Meituan slides into loss in 'milk tea' subsidy war with instant commerce rival Alibaba

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China's food-delivery giant Meituan swung to a deep quarterly loss, as a costly battle with Alibaba Group Holding's instant commerce business eroded margins and kept revenue growth modest.

The Beijing-based company on Friday reported revenue of 95.5 billion yuan (US$13.3 billion) for the three months to September, up 2 per cent year on year, missing analysts' estimates of 97.5 billion yuan.

However, it booked an operating loss of 19.8 billion yuan, compared with a 13.7 billion yuan operating profit a year earlier.

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Net loss reached 18.6 billion yuan, versus a 12.9 billion yuan profit in the same period last year, which was wider than the 14.8 billion yuan loss expected by analysts.

The loss came after Meituan - a large player in the on-demand delivery sector - engaged in a brutal price war with Alibaba, wooing consumers with heavily subsidised milk tea and lunchboxes.

Alibaba's net income attributable to ordinary shareholders in the same quarter fell 52 per cent to 21 billion yuan from 43.9 billion yuan a year ago. Alibaba owns the South China Morning Post.

"In response to changes in industry competition, we continue to strengthen our core capabilities and maintain our leading position in the sector," Meituan founder and CEO Wang Xing said in a statement.

The company said pressure on profit was unlikely to ease in the short term: "Market competition has remained overheated ... we expect the operating loss trend to persist in the fourth quarter."

China's retail market is evolving amid Alibaba and Meituan's instant commerce war. Graphic: SCMP alt=China's retail market is evolving amid Alibaba and Meituan's instant commerce war. Graphic: SCMP>

Shares of Meituan dropped 1.4 per cent to HK$102.5 in Hong Kong on Friday.

Revenue in Meituan's core local-commerce segment - domestic food-delivery business and in-store business - fell 2.8 per cent to 67.4 billion yuan, with the unit posting an operating loss of 14.1 billion yuan, "due to the continuously intensifying competition in the food delivery sector", the company said in its filing.

Its new initiatives division - spanning grocery retail and the overseas delivery service Keeta - recorded 15.9 per cent revenue growth to 28 billion yuan, though the segment's operating loss widened 24.5 per cent to 1.3 billion yuan.

Keeta continued its global expansion this quarter, launching services in Qatar, Kuwait and the UAE, and beginning operations in Brazil at the end of October. Wang said in an earnings call that Keeta's Hong Kong business had turned profitable in October.

Meituan highlighted that daily active users on its app rose more than 20 per cent year on year, while annual transacting users surpassed 800 million over the past 12 months.

Wang said losses in the delivery business had "bottomed out" in the third quarter and described the price war as "a low-quality, low-level form of vicious competition" that Meituan had no intention of joining.

The company said subsidies across the sector had eased from the summer peak between October and November.

Meituan and rivals Alibaba and JD.com have been engaged in a fierce battle for China's instant commerce market, a model with a combination of on-demand online shopping and swift dispatch that delivers orders within an hour. Alibaba owns the South China Morning Post.

While Alibaba's revenue grew 5 per cent to 247.8 billion yuan, buoyed by a 34 per cent surge in its AI-driven cloud business, the investment in "quick commerce, user experiences and technology" continued to weigh on its bottom line in the quarter.

JD.com, which ignited the latest price war earlier this year with a heavy subsidy campaign, also reported a 55 per cent drop in net profit for the quarter.

Meanwhile, Alibaba touted solid results for Taobao Shangou, its instant commerce vehicle. Since October, losses per order for Taobao Shangou had halved compared with the results in July and August, when competition in the segment was at its peak, Jiang Fan, head of Alibaba's E-commerce Business Group, said on Tuesday.

By 2027, Meituan's share of the on-demand delivery market is expected to fall from 73 per cent to 55 per cent by gross transaction value, while Alibaba was projected to be the "main winner" as its share rises from 21 per cent to 40 per cent, according to a recent report by Morningstar analysts.

"China's food-delivery price war is returning to rationality," research firm Third Bridge wrote in a recent report.

It noted that as subsidies tapered off and logistics costs fell, Meituan's unit economics were expected to turn positive in the first quarter of next year, or by the second quarter at the latest.

This article originally appeared in the South China Morning Post (SCMP), the most authoritative voice reporting on China and Asia for more than a century. For more SCMP stories, please explore the SCMP app or visit the SCMP's Facebook and Twitter pages. Copyright © 2025 South China Morning Post Publishers Ltd. All rights reserved.

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