Alibaba, JD.com, and Meituan all fell on the Hong Kong stock market on the same day. What is the market worried about regarding the food delivery war?

On Thursday, Hong Kong stocks fluctuated downward, with the Hang Seng Index and the Hang Seng Tech Index both falling about 0.6%. Alibaba dropped 2.93%, Meituan fell 2.54%, and JD.com decreased by 2.11%, with all three reaching their lowest levels since April.

Currently, the price war in the food delivery industry is still ongoing. Taobao Flash Sale announced yesterday the launch of a subsidy plan worth 50 billion yuan. Where will this round of price war lead? What will the final market structure look like? Goldman Sachs has conducted a simulation in its latest report.

According to news from the Chasing Wind Trading Desk, Goldman Sachs stated in its latest report that this food delivery war is expected to last longer and has warned of profit pressure, with all three companies experiencing a decline in profits in the short term.

However, Goldman Sachs believes that short-term pain can be exchanged for long-term gains. The fundamental goal of this round of price war is to acquire user traffic through high-frequency food delivery services and cross-sell to more profitable e-commerce and travel businesses, which may lead to an increase in GMV profit margins in the medium term.

In addition, Goldman Sachs simulated three scenarios: Scenario One, the baseline scenario, where Meituan successfully defends its leading position; Scenario Two, a duopoly structure where Alibaba and Meituan share the market equally; and Scenario Three, a fragmented market with a "three-legged" competition.

The Price War in China's Internet Food Delivery Sector Escalates, Goldman Sachs Warns of Profit Pressure

The competition among China's internet giants in the food delivery sector has escalated to a new height, with Alibaba, JD.com, and Meituan fiercely competing.

Goldman Sachs' latest research report shows that the total investment of the three companies in just one quarter in June reached 25 billion yuan. This price war, which will last much longer than previous ones, is reshaping the industry landscape.

Analysts point out that this round of competition will last longer, with investment peaking in September 2025, followed by a potential turning point in the second half of 2025.

Unlike previous e-commerce platforms that reduced investment over several quarters, all participating companies are vying for the status of "daily application" in China, hoping to cross-sell their low-frequency e-commerce and travel services through high-frequency food delivery services.

Goldman Sachs warns that investors should prepare for a "profit shock" in the next 12-18 months. In the baseline scenario forecast, Alibaba's food delivery business is expected to lose 41 billion yuan in the next 12 months, JD.com is projected to lose 26 billion yuan, while Meituan's EBIT profit will decline by 25 billion yuan.

Specifically, Goldman Sachs expects JD.com's food delivery losses in June to reach 11 billion yuan, with an annual loss of 30 billion yuan, which will halve the group's net profit forecast to 6-7 billion yuan. Alibaba's profits from its Chinese e-commerce business are expected to decline compared to previous mid-single-digit growth expectations.

Goldman Sachs maintains buy ratings for Alibaba, JD.com, Meituan, and PDD, but has lowered some target prices, reflecting the balance between short-term profit pressure and long-term strategic value.

Three Scenarios Simulation: Who Will Dominate the Food Delivery Market?

Goldman Sachs has constructed three competitive scenarios in its latest research report to assess the future landscape of the food delivery and instant retail markets

Scenario 1 (Baseline Scenario) Assume Meituan successfully defends its leading market share position. Based on user loyalty, delivery network advantages, and a strong position in lower-tier cities, Meituan will form a market structure of 5.5:3.5:1 with Alibaba and JD.com. In this scenario, Meituan will sacrifice short-term profitability, with the EBITDA per order for its takeaway and instant retail businesses dropping to RMB 0.7 and RMB 0, respectively, but is expected to recover to RMB 1.0 in the long term.

Scenario 2 Preset Alibaba gains significant market share through continuous investment of RMB 50 billion. With the synergy from the integration of Taobao's instant commerce and Ele.me, as well as Taobao's daily active user advantage being twice that of Meituan and JD.com, the two sides will form a duopoly structure of 4.5:4.5:1, with JD.com still in third place.

Scenario 3 Assume JD.com achieves a three-way competitive structure of 5:3:2 through improved merchant coverage and an investment of 150,000 full-time delivery riders. JD.com's takeaway business EBITDA per order will improve from -RMB 6.2 in 2025 to a long-term level of RMB 0.5.

Strategic Intent: Competing for "Daily Application" Status

Goldman Sachs analysis believes that the fundamental goal of this round of takeaway price wars is not the profitability of the takeaway business itself, but to acquire user traffic through high-frequency takeaway services and cross-sell to more profitable e-commerce and travel businesses.

Meituan has already successfully validated this model, achieving a 30%-40% EBITDA profit margin through cross-selling from takeaway users to in-store, hotel, and travel businesses. This successful case has prompted e-commerce giants to reorganize their business structures, integrating new services into a single application.

According to QuestMobile data, from January to May 2025, the daily active users (DAU) of the Taobao App increased by 50 million, reaching over 410 million; the DAU of JD.com's main application also increased by 50 million, reaching approximately 170 million. In contrast, the DAU trend of PDD's App during the same period was relatively flat. This directly proves the traffic-driving effect of high-frequency business on the main site.

JD.com's participation is particularly noteworthy. The daily active users of its main application are only one-third of those of Taobao and PDD, with two-thirds of the RMB 47 billion marketing expenditure in 2024 allocated to customer acquisition. Through takeaway services, JD.com's daily active users have grown from 1-1.3 million previously to 1.7 million in May this year, with 40% of new takeaway users converting to JD.com e-commerce customers.

Goldman Sachs estimates that by 2030, the takeaway delivery market size will reach RMB 2.4 trillion, and the instant retail market will reach RMB 1.5 trillion. The emerging centralized outbound model and supply chain improvements will further drive penetration rate increases.

Short-term Pain for Long-term Gain

Goldman Sachs expects that viewing takeaway losses as a long-term investment strategy in marketing expenditure will bring short-term pain to each platform from 2025 to the first half of 2026, but may lead to improved marketing efficiency in the medium term.

In the long run, as competition normalizes, Alibaba and JD.com are expected to reallocate user acquisition marketing expenditure to takeaway subsidies, achieving moderate profitability or breakeven by 2027, thereby enhancing GMV profit margins. In addition, Goldman Sachs stated that PDD has benefited relatively from not directly participating in the takeaway competition. As Meituan Select exits 18 provinces, Duoduo Grocery is expected to absorb the remaining inventory, driving business expansion in the second half of the year.

Goldman Sachs maintains a buy rating on all four companies, believing that although the trading platform will face profit declines for the remainder of 2025, takeaway investment losses are expected to peak within 12 months, creating conditions for a turning point in stock prices in the second half of the year