Chinese food delivery giant Meituan launched a sister app in Hong Kong, its first rollout outside mainland China — but some analysts are skeptical it can quickly gain significant market share.

“I’m not very optimistic about Meituan’s expansion in Hong Kong,” Shawn Yang, executive director of the Blue Lotus Research Institute, told CNBC. “I don’t think the market is big enough where Meituan will invest a lot of resources.

The food delivery service – named KeeTa – launched on May 22 in two residential areas: Mong Kok and Tai Kok Tsui.

A month later, KeeTa announced it was expanding to Hong Kong’s Sham Shui Po and Yau Tsim Mong neighborhoods after its initial launch “exceeded expectations,” it said in a press release shared with CNBC.

KeeTa plans to cover the entire Hong Kong market by the end of this year, Meituan said at the time of its launch.

The expansion comes as Meituan faces increased competition from new players such as TikTok sister company Douyin in its home market, and as it hopes for a strong China’s post-Covid recovery falters.

Meituan is the market leader in China’s food delivery sector, with almost 70% market share in mainland China, data from industry research firm ChinaIRN showed.

“We have received a large number of inquiries and requests from guests and restaurants outside of Mong Kok and Tai Kok Tsui, which has greatly strengthened our confidence in further expansion into the region,” a KeeTa spokesperson told CNBC.

The company will “continue to offer the takeaway service and will expand its services to other parts of Hong Kong as soon as possible,” the spokesperson said.

Kai Wang, chief equity analyst at Morningstar Asia, does not think the Hong Kong expansion will have a significant impact on the company’s earnings.

He said KeeTa’s expansion into Hong Kong “potentially gains an additional 7 million users” compared to Meituan already has more than 678 million users in China.

“I don’t think so [KeeTa] it greatly affects Meituan’s revenue,” Wang said.

Meituan declined to comment on the analysts’ views.

“I think Meituan wants to find a market that is culturally close to mainland China, [build] team and talent and try to see if they can also gain some market share in overseas markets in the long term,” said Blue Lotus’s Yang. He had Hong Kong in mind as a test bed for Meituan, which could eventually expand internationally.

Currently, about 10% of the total restaurant industry uses food delivery services — that’s compared to an average of 21% across China two years ago, according to arreport from research firm Momentum Works.

That’s because “ordering food delivery is not as common a practice in Hong Kong as it is in mainland China,” the report said, adding that the Asian financial center has a high density of food and beverage businesses on every corner.

Hong Kong’s food delivery market is currently dominated by Foodpanda and Deliveroo, which held 64% and 36% respectively in May before KeeTa’s launch, according to data provider Measurable AI. The data takes into account both delivery and pick-up orders.

KeeTa currently does not offer food pickup services, only delivery services.

Uber Eats exited Hong Kong at the end of 2021 after five years in the territory. According to Measurable AI, it had about 5% market share at the time of its departure.

“If there were already two or three big players in this market, then it’s actually very difficult to change the mindset of consumers unless they do a lot of subsidy campaigns,” said Yang of Blue Lotus Research.

″[KeeTa’s expansion into Hong Kong] should lead to more vouchers and discounts for consumers. And in the long run, it should benefit consumers,” said Morningstar’s Wang.

Separately, Hong Kong has launched an investigation into anti-competitive behaviour from Deliveroo and Foodpanda. This means that players cannot engage in practices such as restricting restaurants or penalizing them for switching to partnerships exclusively with other platforms.

This could mean that smaller players like KeeTa may be able to build market share.

KeeTa is trying to get new users offers free vouchers worth HK$300 (US$38.30) for every new user which can be used to offset food and delivery charges. The company “plans to further launch various marketing activities in the new neighborhood,” such as free delivery for all, as well as referral discounts and grocery offers.

KeeTa also offers set meals from HK$60 inclusive of delivery fees to solve the pain of self-eating customers. Foodpanda and Deliveroo’s minimum order requirements typically range from HK$50 to HK$80, excluding delivery fees, according to CNBC’s review.

To further entice customers, KeeTa has launched an “Early Promise” policy for all users. Customers will be compensated in vouchers if their orders are more than 15 minutes later than the original estimate.

Ryan Lai, managing director of Foodpanda Hong Kong, told CNBC that short-term promotions are not enough to create customer loyalty in the long term.

“In such a competitive market, we find that building strong customer retention is a key success factor,” said Lai.

“In our view, the entry of a new player into the local delivery space reflects the sector’s untapped growth potential in the market,” he said, adding that Foodpanda will continue to better serve its customers.

A spokesperson for Deliveroo Hong Kong said of the new entrant: “Since Deliveroo first entered the Hong Kong market seven years ago, we have always been optimistic about the prospects for the local grocery and food industry, and as such we see competition as a driving force for innovation.”

Recently, the platform also launched an “on-time promise” policy for paying users – compensating them with vouchers if their orders are delayed by 15 minutes or more.

However, Hong Kong’s food delivery market “remains tepid,” Momentum Works said in a report, noting that even during the pandemic, growth rates have been modest.

But KeeTa can tap into its parent company’s expertise in China, the research firm said.

“As long as Meituan determines the leadership, selects the right people and organizes its internal structure effectively, they should not worry about competition from the two incumbent companies.