Meituan takes the initiative to strike

Author | Liu Baodan

Editor | Zhou Zhiyu

With the advantage of traffic, Douyin entered the local life field, causing Meituan to appear very passive for a while, and its market value plummeted by two trillion. Now, Meituan has finally started to take the initiative.

Recently, Meituan held a conference themed "Crossing the Cycle" for the catering industry in 2024, explicitly stating that it aims to help merchants operate in all scenarios. Wang Puzhong, the core CEO of Meituan's local business, mentioned that the catering industry is experiencing a major transformation unseen in thirty years, officially entering an era of deep cultivation where all brands and formats need to operate both online and offline, for dining in and delivery.

This is the first public appearance of Meituan's core local business department since its establishment. Essentially, after the establishment of the new department, the at-home business has bid farewell to solo operations and has become part of Meituan's overall local business strategy along with in-store services.

In recent years, the local life market has become increasingly turbulent. After Douyin successfully entered the online group-buying business, Meituan, known as the king of local life, faced external doubts and began to fight back through a series of organizational adjustments to regain its combat readiness. Operating in all scenarios is more like a bold move, indicating that Meituan is shifting from a defensive to an offensive stance.

If the result of the first round of the local life battle was Douyin successfully entering the field, this time, it's Meituan's turn to prove itself proactively.

A Unified Strategy

As the core business, Meituan's local business is undergoing unprecedented changes.

Meituan positions itself as a helper for catering merchants. Wang Puzhong stated, "We serve consumers, providing them with takeout, group buying, Dianping, restaurant searches, and reviews. For merchants, we play a role in helping them operate in all scenarios, which is our positioning."

According to Meituan's data, approximately 275 million people use Meituan to meet their dining needs every week. To better assist merchants in their operations, the merged local business department focuses on business synergy, which is the core of operating in all scenarios.

Firstly, in terms of business, Meituan is trying to connect catering with other services such as spas, massages, movie tickets, and bicycles; in terms of models, Meituan is considering takeout, in-store, and dining-in services as a whole. This is also the reason why Meituan integrated its in-store and at-home departments in February, making strategic adjustments from an industry-wide perspective.

Secondly, at the data level, Meituan is working on better integrating products and data, merging a lot of data together. In the future, the customer base on both sides, including merchants, brands, and stores, will be thoroughly integrated, managing operations on a "people" basis. Wang Puzhong expects that by next year when this meeting is held, the products will have already been released.

From the perspective of operating in all scenarios, Meituan's at-home and in-store services have new strategies.

In-store services are the main battlefield of local life competition, and the outside world is also paying attention to Meituan's every move. At the conference, Wei Wei, Vice President of Meituan and General Manager of Meituan's in-store catering business, publicly presented the "In-store Catering Operation Panorama" for the first time, breaking down new operational ideas from the aspects of operational infrastructure, marketing growth, and data assets.

Operational infrastructure refers to the two major platforms of Meituan and Dianping, the two main fields of dining in and delivery, the "Must Eat" list and the "Black Pearl" list, which are all the foundation of merchant operations; the core of marketing growth is the "321 Growth Model," with 3 live broadcast scenes including Meituan, Kuaishou, and Video Number, 2 distribution scenes mainly through Meituan Alliance and special price groups, and a marketing cycle refers to integrating both sides' marketing calendars, mainly achieving performance growth through marketing Data assets are very important accumulations for Meituan itself. In response to the "channel isolation" in the traditional retail industry, Meituan uses "Meituan Members" to connect various services such as hotel stays, dining, food delivery, and leisure activities. Users can use "Meituan Members" across these services, essentially connecting user groups and expanding marketing accordingly.

In terms of food delivery, as a lifestyle choice, its impact on consumers is increasing. In the first half of this year, the annual active users of Meituan's food delivery service have exceeded 500 million. This means that nearly half of internet users are food delivery users. For example, on August 7th, the peak daily orders for Meituan's food delivery service exceeded 98 million, approaching 100 million orders.

Xue Bing, General Manager of Meituan's food delivery business unit, mentioned that dine-in and food delivery share the same physical space, with significant differences in rent costs and user demands. To address this, Meituan introduced the "Satellite Store" model to tackle these differences from the supply side.

Similar to satellites orbiting the earth, "Satellite Stores" are small stores that can expand coverage around the main store, similar to front warehouses. Currently, more than 150 restaurant brands have opened over 1,000 satellite stores based on their dine-in operations. Xue Bing stated that brand satellite stores have become a new growth model for food delivery, rapidly expanding to more cities at a rate of 100 new stores per week.

The restaurant market is currently undergoing a transformation, with a significant decrease in average spending per customer, increasing operational challenges for restaurant businesses. In response, Meituan announced the upgrade of the "Flourishing Plan" to enhance business operations. For example, Meituan upgraded the "Brand Satellite Store" program with a commission rebate plan for restaurants, providing a 6 to 12-month commission refund.

This is the first time Meituan's local business has fully disclosed its operational strategy. With Meituan taking proactive measures, competition in the local life market is expected to enter a new round of escalation.

Future

Before Douyin entered the local life market, Meituan had been the king of local life for many years, with food delivery riders building a strong moat for Meituan. At its peak, Meituan's market value reached as high as 2.4 trillion, consistently ranking as the third largest internet company in China by market capitalization.

However, all of this was disrupted by Douyin. Since Douyin started focusing on local life, the core profit contribution to Meituan from its offline business was severely impacted. Meituan appeared powerless in its counterattack, leading the capital market to reassess Meituan's value. On January 17th, Meituan's stock price fell below its IPO price of HKD 69, wiping out 2.08 trillion RMB from its market value at its peak.

This was undoubtedly a huge blow to Meituan, prompting the company to realize its issues and embark on significant reforms.

In February, Meituan CEO Wang Xing announced a new organizational restructuring through an internal email. The main adjustments included the integration of the at-home business group, offline business group, Meituan platform, and basic research and development, all reporting to Meituan's Senior Vice President Wang Puzhong. Two months later, this department was collectively referred to as the Core Local Business, with Wang Puzhong appointed as CEO.

This is the first large-scale organizational and personnel adjustment by Meituan in three years, with the previously independent at-home and offline businesses now working together. A source close to Meituan mentioned that group buying and food delivery have a high degree of overlap on the supply side, meeting similar consumer needs through different fulfillment methods, making this integration somewhat expected From the results, it can be seen that Meituan's adjustments have already achieved results. On August 28, Meituan announced its second-quarter report for 2024, with the company achieving revenue of 82.25 billion yuan and adjusted net profit of 13.6 billion yuan, exceeding market expectations and receiving recognition from the capital market.

In particular, Meituan's core local business has shown significant profit growth. According to the financial report, in the second quarter, Meituan's core local business revenue increased by 18.5% year-on-year to 60.7 billion yuan, with operating profit of 15.234 billion yuan, a year-on-year increase of 36.8%, and an operating profit margin increase of 3.3 percentage points to 25.1%.

This means that Meituan has emerged from the darkest moments brought by Douyin, regaining the initiative for development.

The catering industry conference released an important signal that the integration of home delivery and dine-in services will be fully realized, including product supply, user behavior, and merchant operations, as Meituan is ushering in its version 2.0.

This is a significant turning point, representing Meituan's shift from defense to offense.

The local life market has undergone significant changes. Since the entry of Douyin, whether it is content platforms like Kuaishou and Xiaohongshu, or e-commerce platforms like JD and Alibaba, they have all started to focus on local life, forming a siege against Meituan.

Over the past decade, Meituan has successfully emerged from the fierce battles of group-buying and food delivery wars, establishing its position as the king of local life. Now, Meituan needs to once again prove whether it still has the ability to defend its throne.

A new round of warfare in the local life market has begun