MEITUAN’S quarterly revenue climbed 23 per cent, a sign that it’s making headway in efforts to fend off a challenge from ByteDance’s Douyin in China’s meal delivery arena.
The company reported sales of 73.7 billion yuan (S$13.8 billion) in the December quarter, versus the 72.7 billion yuan average projection. Net income was 2.22 billion yuan, also better than a consensus of estimates compiled by Bloomberg.
Meituan, for years the dominant player in a mammoth Chinese food delivery market, is now exploring international expansion because of a slowdown back home. Its shares are up this year, after losing more than half their value in 2023.
In February, billionaire founder Wang Xing took over the company’s overseas businesses, which for now are centreed on the fledgling KeeTa app – already the No. two service in Hong Kong by some measures.
Meituan joins a growing wave of Chinese consumer brands now dabbling abroad because of a weak rebound in Chinese consumption after years of strict Covid controls.
“Gross transaction volumes (GTV) of Douyin’s comparable business surged more than threefold last year, according to the short-video platform on Jan 1. This rate of increase probably exceeded Meituan’s, which stopped disclosing GTV from March 2022, suggesting market-share loss for the deliverer last year,” Catherine Lim, analyst of Bloomberg Intelligence said.
“Amid lingering consumption weakness on the mainland so far this year, Meituan will likely cede more margin gains in 2024 to curb further market-share loss. Meituan’s surplus cash, coupled with the absence of M&A or overseas expansion plans like Alibaba or PDD, raises the likelihood that it will return more cash to shareholders this year.”
The company, which grew into a meal delivery leader with backing from Tencent Holdings, is also contending with video platform Douyin and a potentially renewed challenge from Alibaba Group Holding’s Ele.me.
It’s spending heavily to protect its user base from new entrants, sapping margins. The Beijing-based company has been relying on its familiar subsidy-heavy strategy to draw in merchants and users despite the economic malaise.
Meituan is also getting involved in the artificial intelligence contest, first by acquiring generative AI firm Light Year and then by backing high-flying startup Moonshot via its investment arm Long-Z.
The company has ramped up investments in past years in newer initiatives such as grocery retailing, group-buying and live-streaming. It held talks with Delivery Hero SE about potentially acquiring the Foodpanda business in South-east Asia, though those discussions ultimately went nowhere. BLOOMBERG
