Food delivery giant Meituan eats US$300 million in losses to chase ‘best opportunity in five years’ as community group buying heats up
- Fierce competition in China’s community group buying market took a toll, as Meituan swung to a loss in the fourth quarter
- Both revenue and profit were up in 2020 even as consumer spending shifted online because of the Covid-19 pandemic
Meituan, operator of China’s largest food delivery platform, beat fourth-quarter revenue estimates even as it swung to a loss in the three months ended December, as the company continues to invest heavily in its community group buying business, Meituan Select, and warned that there were more losses to come.
Revenue rose 35 per cent to 37.9 billion yuan (US$5.8 billion) in the quarter ended December, beating the estimated 36 billion yuan from a Bloomberg analyst survey and up from 28 billion yuan during the same period in 2019. The company posted a net loss of 2.2 billion yuan, swinging from a net profit of 26.96 million yuan a year earlier.
For the full year, revenue increased 18 per cent to 114.8 billion yuan in 2020, up from the 97.5 billion yuan it made in 2019, beating estimates. Net profit for the year rose to 4.7 billion yuan, up 110 per cent from 2.2 billion yuan in 2019.
Meituan co-founder and chief executive Wang Xing acknowledged that community group buying was a drag on profits, but emphasised the company’s commitment to the model, calling it a rare opportunity for growth.
“Let’s make it very clear, we are going to keep investing in Meituan Select, as community e-commerce is probably the best opportunity, once every five or 10 years,” Wang said during an earnings call. “It’s not common to get an opportunity to build new infrastructure for e-commerce.”