Yesterday (26 May) after (Hong Kong) market closed, Meituan released its Q1 2025 results.
The market has been in jitters about Meituan, because of intensified competition with JD.com and Alibaba in food delivery and quick commerce in China, as well as uncertainty with Meituan’s investments into international expansion.
Adding to the anxiety of investors is a story that the regulators voiced concerns over the competition in food delivery, sending Meituan’s share price down by more than 5% on the trading day prior to the earnings release.
In our opinion, the Q1 results were solid if not stellar. Revenue increased 18.1% YoY to reach RMB86.6 billion. Commission of new businesses increased by 85.4%, while operating profit of the group doubled.
The Q&A section of the earnings call this time was very interesting, as founder Wang Xing and CFO Chen Shaohui addressed a few key topics: competition, international expansion and AI, extensively.
We have taken some notes, and added some thoughts below on these topics:
- Competition:
In short, Wang Xing pledges to “take all necessary measures to win this war”. The fact that every competitor invests 10s of billions of RMB into this fight, in Wang Xing’s words, demonstrates the “massive market value” the winner will be able to capture, and Meituan “is determined to be that market winner”.
The intensive subsidies in April and May drove significant order volume growth especially in high frequency categories such as milk tea and coffee. Wang Xing believes that while in the short term investments are needed to defend Meituan’s ‘consumer mindshare’, in the long run subsidies will recede, and consumers will choose the platform that offers “largest selection, best experience and reliance services”.
Wang Xing also brought up the regulators, saying that their role is “to stop irrational and unhealthy subsidy wars”, whilst Meituan’s responsibility is “to win this war within the boundaries that regulators allow”.
Momentum Works has argued that compared to all the buzz JD created in food delivery, Alibaba’s foray into quick commerce represents a bigger threat to Meituan. Over the years, Meituan has won ‘wars’ against almost all tech giants in China, with the only exception of community group buy, where it is still behind Pinduoduo. Wang Xing’s confidence has some good ground, if he could steer the organisation as he has done in the past.Quick commerce/Instashopping:
CFO Chen Shaohui explains that “Meituan Instashopping represents an innovative supply model”. Currently there are more than 30k Meituan instashopping stores, covering “all categories”.
In addition to flowers, fruits and fresh food which are ‘naturally suitable’ for quick commerce, Meituan is also creating demand in low frequency categories including digital devices, consumer electronics, beauty and personal care, and even fashion. In Q1 non-food order volume grew more than 60%.
Amongst 300 million transacting users of Instashopping in Q1 2025, more than ⅔ were born after 1990. “The number of fashion orders from young consumers far exceeded our expectations, indicating that quick commerce has become an important channel to satisfy diversified consumption needs, and a trusted lifestyle choice for the younger generation.”
Momentum Works believes that in addition to the convenience to the consumers, quick commerce also has the ability to transform retail and offline commercial real estate. Would brands prefer to add fulfilment capabilities from their existing stores, or put their goods into JD warehouses?Keeta/international expansion:
In international expansion (with Meituan’s subbrand Keeta), Wang Xing said the core focus is to “deepen the penetration in Saudi Arabia, while preparing for a large-scale roll out in Brazil”.
On 22 May, Keeta celebrated two year anniversary in Hong Kong. Wang Xing explained that Keeta had become the largest food delivery platform in Hong Kong. Whilst in Saudi Arabia, Keeta has covered all the 9 cities with a population >1 million.
Wang Xing explained the rationale behind the plan to enter the Brazilian market with a US$1 billion investment commitment. “We evaluate every opportunity carefully. The decision to enter a new market is based on a comprehensive analysis of factors including the market size, potential, market landscape.”
He added that Keeta needed to become market number 1 or 2 in any new market it enters, otherwise it will “become meaningless”. In that context, Keeta needs to work with a lot of local partners, therefore “we care a lot about the regulatory framework and overall business environment in the target market.” To use Brazil as an example, Wang Xing emphasised that “the long-lasting strategic partnership between China and Brazil is critically important.”
This basically validated Momentum Works’s thought that the good relationship between the two countries is a key deciding factor of Meituan’s entry to Brazil. (Watch/listen to our latest podcast Why is EVERY Chinese company going to Brazil?). Wang Xing said that Meituan believed “Investment of Chinese companies in Brazil will be welcomed by Brazil’s consumers and local businesses”.
How to win in Brazil and other markets? Wang Xing believed that a key winning factor was “a world leading system” that “handles over 20 million orders every day”. Meituan’s plan is, through Keeta, to adapt these “core capabilities”, including “technical knowhow and operational experience” into other markets.
Wang Xing also said that in many markets, food delivery is only a service to a selected segment of consumers with “occasional convenience”. But with Keeta’s capabilities, the penetration and frequency in these markets will “significantly increase”.
It seems that Meituan is encouraged by Keeta’s first two years’ performance. Incumbent players in all these markets have better margins than Meituan has in China – which is a strength or more of a vulnerability?
Also, if you read the words of Wang Xing in the earnings call, you can also basically understand why Southeast Asia is not an immediate focus of Keeta. Nonetheless, it is worthwhile for incumbents in non-Keeta markets to watch very closely how Keeta adapts their capabilities in Saudi Arabia and Brazil.AI investment:
Wang Xing re-emphasized that Meituan’s AI initiatives are concentrated in three areas: 1) AI infrastructure; 2) AI adoption in products; and 3) AI adoption in business operations. “We have achieved good progress in all three areas”.
1) In the last quarter, Meituan improved its self-developed LongCat LLM, whose Chinese name 龙猫 means “Dragon Cat”. Wang Xing said LongCat’s performance in context, emotional intelligence and voice conversations is ‘approaching the level of GPT-4o’.
2) Meituan is also using AI to help F&B businesses optimise and transform. In June, Meituan will launch a decision assistant to help F&B businesses in four core use cases: dish selection, new store location selection, menu development and store operations.
“This innovation indicates that decision making in the F&B industry has evolved from ‘experience driven’ to ‘AI+data driven’, enhancing business growth while reducing operational risks for merchants.”
3) Inside Meituan, 52% of new codes are now generated by AI. In certain engineering teams, more than 90% of coders are already using AI for coding extensively (the goal is 100%).
Meituan’s own NoCode platform allows users to generate applications using natural language without any coding experience. It is currently used by “62% of product managers and 28% of business analysts”.
Last week, Meituan opened up its NoCode platform (nocode.cn) to the public, a move which Wang Xing believes will “support small and medium sized merchants achieve digital transformation in the AI age”. He also unveiled that users have created 9400 applications on the platform, with 1600 already in active use.
Meituan’s focus on AI seems to follow the same methodology it has adapted in all other areas: relentless focus on efficiency gain, in its own operations as well as in transforming the supply.
Most markets globally have less competitive pressure on the supply side, which could become opportunities for Keeta, if it is able to truly build a (culturally) global organisation.
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