Meituan (Minutes): Win the competition at all costs, Q2 profits will significantly decline yoy

The following is the FY25Q1 earnings call minutes for $MEITUAN(03690.HK) . For the earnings report interpretation, please refer to《 Meituan: Sunshine Before the Storm? The Takeaway War "Clouds" Are Pressing Down 》

1. Core Information Review of the Earnings Report

2. Detailed Content of the Earnings Call

2.1 Key Information from Executives' Statements

1. Restaurant Industry: As of the end of Q1, over 480 brands have opened more than 3,000 satellite stores, with average revenue per store several times that of traditional dine-in restaurants. Launched self-operated cloud kitchens to provide customized supply chain solutions for chain brands. Plans to invest 100 billion RMB over the next 3 years, focusing on supply chain upgrades, merchant digital transformation, and stimulating consumer demand.

2. In-store Business: Launched educational services and fitness services, supporting worry-free refunds for prepaid scenarios. Optimized online marketing tools for merchants to improve conversion rates, with the number of active in-store merchants in Q1 increasing by over 25% year-on-year.

3. Instant Retail: Launched "Meituan Flash Purchase" and "Meituan Little Elephant" brands in April, with direct access from the homepage, focusing on 30-minute delivery of daily necessities. Collaborated with millions of retailers, brand owners, and small and medium-sized businesses, covering over 300 million consumers, enhancing supply chain efficiency and product quality.

4. Meituan Takeaway:

a. Since July 2022, invested over 1.5 billion RMB in occupational injury insurance for riders in 7 provinces, aiming for nationwide coverage by 2025.

b. Launched a new pension plan in April 2025, gradually expanding nationwide; 86% of delivery network management positions are promoted from frontline riders, funding hundreds to pursue higher education.

c. Distributed over 100 million RMB in critical illness relief funds through the "Kangaroo Baby" program, covering over 6,000 rider families; provided free critical illness insurance for over 700,000 female riders.

5. Membership System: Covers all categories including takeaway, in-store, and travel, allowing users to accumulate points for upgrades, unlocking privileges such as priority delivery and free dishes. Aims to enhance transaction frequency and cross-selling efficiency through cross-scenario benefits, with plans to expand to more categories in the future.

1. Emerging Businesses and Overseas: Optimized the supply chain through "Meituan Preferred" and "Little Elephant Supermarket" formats, launched an "Export to Domestic Sales" section in Q1, helping foreign trade enterprises expand into the domestic market, covering categories such as beauty and food.**

2.2 Q&A

Q: Does JD's 10 billion yuan takeaway subsidy measure have an impact on Meituan's order growth?

A: The industry's high-intensity subsidies have catalyzed demand in certain categories (such as milk tea, coffee, and other price-elastic beverages). Meituan saw strong growth in beverage categories from April to May, while other food categories remained stable. At the same time, we noticed a conversion of medium-frequency users to high-frequency users, and these core users have a high repurchase rate.

Current competition in the industry is somewhat irrational and a bit cutthroat. Some subsidies are irrational and may be accompanied by low quality, making such measures unsustainable.

Competitors have experienced system failures and delivery delays due to subsidies, while Meituan, relying on its mature delivery network and system stability, has not seen a significant negative impact on order volume, but instead has strengthened user stickiness through quality service.

Q: How does management assess the current changes in the competitive landscape of the takeaway industry?

A: The entry of new players confirms the market's growth potential, and competition will drive the overall development of the industry (especially instant retail). However, the current irrational subsidy competition characterized by low quality and low prices is unsustainable and will ultimately return to a fundamental competition among "consumers - merchants - delivery networks." As an industry leader, Meituan is confident in winning long-term competition due to its scale effects and delivery network advantages.

Q: After Alibaba launches a similar 10 billion yuan subsidy plan, will Meituan adjust its subsidy strategy?

A: In the short term, we will invest "at all costs" to consolidate consumer mind share and flexibly adjust strategies to respond to competition. In the long term, we do not agree with a model that relies solely on subsidies, believing that the industry should shift towards supply-side innovation and user experience competition. Meituan will not blindly follow irrational subsidies.

Q: What specific measures will Meituan take to respond to the new competitive environment?

A: Supply-side innovation: Assist small and medium-sized merchants in customer acquisition and innovate supply models for brand restaurants (such as satellite stores and community stores). Optimize products like "Pin Hao Fan" to enhance merchant order volume and consumer cost-performance experience.

User experience enhancement: Rely on the industry-leading delivery network and system to ensure service stability and avoid competitors' experience shortcomings.

Ecosystem synergy: Improve marketing efficiency and enhance core user stickiness; help merchants reduce ineffective marketing burdens and optimize the online operating environment.

Industry advocacy: Call for a resistance to excessive subsidies and promote the industry's transition to rational, quality-driven growth.

Q: What impact does the change in market competition have on Meituan's overall profit growth this year?

A: Short-term impact: Q2 core local business revenue growth is expected to slow compared to Q1, with operating profit significantly declining year-on-year, and there is volatility in the financial performance for the entire year. Due to the uncertain duration of competition, we cannot provide accurate financial guidance, but we will continue to invest to defend our market share.

Long-term impact: After the end of irrational competition, Meituan's scale effects and ecosystem synergy will steadily improve the profit margin of core local business transaction amounts (GDV) to a reasonable level. Regulatory authorities may intervene to curb unhealthy competition, which will be beneficial for the industry to return to sustainable development in the long runQ: What is Meituan's strategy for expanding more categories after the brand upgrade of Meituan Flash Purchase? How is Meituan progressing in the expansion of high-ticket items such as consumer electronics and home appliances?

A: Focusing on "30-minute delivery for everything," Meituan attracts young users through strategic marketing activities, with peak daily active users reaching nearly 6.5 million in the early stages, over 50% of whom are post-95s. In terms of categories, it integrates food (fresh produce) and non-food (3C home appliances, beauty products, etc.), launching a Service Guarantee Plan (such as half-day delivery for home appliances and seven-day no-reason returns).

Ecosystem Cooperation: Collaborating with leading brands like Midea and Philips to drive growth across all categories through marketing activities such as "618."

Q: What is the progress of Instamart?

A: Over 30,000 stores, including 10,000+ convenience stores, covering all categories, with increased density in lower-tier markets. As of the first quarter, Meituan Flash Purchase has over 500 million transaction users, with post-90s accounting for 2/3, showing increased stickiness and frequency. Leading brands in supermarkets and small home appliances are accelerating their integration, and categories like trendy beverages are entering a period of rapid growth.

Q: How is Meituan progressing in the expansion of high-ticket items such as consumer electronics and home appliances?

A: 3C home appliances (significant growth in order volume in the first quarter, breakthroughs in large home appliances, overall order growth in non-food categories exceeding 60%; order volume for young consumers' clothing far exceeds expectations, with high-ticket categories becoming a growth highlight.

Collaborating with home appliance brands to launch "half-day delivery + installation" services, customizing exclusive delivery and customer service for high-value products; in the first quarter, five leading brands including Midea and Philips were introduced to open instant supermarkets, forming a "high-quality supply + incremental revenue" win-win ecosystem; through services like "seven-day no-reason returns" and "30-minute delivery for old-for-new," the purchase threshold for high-priced products is lowered.

Q: Can management elaborate on the recently announced plan for a 100 billion yuan takeaway subsidy promotion over the next three years?

A: Core Objective: Through a 100 billion yuan investment over three years, promote growth in the takeaway industry, improve supply quality, and optimize the merchant operating environment, with measures including:

Empowering Merchants: The first phase of the 1 billion yuan "Merchant Support Fund" has benefited over 180,000 merchants (as of April 2025), covering small and medium-sized merchants, community stores, lower-tier markets, and chain brands, with funds used for online operation optimization, product innovation, and equipment upgrades.

Improving Supply Quality: The "Brand Satellite Store" model helps over 480 brands open 3,000 stores, with AI-driven site selection and traffic support enabling revenues to reach 2-3 times that of traditional stores; promoting the "Bright Kitchen, Bright Stove" plan, with over 100,000 participating merchants expected by the end of 2025, allowing consumers to watch the food preparation process in real-time, enhancing food safety.

Stimulating Consumption: Incentivizing users through Meituan membership "Super Member" products to increase order volumeQ: What are the latest developments, expansion plans, and annual promotion rhythm of the rider pension insurance pilot project launched by Meituan?

A: As of April 3, 2025, the project has been launched in Nantong and Quanzhou, covering all riders in both cities. By early May, the first batch of riders had received cash subsidies and positive feedback from local human resources and social security departments. The subsidy plan provides a 50% premium subsidy for riders whose monthly income reaches the local social security contribution base minimum and who meet the standard for 3 out of the last 6 months. The plan fully respects the flexibility of the new economy, allowing riders to freely decide their working hours and workload. There are no preconditions, no restrictions on the riders' social security insurance location, no set working hours or order quantity requirements, and no differentiation based on delivery types.

In 2025, the plan is to expand the pilot to more cities and continue optimization, leveraging network efficiency and order density improvements to offset the incremental costs of insurance through cost savings. Previously, the occupational injury insurance pilot covered 7 provinces and 7 million riders, providing 1.5 billion yuan in protection.

Q: What are the latest developments of Keeta in Hong Kong and Saudi Arabia? What are the company's core competitive advantages in these regions? Why did the company previously mention a short-term focus on the Middle East but recently announce entry into the Brazilian delivery market? What are Keeta's regional expansion plans and new market selection criteria? Given that the scale of overseas markets is not as large as China, what is the company's overall planning and long-term goals for these overseas businesses?

A: Hong Kong: Launched in May 2022, it aims to become the largest delivery platform locally by 2024, with continuous growth in order volume, average order value, market share, and the number of partnered restaurants and riders. Saudi Arabia: Set to launch in September 2024, it has covered all 9 cities with a population of over one million and plans to further expand to more cities.

Core Competitive Advantages: Leveraging Meituan's ten years of experience in food delivery, it possesses a globally leading order scheduling system (optimized by machine learning) to achieve efficient delivery and user experience. It can replicate China's mature food delivery operation model, including merchant cooperation, rider management, and localized services.

Brazilian Delivery Market: Brazil has a vibrant economy with a population of over 200 million, and its delivery market ranks among the top five globally. The strategic partnership between China and Brazil provides a favorable environment for investment. Meituan's technological capabilities can quickly adapt to new markets, seizing growth opportunities through Keeta's system and experience. The plan is to invest $1 billion in building a delivery network within five years.

New Market Selection Criteria: Entering a new market requires consideration of various factors, including the current market size, potential size, growth potential, and market structure. Each time a market is entered, it must ensure it can become the first or second player; otherwise, it is not meaningful. Additionally, it is necessary to collaborate with numerous local partners and pay close attention to the regulatory framework and overall business environment of the target market.

Overall Planning and Long-term Goals for Overseas Businesses: Internationalization is a long-term strategy. Through technology output and localized operations, Keeta aims to become a globally leading platform, not limited to food delivery but encompassing the entire instant delivery sector. In the short term, the focus is on expanding market share in Saudi Arabia, Brazil, and other markets, allowing for phased investments;Long-term realization of scale effects and profitability in major global regions (Middle East, Latin America, etc.) has become the company's growth curve, replicating the path of increased penetration rate of food delivery in China.

Q: In the face of increased overseas expansion investments and domestic food delivery competition, will the company adjust the business strategy and investment scale of Meituan Preferred to balance overall profitability and cash flow? What are the priorities and strategies for the company's capital allocation? Will the stock repurchase plan be suspended due to increased overseas investments?

A: Adjusting business strategy: Continuously and comprehensively review capital allocation strategies, balancing core local business cash flow, new business resource needs, and shareholder returns, and formulate an optimal annual capital deployment plan. In the face of competition, the core local business will still generate strong cash flow to support the expansion of fresh retail business.

Capital allocation: New businesses are in the growth stage, and each business unit has independent KPIs, requiring dynamic assessment and adjustment of strategies. Meituan Preferred, as part of the fresh strategy, focuses on the potential of the Chinese market, requiring differentiated solutions due to market fragmentation. High-tier markets establish brands through the "Little Elephant Supermarket" front warehouse model and the "Meituan Flash Purchase" platform model; low-tier markets test potential and validate models with Meituan Preferred. At this stage, the focus is on replicable models to validate unit economics rather than blind scale expansion. Therefore, the overall loss of Meituan Preferred is currently within a controllable range.

Stock repurchase: In terms of capital allocation, shareholder returns are primarily channeled through stock repurchase, with the basic goal of offsetting ESOP share dilution. On this basis, suitable market windows will be sought to further reduce the number of circulating shares.

Q: What is the progress of Meituan's AI large language model? What are the R&D expenses and time planning for related applications?

A: The foundational model LongCat continues to upgrade, supporting seamless switching between reasoning/non-reasoning modes, with performance reaching a leading level in China; the recently updated voice interaction model LongCat-S performs close to GPT 4.0, capable of understanding emotions and context to achieve natural conversations. The company will continue to invest in large language models, including computing power infrastructure and top talent recruitment, to ensure a leading technology team;

External applications: In June, the "Kangaroo Advisor" AI assistant will be launched, focusing on four major scenarios for catering businesses (dish selection, new store location, human resource management, store operation), promoting the industry's shift from experience-driven to "AI + data" decision-making, reducing merchant risks and enhancing growth;

Internal applications: Developing internal AI tools (i.e., "Office Efficiency Layer AI") to enhance employee productivity and workplace experience is a core priority of the AI strategy.**The company is actively promoting the internal adoption of AI coding. Currently,52% of the company's new code is generated by AI, and over 90% of members in some R&D teams use AI programming tools, with the goal of achieving full coverage for all engineers.

No-code platform: A no-code platform has been launched for all employees, which has been widely applied internally. It allows users to quickly generate applications through natural language conversations without the need for programming experience. Currently, all professional positions within the company, including 62% of product managers and 28% of business analysts, have used the no-code platform internally.**

Last week, it also launched a no-code platform for free to the public, with the website nocode.cn. Users can turn various creative ideas into reality without any programming skills. On the nocode.cn platform, users have created 9,410 applications, of which more than 1,600 have been published and put into use, assisting small and medium-sized businesses in their digital transformation.

In the long run, Meituan's unique advantages lie in its diversified consumption scenarios, rich offline service supply, and strong fulfillment capabilities. It will continue to delve into AI foundational research and application, relying on technology to support the mission of "helping everyone eat better and live better."

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