Demae-Can: The LINE "SuperApp" Backed Meituan, Doordash, & Just Eat Takeaway of Japan
Fully backed by "SuperApp" LINE, Demae-can is now set to "own" the domestic food delivery market & ultimately all local commerce logistics, aiming to scale revenue by ~10x within the next 3 years
Japan Business Insights
Dec 6, 2020
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In today’s post, we’ll be discussing one of the more exciting - though still sometimes controversial - emerging growth sectors: online food delivery. It is a fascinating space to study, though particularly so in Japan, given the cultural nuances around food & dining norms, city & neighborhood development, employment realities & much more.
Unlike our last post where we discussed tsukuruba - the Redfin & Opendoor of Japan - and categorized the company as an “early-stage venture investment available in the public markets”, the business of focus today, Demae-can, has been in existence for much longer (21 years), is far larger in size (~$2.3Bn market cap) and is much more dominant in its industry (#1 market share). So instead, we’ll call this one a “late-stage venture investment available in the public markets”.
We have loosely followed Demae-can for the past several years, though never felt terribly excited about the prospects of the business itself…until more recently. As we’ll further discuss, in March of this year, Japanese technology giant, LINE Corporation - whose eponymous “SuperApp” is equivalent in ways to WeChat in China - invested a substantial sum into Demae-can. Not only that, but LINE is also in the midst of merging its own food delivery properties into Demae-can, has installed one of its own executives as President & CEO of the company, has transferred tens of LINE employees to Demae-can & has just begun releasing initial product updates to its “SuperApp” that further integrates Demae-can into the broader LINE app ecosystem & better promotes the food delivery service among LINE’s 86M monthly active users in Japan.
Worthy of mention, while the company’s current focus is indeed on food delivery, Demae-can’s ambitions extend far beyond that. Its ultimate aim is “to establish Demae-can from a simple delivery service to a life infrastructure that is indispensable to Japan.”
Given such, and similar to tsukuruba, we believe Demae-can is today a highly attractive, long-term investment opportunity with significant “embedded option value” for a patient investor seeking to back a category-defining company competing with an “unfair” advantage in a large, under-appreciated domestic market still in the early innings of its “digital transformation” (what a mouth-full!). Moreover, as fervent believers in the broader “seller services” investment thesis (think: Shopify or Etsy, the latter of whom makes about 1/4 of its revenue from “seller services” such as advertising, packaging, a wholesale platform, etc.), we feel that Demae-can has barely begun to tap the full breadth & depth of its market & ultimate profit opportunity.
Fully backed by "SuperApp" LINE, Demae-can is now set to "own" the domestic food delivery market & ultimately all local commerce logistics, aiming to scale revenue by ~10x within the next 3 years
Japan Business Insights
Dec 6, 2020
2
2
In today’s post, we’ll be discussing one of the more exciting - though still sometimes controversial - emerging growth sectors: online food delivery. It is a fascinating space to study, though particularly so in Japan, given the cultural nuances around food & dining norms, city & neighborhood development, employment realities & much more.
Unlike our last post where we discussed tsukuruba - the Redfin & Opendoor of Japan - and categorized the company as an “early-stage venture investment available in the public markets”, the business of focus today, Demae-can, has been in existence for much longer (21 years), is far larger in size (~$2.3Bn market cap) and is much more dominant in its industry (#1 market share). So instead, we’ll call this one a “late-stage venture investment available in the public markets”.
We have loosely followed Demae-can for the past several years, though never felt terribly excited about the prospects of the business itself…until more recently. As we’ll further discuss, in March of this year, Japanese technology giant, LINE Corporation - whose eponymous “SuperApp” is equivalent in ways to WeChat in China - invested a substantial sum into Demae-can. Not only that, but LINE is also in the midst of merging its own food delivery properties into Demae-can, has installed one of its own executives as President & CEO of the company, has transferred tens of LINE employees to Demae-can & has just begun releasing initial product updates to its “SuperApp” that further integrates Demae-can into the broader LINE app ecosystem & better promotes the food delivery service among LINE’s 86M monthly active users in Japan.
Worthy of mention, while the company’s current focus is indeed on food delivery, Demae-can’s ambitions extend far beyond that. Its ultimate aim is “to establish Demae-can from a simple delivery service to a life infrastructure that is indispensable to Japan.”
Given such, and similar to tsukuruba, we believe Demae-can is today a highly attractive, long-term investment opportunity with significant “embedded option value” for a patient investor seeking to back a category-defining company competing with an “unfair” advantage in a large, under-appreciated domestic market still in the early innings of its “digital transformation” (what a mouth-full!). Moreover, as fervent believers in the broader “seller services” investment thesis (think: Shopify or Etsy, the latter of whom makes about 1/4 of its revenue from “seller services” such as advertising, packaging, a wholesale platform, etc.), we feel that Demae-can has barely begun to tap the full breadth & depth of its market & ultimate profit opportunity.
