Food Delivery Giant Meituan Sinks Into The Red Amid Expansion Into Community Group Buying

March 27, 2021 10:25 am

Beijing (PingWest)- Meituan, China’s largest food delivery platform, has sunk into the red with a net loss of CNY2.24 billion for its fourth quarter ended Dec 31 as the company continues to invest heavily in community group buying business that relies heavily on subsidies.

In comparison, the company reported a net profit of CNY1.46 billion for the further quarter of last year.

The total revenue of Meituan rose 35 percent to CNY35.9 billion in the fourth quarter, its core business-food delivery booked quarterly revenue growth of 37% to CNY21.54 billion, accounting for more than half of Meituan’s total revenue.

Meituan Select, its community group buying unit, generated a revenue of CNY9.24 billion, representing 51.9% year-on-year growth.

Despite the heavy losses on community group buying, Meituan Co-founder and CEO Wang Xing still insist on the development of the group buying, calling it a very good opportunity for growth.

Looking ahead, Meituan warned that continued investment in group buying would likely lead to losses in future quarters.

Meituan Select enables communities to set up groups for bulk buying. In general. community group buying is a popular service in lower-tier cities.

Despite the strong growth anticipation, Meituan’s expansion has encountered some regulatory hurdles as China has placed tighter scrutiny to rein in the growing influence of tech giants.

Earlier this month, China’s market regulator fined Meituan Select, along with peers including Tencent-backed Shixianghui, Pinduoduo’s Duoduo Maicai.

Amid intense price competition in the market, Chinese regulator determined the companies has involved in improper pricing behavior that squeezed out competitors by manipulating prices, which is a violation of the country’s pricing law.