Wang Xing decides to "win the competition at all costs."

Author | Wang Xiaojuan

Editor | Zhou Zhiyu

Since JD.com officially entered the food delivery market, the industry has been in fierce competition for a quarter. As one of the parties being "attacked," Meituan's financial report has attracted significant market attention.

During the earnings call on the evening of May 26, Meituan CEO Wang Xing, when asked about the impact of JD.com's 10 billion yuan subsidy on Meituan's food delivery business, gave a simple and direct answer: "We will spare no effort to win the competition."

This bold statement is already accompanied by specific actions.

On May 27, Meituan announced a collaboration with over a hundred catering and retail brands to launch the 618 promotional event from May 28 to June 18. This is Meituan's first participation in the 618 major promotional event of e-commerce platforms and represents Meituan's further push into its flash purchase core business.

In addition, Meituan will continue to invest in rider subsidies, AI, international expansion, and other areas to increase its chances of winning in future competition.

The impact of the instant retail war, which has opened a gap in food delivery, on Meituan and other companies' financial data will begin to be reflected in the second quarter's financial report. Wang Xing estimates that Meituan may experience fluctuations in its financial situation in the short term, predicting that the growth rate of core local business revenue in the second quarter of 2025 will be lower than the same period last year, with a significant decline in operating profit margin year-on-year, and it is impossible to predict how long the irrational competition within the industry will last.

As competition continues, the food delivery industry is also undergoing some changes. Companies are not only competing on consumer subsidies but also on paying social insurance for riders and alleviating consumer concerns through measures like "open kitchens."

This also means that while competing, companies are promoting the healthy development of the industry.

Stability

In the first quarter of this year, Meituan delivered a solid financial report overall, with steady growth in core businesses and a continued narrowing of losses in new businesses.

Specifically, Meituan's total revenue in the first quarter was 86.6 billion yuan, a year-on-year increase of 18%; adjusted net profit was 10.949 billion yuan, a significant year-on-year increase of 46.2%. This growth was mainly attributed to the sustained efforts in core local businesses and the reduction of losses in new businesses.

In the core local business segment, including food delivery, in-store dining and travel, and flash purchase, revenue reached 64.3 billion yuan, a year-on-year increase of 18%, with the operating profit margin rising to 21%. Among them, the food delivery business supported over 480 chain restaurant brands in opening 3,000 new stores through the "brand satellite store" model.

It is worth mentioning that Meituan's flash purchase daily order volume exceeded 18 million, with over 500 million users. According to Meituan's user profile report, young consumers born in the 1990s account for a significant proportion, making up about two-thirds, with non-food categories (such as 3C, home appliances, and beauty) becoming new growth engines. This is also the main battlefield that JD.com and Taobao need to defend.

In the new business segment, including community group buying, shared mobility, and international business, revenue was 22.2 billion yuan, with losses narrowing by 17.5% year-on-year to 2.3 billion yuan. In this part, the international business performed well, with the Middle Eastern brand Keeta establishing a foothold in Saudi Arabia; recently, Meituan also announced its entry into the Brazilian market, indicating that its overseas expansion pace is accelerating.

At the same time, in the first quarter, Meituan's in-store business performed strongly, with the number of active merchants growing by over 25% year-on-year. Benefiting from intensified external competition, the newly upgraded "Meituan Membership" system further promotes business synergy, integrating all life scenario services such as dining, accommodation, transportation, travel, entertainment, shopping, and medical care into one membership system, greatly enhancing user stickiness Guosen Securities analysts believe that in response to changing consumption trends and a diversified competitive landscape, Meituan is upgrading its membership system to achieve further synergy in its local lifestyle business, while actively iterating its organizational structure to adapt to strategic changes. The launch of the "Meituan Membership" system is expected to accelerate the formation of a closed loop in local lifestyle consumption, and once the business flywheel is established, it is likely to provide strong support for future growth.

In terms of investment, Meituan's R&D expenditure in the first quarter was 5.8 billion yuan, a year-on-year increase of 15%, focusing on AI, unmanned delivery, and international technology output. These investments also point to Meituan's future competitiveness, which is oriented towards a technology breakthrough strategy with AI and unmanned delivery, as well as market-oriented international expansion.

During the earnings call, Wang Xing also revealed progress regarding Meituan's AI large model development. He stated that Meituan plans to launch a business decision-making assistant in June, which will help merchants grasp AI trends and achieve digital transformation.

In the last quarter, Meituan provided internal engineers with an automatic code generation tool, and currently about 52% of new code is generated by AI, with over 90% of engineering team members widely using AI coding tools.

In terms of drone delivery, Meituan's fourth-generation drone has received operational permission for the entire territory of China and has completed a total of 520,000 orders, covering cities such as Shenzhen, Beijing, and Dubai.

On the international front, Keeta's operations in Saudi Arabia have already shown characteristics of high order value, and after breaking through in Saudi Arabia, it is extending to surrounding GCC countries. The newly entered Brazilian market ranks seventh in the world by population, with huge potential for the takeaway market in the future.

However, Meituan currently faces criticism over high commissions, which has become a direct point of attack from JD.com after its entry into the market. However, Meituan did not respond to this point in this earnings report.

It is worth mentioning that recently the "Compliance Guidelines for Charging Behavior of Online Trading Platforms (Draft for Comments)" was released, clarifying eight unreasonable charging behaviors, such as repeated charges and transferring costs that should be borne by the platform itself, mainly used in the takeaway industry. Meituan, Pinduoduo, Taotian, Douyin, Ctrip, and Didi have stated that they will conduct self-examination and rectification.

Mixed Battle

Currently, the competition among various companies is intense, and the outcome of the competition, as well as whether Meituan's position can be shaken, remains uncertain. However, with the entry of competitors and the intervention of regulatory policies, the takeaway industry is undergoing a new round of transformation.

In this round of the takeaway war, subsidies for riders' social security and support for quality merchants have also become new angles of competition. Meituan's ecological construction in this regard is also continuously investing.

Previously, Meituan stated that it plans to invest 100 billion yuan over the next three years to promote high-quality development in the industry. In terms of rider protection, it is piloting pension insurance subsidies (covering 7 million riders) and promoting "new occupational injury" insurance, which is expected to cover the entire country by the end of 2025, reducing rider turnover rates.

Meituan has also implemented a series of measures to support merchants, such as covering 180,000 catering merchants with a "1 billion assistance fund" and promoting "bright kitchen and stove" coverage for 100,000 merchants, thereby enhancing merchant loyalty. The investments in these areas are also efforts by Meituan to increase its winning chances and consolidate its position Wang Xing summarized in the conference call: "Meituan is more focused on its market position in five years rather than short-term financial indicators." This statement highlights Meituan's long-term strategic determination to respond to competition through technological investment and ecological synergy.

Many institutions also express optimism about Meituan's long-term prospects, but short-term pressures will indeed arise due to investments. Morgan Stanley stated that it is confident in Meituan's long-term moat in the food delivery sector but expects short-term profit margins to face pressure, especially as new initiatives like expansion in Brazil will lead to increased losses. The firm lowered the company's target price from HKD 200 to HKD 160, maintaining an overweight rating.

Additionally, regarding food safety, which is a major concern for many consumers, both Meituan and JD have taken some actions.

This year, Meituan has implemented the "Internet + Bright Kitchen" initiative in many places, encouraging merchants to live-stream their kitchens. Consumers can directly observe the food preparation process when ordering takeout and decide whether to place an order. JD has also emphasized quality dining and plans to open a food mall that will live-stream all day offline.

In the long run, the fierce competition in the food delivery sector will continue for some time. JD's daily order volume has exceeded 20 million for several days, and Taobao and Ele.me announced on May 26 that their daily order numbers have surpassed 40 million. This poses a significant challenge for Meituan, and it remains to be seen where each company will head.

In Wang Xing's view, some subsidies in the current industry competition are irrational, accompanied by low quality and low prices. However, competition ultimately needs to return to the essence of business. The Chinese food delivery industry has developed to a new stage, and both delivery platforms and merchants should not revert to the aggressive subsidy-driven competition model of many years ago. Platforms need to serve the interests of consumers, merchants, and delivery riders simultaneously to achieve sustainable development.

CITIC Securities' research report also indicated that from the perspective of competition, with the expansion of order volume, competition will present an all-around, multi-factor situation. Reviewing past confrontations in the food delivery market, subsidies have a significant short-term effect on order growth, but they are not the decisive factor in determining the outcome of competition. Systematic variables such as delivery efficiency and merchant supply are more core.

Currently, competition is in a heated phase, and subsidies are often the most direct means, which is understandable.

In the short term, subsidies from various companies may affect financial performance and market sentiment. However, in the long term, competition among companies will tend to stabilize, promoting healthy industry development.

How to sustain the game under the principles of fair and orderly competition requires joint exploration by the industry