Brazil’s takeout market is falling into an unprecedented “secret war.” According to the Financial Times, as Keeta, owned by Chinese food delivery giant Meituan, and 99, owned by Didi DiDi, enter Brazil, Latin America’s largest consumer market is experiencing fierce competition. However, the competition has escalated from a mere market battle to accusations of industrial espionage and unfair means.
iFood Allegations: Commercial Espionage and Data Theft
iFood CEO Diego Barreto revealed to the Financial Times that the company discovered that there was a concerted effort to steal its trade secrets to gain unfair market advantages.
He claimed the incidents began around the time two Chinese rivals unveiled plans to enter the Brazilian market.
"I saw a very obvious coincidence that makes me believe there is some kind of connection between the two. I think this is someone trying to sabotage it," Barreto said. "I can't tell you who this person is, but I am sure that some foreign consulting firm is acting as a middleman behind the scenes."
According to iFood, some overseas consulting companies used questionable and aggressive methods to contact iFood employees through LinkedIn in an attempt to obtain private data about the group’s operations, sometimes even offering hundreds of dollars to invite them to participate in interviews.
The company says it has discovered about 500 different ways to apply for jobs.
"This is not common market practice. This is clearly an attempt to steal sensitive data and information from iFood, such as our pricing strategy. This is commercial espionage - stealing the intellectual property developed by iFood in Brazil." Barreto emphasized.
Police Involvement: Search Warrants and Forensic Examination
The dispute has triggered a criminal investigation. Following complaints from iFood, police have launched an investigation into at least four former employees suspected of stealing or unauthorized sharing of company data, according to court documents seen by the Financial Times.
In October, police executed judge-issued search warrants at the homes of two of the men. In both cases, police removed electronic devices and forensic testing is currently underway.
Documents show that one of the former employees who was raided allegedly downloaded data from about 4,900 restaurants and sent it to a private email address. Another employee had been contacted by a Chinese consulting firm, which sent him a list of questions about iFood and arranged a video interview.
Chinese companies respond: deny the accusations and emphasize compliance
Faced with iFood’s accusations, Keeta’s CEO Tony Qiu denied it. He said the company had not implemented the core elements of iFood's complaint.
"We have very high standards of ethical and legal conduct, so we are not involved in the type of activity they are alleging. In fact, to date, we have not received any accusations or lawsuits from any company," he said.
At the same time, Mr. Qiu claimed that Keeta restaurant may also have suffered from foul play. He revealed that on the day after Keeta opened in Santos last October, 8 to 10 people pretended to be Keeta employees and visited several restaurants, asking the owners to show the Keeta system, taking many photos and videos, and even closed some Keeta accounts.
One restaurateur told the Financial Times that he was contacted by a 99 representative and given specific details about his contract with iFood.
iFood has also filed a labor court case against former employees, accusing them of breaching non-compete clauses, according to people familiar with the matter.
99 said it does not condone or support any inappropriate behavior involving the use of external data obtained through illegal means.
“We operate under a strict code of conduct and policies are regularly communicated to all employees through training, supervision and accountability.”
The company added: 99Food is challenging the food delivery market in Brazil and has become a real choice for restaurants, delivery people, consumers and professionals, gaining greater visibility and relevance, which naturally increases attention to our strategy. We are confident that our practices comply with all applicable laws and regulations, allowing us to continue to drive change in the industry within an ethical and legal framework.
Market background: Brazil becomes a testing ground for Chinese companies to go overseas
Brazil has an Internet population of more than 200 million, a very high penetration rate of digital payments, and a large number of motorcycle couriers, making it a key target market for the global expansion of Chinese technology companies.
Keeta and 99 both launched services in Brazil last year, challenging iFood's long-standing market dominance. 99 Group and Keeta Group have committed a total investment of 7.6 billion reais (approximately US$1.5 billion) to enter the Brazilian market. Meanwhile, iFood Group also invested 17 billion reais (approximately $3.3 billion) in the 12 months to March.
The Brazilian Association of Bars and Restaurants estimates that the total number of orders completed through food delivery apps is expected to reach 100 billion reais by 2025, up from 91 billion reais the previous year.
Industry Watch: Increasing Competition and Market Shuffling
Mauricio Morgado, a professor at the Vargas Center for Retail Research, said some restaurants and motorcycle drivers unhappy with iFood welcomed the additional competition. iFood is estimated to occupy 80% of the market share, almost equivalent to a monopoly.
"This is an exciting battle. iFood will face a real battle with Chinese companies," Morgado added, describing the subsidized promotions of Keeta and 99 Foods as very aggressive.
However, previous attempts to shake the status of Brazil's local food delivery giant have failed. Uber Eats will exit the Brazilian market in 2022, a year before 99 Foods initially exited the Brazilian market.
This time, with the strong entry of Chinese companies and the injection of huge investments, the Brazilian food delivery market may usher in a new round of reshuffle. But accusations of commercial espionage and unfair means have undoubtedly cast a shadow over the competition. (Compiled by Blue Hole New Consumption)