Meituan's Wang Puzhong talks about the takeaway war: After four months of calling for action, the industry is still in an irrational state

"The largest subsidy war in the history of China's internet" is currently raging in the food delivery sector. JD.com (09618) and Alibaba (09988) have announced a total investment of 80 billion yuan for this purpose, forcing Meituan (03690) to join the battle and pushing daily order volume to a historical high.

According to a report by LatePost on July 16, Wang Puzhong, CEO of Meituan's core local business, publicly responded for the first time to the fierce competition in the food delivery market. The full interview totaled 13,000 words, discussing the various participants in the delivery war. Wang repeatedly mentioned the current phenomenon of order volume inflation and called for a return to rationality, stating bluntly, "It's meaningless to compete; it harms the industry."

"Meituan doesn't want to compete, but cannot avoid retaliating"

Passive response, self-preservation, and accompanying to the end are the three key phrases Wang Puzhong mentioned regarding Meituan's participation in the war.

"When others attack you irrationally, you are forced to retaliate. If we do not participate in our main business, we won't even have the opportunity to transition to AI," Wang stated.

In his view, Meituan does not want to get involved in a meaningless price war, but must retaliate for self-preservation. He pointed out that competitors hope to quickly capture market share through high subsidies, but this strategy is unsustainable. Moreover, Meituan has adopted a more efficient and lower-cost strategy in response to competition, such as optimizing order structure through in-store pickup to reduce ineffective subsidies. He also mentioned that Meituan's system capabilities allow for precise subsidy distribution, avoiding resource waste, while competitors face higher loss risks due to insufficient system capabilities.

"We not only keep up but also use much fewer resources to do so," Wang Puzhong referred to the logic behind Meituan reaching a peak of 150 million daily orders last weekend (July 12), indicating that the goal is to reveal the truth about order volume in the industry—"You can achieve as many orders as you want, and do it at a lower cost."

Orders are just numbers; Wang Puzhong believes that "the vast majority of the instant retail industry is currently a bubble." For example, buying 12 bottles of water for 1 yuan, paper towels for 1 cent, and "0 discount coupons" that reduce 16 yuan do not bring much value to the industry.

According to Wang Puzhong, Meituan's current share of high unit price orders (over 30 yuan) remains stable at over 70%. He believes that the most important aspect is valuable orders or the market share of GMV after removing the fluff. He stated that Meituan "is good at fighting but not aggressive."

No winners in irrational business wars

"No matter how fierce the business war is, if it cannot promote progress or even contradicts business logic, then there are no winners on this battlefield." Wang Puzhong stated that Meituan has been calling for a response to the issue of internal competition in the industry for four months.

He cited a city with the most intense battle—Suqian.

Statistics show that compared to before the food delivery war, the local order volume in Suqian has increased fourfold. The current situation is that no one dines in fast-food restaurants; all orders are for delivery. A bowl of noodles costs 18 yuan for dine-in and 6 yuan for delivery—this huge price distortion is unsustainable. "So at that time, we knew that after this wave of food delivery wars, there wouldn't be much real value added," Wang Puzhong believes For the catering industry, the side effects brought by the subsidy war are more evident. Wang Puzhong pointed out that from gourmet food to milk tea and coffee, the long-established price mentality is being disrupted by the subsidy war, leading to new problems—when the subsidies stop, will this mentality recover? At the same time, for most dining brands, the takeaway subsidy war affects the normal operating order of dine-in services, which is also unsustainable.

Goldman Sachs estimates that in a single month, Meituan, JD.com, and Alibaba may collectively spend up to 25 billion RMB. In response, Wang Puzhong believes that the phenomenon of "ultimately exhausting the cash of the three companies" will not occur. He stated that if there were only three companies in the world, there would be a Candy Crush game-like competition, but each company has its own main battlefield. "Will there be no more Double Eleven promotions? Should we still invest in AI? Should we compete overseas?" These are all issues that need to be considered, but Meituan will respond with losses far below those of industry players.

Takeaway is a delicate and low-margin business model

After a six-month tug-of-war in the takeaway war, many industry insiders pointed out that the takeaway business model has vulnerabilities, and once faced with fierce competition, it must "subsidize three heads."

Wang Puzhong believes that the takeaway model indeed has the characteristic of low margins, with profits of just over one yuan per order. This leads to a need for a clever balance among the interests of the four parties involved in the takeaway network—merchants, delivery riders, platforms, and users—so that everyone can be satisfied. Therefore, "this business model cannot be approached in an overly idealistic or simplistic manner."

Currently, Meituan's OPM (Operating Profit Margin) is about 3, while the high-commission American takeaway company DoorDash charges 16% - 18% for merchant self-delivery, and users also pay substantial delivery fees and tips to riders, resulting in only a small profit.

The scale and profit margin of the takeaway market are limited. Last year, the takeaway industry generated a total profit of 30 billion, ranking at the bottom in profit margins within the internet industry. In contrast, e-commerce had a profit of 600 billion. Meanwhile, the takeaway industry accommodates more merchants and delivery riders, leading to increasing conflicts of interest and growing skepticism about the industry.

As a large platform with 14.5 million active merchants and an average of 3.36 million connected riders per month, Meituan has faced increasing controversy in recent years.

In the interview, Wang Puzhong also responded to the controversies faced by Meituan in the public opinion arena.

Wang Puzhong stated that the social attention Meituan receives far exceeds the profits generated by its business. "Every e-commerce company has higher profits than our business; they even spend money to attract attention."

Regarding the construction of the industry ecosystem, Wang Puzhong said, "In recent years, we have been holding various symposiums, including those with riders and merchants. My colleagues and I also regularly go out to take orders and deliver food. We quickly improve on what we do poorly and what can be changed promptly."

For example, the company established an ecological partner department last year, spending a lot of time communicating with merchants, including how to counteract internal competition; how to support and promote time-honored brands; and providing guarantees for riders, etc. Additionally, Meituan started collaborating with the Ministry of Human Resources and Social Security on new employment-related occupational injury insurance, among other initiatives. "Now, due to this intense competition, everyone's attention in this direction is declining." How the outside world views and understands Meituan is also a question that Wang Puzhong believes Meituan needs to reconsider today.

"It is necessary to clearly explain a business model that has a long profit chain, is complex, and not very profitable to the outside world, including the government, the public, riders, merchants, and employees. The company's overall communication ability needs to be strengthened; we cannot just speak for ourselves."

Returning to the current industry competition, Wang Puzhong believes that the bubble in this food delivery war is unprecedentedly large, calling for all sectors of society to discuss and reflect together on whether this kind of order competition has any positive impact on society and whether it is meaningful for the sustainable development of the entire industry. "I believe that the current environment definitely does not support this kind of irrational war."