around 5 billion yen ($45.6 million) in Menu, a Tokyo-based food delivery startup founded in 2018, taking a 20% stake in the company under a partnership to be agreed as early as this month.

Reazon Holdings, which operates several businesses, including smartphone game makers and advertisers, is currently Menu's sole owner. KDDI will take a stake in the company through a third-party allocation of new shares, turning the startup into a KDDI equity-method affiliate.

Data analytics company Values says that Menu had 978,000 monthly users in April, making it the No. 3 food delivery service in Japan, behind Uber Eats' 4.56 million users and Demae-can's 3.55 million. Menu does business with 60,000 restaurants, compared with more than 100,000 for Uber Eats and Demae-can's 70,000 partner restaurants.

Through the investment, KDDI willsupport the expansion of the Menu franchise and allow customers to pay for Menu items through its au Pay smartphone payment service.

KDDI's customer base of about 30 million will also be used to analyze consumer preferences by integrating customer data and Menu usage history. The company plans to suggest restaurants to customers and distribute discount coupons to them.

The food delivery market has grown rapidly in Japan during the pandemic. The market expanded by 50% from 2019 to 626.4 billion yen in 2020, according to NPD Japan, a market research specialist based in Tokyo. The growth rate was around 5% a year before the pandemic.

The growth of KDDI's main communications business has slowed due to a falling population, among other factors. On the other hand, the operating income of the company's noncommunications businesses, such as financial services and e-commerce, is expected to increase by 26% annually in the fiscal year ending March 2022. Such businesses are forecast to overtake telecommunications services in terms of revenue by 2030.

Other telecom companies are also looking to food delivery services to boost their payment services business. SoftBank Group has a stake in Uber Technologies, the parent company of Uber Eats Japan, while Demae-can is effectively a subsidiary of SoftBank Group company Line, which has a stake of more than 30% in the food delivery service.

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