Meituan Cautions on Market Uncertainty as Competition in Instant Retail Intensifies

Chinese food delivery giant Meituan reported a strong 46% year-on-year jump in net profit for the first quarter but warned that heightened rivalry in the instant retail space could weigh heavily on second-quarter results.

On a post-earnings call, CEO Wang Xing told analysts that predicting financial performance for the rest of the year was difficult due to the dynamic nature of the market.

“With competition heating up, short-term financial fluctuations should not come as a surprise,” Wang noted.

Rising Competition in Fast Delivery

The battle in instant retail — where orders are delivered within an hour — has been escalating. In recent months, JD.com has stepped into Meituan’s core food delivery territory, while Alibaba, through its Ele.me platform, has been ramping up its own instant retail efforts.

Both JD.com and Ele.me have pledged 10 billion yuan ($1.39 billion) each in sales subsidies, aimed at gaining a larger slice of the growing market.

“Everyone seems eager to throw 10 billion yuan into this competition,” Wang remarked, adding that Meituan is prepared to commit 100 billion yuan over three years to innovate and strengthen its supply chain.

Margin Pressures and Regulatory Challenges

While Meituan holds an estimated 70% share of China’s food delivery market, analysts at Morningstar believe that retaining this dominant position could come at a cost. The fierce competition may lead to shrinking profit margins, especially as the company increases its investment in promotional strategies.

Adding to the pressure, China’s State Administration for Market Regulation is in the process of drafting new rules regarding how major platforms like Meituan, JD.com, and Alibaba charge merchants.

“It’s up to regulators to curb irrational subsidy wars,” Wang said. “But as long as the fight continues, we’ll stay in and do what it takes to win.”

Financial Results and Global Expansion

For the quarter ending March 31, Meituan posted 86.6 billion yuan in revenue, up 18.1% year-over-year — surpassing expectations from analysts polled by LSEG, who projected a 16.5% increase.

Meituan also recently announced a $1 billion investment over five years to support its international expansion, including its Keeta app’s entry into Brazil. Keeta is already active in Hong Kong and Saudi Arabia.

Beyond its core business, Meituan is investing in emerging technologies like drone-based delivery systems and artificial intelligence. The company has committed to investing billions of dollars in AI development to stay competitive in the tech-driven delivery ecosystem.