In the second quarter, Meituan avoided the sweeping organizational changes that marked the start of the year. Instead, in an internal letter issued by CEO Wang Xing on August 23, Meituan focused on refining and consolidating previously scattered initiatives into three distinct segments: hardware and software services, food and grocery retail, and Keeta. Essentially, the letter aimed to clarify the roles and positioning of each business unit.
Overall, the latest quarter was one where Meituan began delivering results from previous major changes. Before the earnings report, investors had voiced concerns about competition in the in-store business, losses in new business, and food delivery demand—all of which showed positive responses.
The highlights this quarter were the record profit margins in Meituan’s core local commerce segment and a sharper-than-expected reduction in losses for new business. While core local commerce profits had improved in the first quarter, they remained below peak levels. However, in the second quarter, profit margins reached a historical high of 25.1%. Meanwhile, losses in new business narrowed from RMB 5.2 billion (USD 731.3 million) a year earlier to RMB 1.3 billion (USD 182.8 million), far exceeding market expectations of RMB 1.8–2.1 billion (USD 253.1–295.3 million).
Competitively, this quarter saw Meituan refining its strategy while the intensity of rival competition diminished. Whether by choice or circumstance, Meituan has stepped back from being combative, focusing instead on internal efficiency and profitability. Wang once remarked that, during tough times, one must be more courageous and diligent. That sentiment remains relevant. While some companies continue to push forward aggressively, Meituan is finetuning its operations.
Last quarter’s surprise was the growth in on-demand orders, but this quarter was more subdued. Total on-demand orders reached about 6.2 billion, a year-on-year increase of 14.2%, roughly meeting expectations. On the earnings call, it was noted that the revenue growth rate for on-demand deliveries outpaced the order growth rate, indicating that the impact of declining per-order revenue from Pinhaofan had eased. Pinhaofan accounted for around 11% of total orders in the second quarter, with its supply gradually shifting from smaller merchants to branded ones.
Meituan’s resilient performance also showed in its stock price. By the midday close on August 29, the Hang Seng Tech Index (HSTECH) dropped 0.61%, but Meituan defied the trend, rising over 9% and standing out.
Finding its identity
Reducing new business losses has been Meituan’s north star this year, with Youxuan playing a key role. In the second quarter, Youxuan’s loss ranged from RMB 1.6–2 billion (USD 225–281.3 million), while other new businesses such as Xiaoxiang Supermarket and Kuailv have begun scaling profitability.
Previously, competition with Duoduo Maicai had been a significant factor for Youxuan, with both companies locked in a prolonged market share battle. Now, however, Youxuan is redefining its identity and positioning. A source close to Youxuan told 36Kr that Meituan’s core users are less sticky than Duoduo’s—strategically, Meituan is paying attention to its competitor, but tactically, it’s differentiating itself.
Youxuan has begun consolidating central warehouses, improving product quality and markup rates, and closing inefficient groups. On one hand, it’s moving away from the fixation on scale, while on the other, it has sought to focus on quality to differentiate itself from Duoduo Maicai. According to 36Kr, Youxuan’s summer campaign this year focused on developing high-quality groups and new high-quality products. The team’s main focus during this period has been on closing inefficient groups, strengthening the appeal of branded products, and incubating differentiated products.
The number of central warehouses in Youxuan has notably decreased, and since May, a large number of white-label products in the snack and non-food categories have been removed from the platform as part of governance efforts. Some regions in southern China have already seen signs of positive unit economics.
Meanwhile, after achieving profitability, Duoduo Maicai has shifted its focus back to market share. According to LatePost, Duoduo Maicai pivoted from prioritizing profit to pursuing growth in June, lowering prices and increasing subsidies while maintaining profitability, aiming for gross merchandise value (GMV) growth and greater market share.
To some extent, Youxuan’s strategy in the second quarter could be seen as a calculated step away from direct competition with Duoduo Maicai. The two seem to have formed a tacit understanding. However, Duoduo’s pivot raises the question of how committed Youxuan will remain to its current path. A source close to Youxuan noted that, under the company’s loss-reduction measures, user numbers in some regions have dropped significantly. But, according to the source, “sacrificing scale is inevitable,” with a more important focus being on increasing repurchase rates and strengthening penetration in weaker categories.
Beyond loss reduction, the strong growth of Xiaoxiang Supermarket and Kuailv helped new business revenue exceed expectations this quarter, reaching RMB 21.6 billion (USD 3 billion), surpassing forecasts by RMB 1.1 billion (USD 154.7 million), and marking a year-on-year increase of 29%.
Will the in-store reversal continue?
Last quarter, the battle between Meituan and Douyin in the in-store segment showed signs of cooling—Douyin’s internal focus had shifted toward commercialization, while Meituan quietly raised its commission rates. In the early quarters of their battle, Meituan’s commission revenue growth outpaced its advertising revenue growth. However, in the first quarter of this year, advertising revenue growth surpassed commission growth, suggesting that the competition over merchant ad budgets had calmed.
The conflict has shown signs of easing further. In its latest report, Goldman Sachs described Meituan as holding a leading position in the food delivery and in-store markets.
Meituan’s approach to managing its business development team reflects this shift. During intense competition, Meituan’s catering department brought key accounts and small- and medium-sized clients under direct BD management, significantly expanding its personnel. But, by May, the BD for smaller in-store clients had been outsourced to agents, reducing labor costs, according to 36Kr.
This quarter, commission and advertising revenue grew by 20.1% and 19.7%, respectively. While these figures may fall short of the more than 20% expected growth in in-store business revenue, it’s important to note that in-store and to-home performance are now reported together. Since to-home order growth was only 14.2% while in-store growth exceeded 60%, in-store revenue growth actually surpassed expectations.
Douyin had previously announced increased subsidies for its lifestyle services in July, raising investor concerns about Meituan’s in-store profit recovery. But profitability remains a priority. On July 1, Douyin raised commission rates for accommodation services from 3–4.5% to 8%, and for beauty services from 3–10% to 4–10%. If any new competitive shifts are in store, they may come from Douyin’s next strategy adjustments in lifestyle services.
During the earnings call, CFO Chen Shaohui discussed competition, noting that as the industry matures, major players will shift from growth driven by subsidies to growth focused on returns. Chen also emphasized that, while Meituan is closely monitoring its rivals, its strategy centers on its own development and strengthening its long-term advantages.
In community group buying and in-store businesses, Meituan’s battles with competitors may be winding down, but competition won’t stop. New challenges are on the horizon—where will they arise next?
At present, instant retail is gaining momentum—Meituan’s quick commerce business, Shangou, saw its order volume growth outpace food delivery by threefold. Daily order volume is expected to reach nearly 10 million this year. Xiaoxiang Supermarket’s sales grew over 30% in the first half of the year, and Taobao, JD.com, and Douyin Mall have all opened primary traffic channels for instant retail.
In Finite and Infinite Games, philosopher James P Carse distinguishes between finite games, which are played to win, and infinite games, which are played to continue. This perspective has profoundly influenced Wang, who views entrepreneurship as an infinite game—there is no endpoint.
In this light, Wang sees business not as a series of battles to win, but as a continuous journey of growth and adaptation. For Meituan, competition is like a sequence of challenges in an infinite game, where the goal isn’t just to conquer each one but to ensure the company’s long-term sustainability and evolution.
KrASIA Connection features translated and adapted content that was originally published by 36Kr. This article was written by Ren Cairu for 36Kr.