At Meituan’s Beijing headquarters, managers meet weekly to run a crucial exercise: estimating how much their rivals will burn on ecommerce delivery subsidies — and how aggressively they must respond.
Fierce competition from tech giants JD.com and Alibaba for China’s fast-growing instant retail market this year has resulted in a brutal subsidy war where Meituan has rushed to bankroll coupons for burgers and sugary drinks to defend its dominance.
Goldman Sachs analysts estimate that Meituan will lose on average about Rmb1 for every instant delivery order this year, helping to push it to a third-quarter loss of Rmb16bn — its largest since going public in 2018.
“It’s been an expensive year,” said one executive. Inside Meituan, the domestic onslaught has sparked debate among senior leadership and investors over whether the company can continue funding its overseas expansion, according to several people familiar with the matter.
Alibaba’s resurgence has shifted the balance. Emboldened by advances in artificial intelligence and the public rehabilitation of founder Jack Ma, the group has mounted its most serious attempt yet to disrupt China’s $2.2tn ecommerce market.
In April, Alibaba relaunched its ecommerce division, rolling out a rapid-delivery service inside its ubiquitous Taobao app. To turbocharge growth, it pledged to spend $7bn on subsidies to lure shoppers, blanketed cities with advertising campaigns, and embarked on an aggressive recruitment drive for couriers.
The impact has been rapid. Alibaba’s food delivery merchant app now has about 80 per cent of the number of daily active users of Meituan, compared with about half at the beginning of the summer, according to Bernstein analysts.
“Many people assumed Meituan had built an impregnable moat — the broadest network of delivery drivers and restaurant partners — that would be almost impossible to disrupt,” said Robin Zhu, internet analyst at Bernstein. “This year has shown the moat doesn’t exist. Disruption isn’t impossible — just extraordinarily expensive.”
If the subsidy war drags on, Bernstein estimates that Meituan’s cash on its balance sheet will fall to Rmb74bn next year, down from Rmb110bn in 2025. Alibaba’s deeper pockets, with Rmb574bn in cash, give it room to keep pressing its advantage next year.
Meituan’s share of the instant-delivery market is forecast to fall from 73 per cent in 2024 to 55 per cent by 2027, while Alibaba’s will rise from 21 per cent to 40 per cent in the same period, according to research by Morningstar.
But Chelsey Tam, senior equity analyst at Morningstar, said she expected Meituan to maintain its leadership position and return to profitability once the subsidy war subsided. “The market is being too pessimistic on Meituan. It has a strong record,” she said.
Alibaba’s renewed fight comes as it pushes to become China’s leading “everyday app” for transactions across goods and services.
“Alibaba wants to weave together the entire consumer internet — what you buy, where you go, what you search for — into a single integrated ecosystem,” Zhu said. “With that, it can cross-sell everything from takeout meals to travel bookings and fashion.”
The ecommerce giant’s challenge extends beyond food delivery. Meituan’s popular Yelp-like app, Dianping, is facing strong competition from Alibaba’s mapping and navigation service, Amap, China’s fourth most-used app with 890mn monthly active users.
Amap now offers restaurant and store recommendations based on footfall data — harder to manipulate than the user reviews Dianping relies on. Consumer trust in Dianping was recently hit by paid posts from restaurants and clubs, according to analysts.
Li Chengdong, founder of ecommerce consultancy Haitun, said the domestic fight would inevitably affect Meituan’s international ambitions. “The Chinese market is saturated, so Meituan was looking abroad. Now it is forced to defend its position at home.”
Meituan’s overseas expansion has shown early signs of traction. Within six months of launching in Hong Kong, it overtook Deliveroo — which subsequently exited the market — and its user base is now twice that of the previous incumbent, Foodpanda, according to Bernstein estimates.
In Saudi Arabia, where Meituan launched in September 2024, it has already surpassed the second-largest player and is rapidly closing in on Hungerstation, the leader.
The company recently launched in Brazil, a market that industry insiders warn is tougher because of stronger existing players and the presence of the Chinese tech group DiDi, which has already launched a food delivery service.
It is also assessing markets traditionally difficult for Chinese tech groups to enter, such as the UK and US, where regulatory scrutiny and strong incumbents pose significant barriers.
Earlier this year, Meituan joined a bidding process for UK delivery company Deliveroo but withdrew after concluding the deal risked being blocked by Westminster, according to three people with direct knowledge of the matter. Instead, it has now opted for a less capital-intensive entry by rolling out mobile charging stations across London — a test bed for operating a new business in the UK.
In the US, Meituan has backed Peppr, a spin-off that licenses restaurant-management software, as a preliminary step to understanding the American market.
At home, staff morale had deteriorated, according to two people familiar with the matter.
Months of overtime and weekend work have become routine as teams deploy new rounds of subsidy campaigns — each requiring engineering support and co-ordination with restaurants. International teams are stretched across multiple time zones as they juggle founder Wang Xing’s global ambitions with the competition at home. Meituan declined to comment.
The gloom has been deepened by Meituan’s listless share price, down more than 30 per cent this year — a stark contrast to the rebound enjoyed by other Chinese internet stocks. “It’s been a terrible year,” one employee said.
Additional reporting by Arash Massoudi and Ivan Levingston in London
