Japan food delivery firms at crossroads as inflation squeezes profits

TOKYO: Japan's food delivery industry is at a crossroads as intensifying competition and rising prices squeeze profits, forcing some operators to withdraw from the market, Kyodo News reported. Driven by the convenience of being able to order meals via smartphone apps, the food delivery market expanded rapidly on the back of stay-at-home demand during the coronavirus pandemic. The domestic market was worth 860.3 billion yen (US$5.3 billion) in 2023, more than double its 2019 level before the pandemic, according to research firm Circana Japan Ltd. It then contracted 6.1 per cent in 2024 before rebounding to 2.0 per cent growth in 2025, but the market is showing clear signs of slowing. The industry centres on a handful of players, led by Uber Eats Japan Inc. and Demae-can Co., that are locked in fierce competition. Delivery prices are generally higher than in-store rates, but the price war intensified after Rocket Now, operated by the Japanese unit of a United States (US) company, entered the market in 2025 with a pledge to match in-store prices. In March 2026, Helsinki-based Wolt was forced to withdraw from Japan after around six years in the market. Food delivery has long been regarded as a low-margin, high-volume business as labour costs for delivery workers and advertising expenses weigh on operators. Even Demae-can, one of the Japanese market's leading players, is expected to post a net loss of four billion yen for the business year ending August this year, marking its eighth consecutive year in the red. Overseas, some companies are seeking profitability not from food delivery alone but through synergies such as using customer data for online shopping businesses. But even as inflation pushes customers to cut spending, the market could see modest growth thanks to the convenience of such services. "The cycle in which some players exit the market as new operators enter will continue," said Sayaka Azuma, an analyst at Circana Japan.