What has changed for Meituan after the restructuring?

The following is a summary of Meituan's first quarter financial report conference call in 2024. For financial report analysis, please refer to " Meituan after the surge: Has it truly regained its momentum? "

1. Review of Core Financial Information:

2. Detailed Content of the Financial Report Conference Call

2.1. Key Points from Executive Statements:

Recent Strategic & Business Developments:

① Food Delivery Business:

Healthy growth in the first quarter, closely cooperating with millions of merchants and brands. Providing traffic support and AI empowerment services to merchants, rapidly boosting new store business.

Introduced the brand satellite store model, focusing on the efficiency of well-known chain restaurants, providing high-quality delivery services without dine-in options.

② Instant Retail:

During the Spring Festival, there was an increase in consumers purchasing products and gifts through instant retail channels. Collaborating with high-quality brands and merchants to enhance sales of holiday gifts, daily necessities, and other categories.

In terms of the supply chain, with around 7,000 Meituan sites, accelerating online penetration in lower-tier markets. Annual active users approaching nearly 500 million, with a significant increase in transaction frequency.

③ In-store Hotel & Travel Business:

GTV in the first quarter grew by over 60% year-on-year, with annual transaction users increasing by over 37%.

Low-star hotels: Improved customer acquisition capabilities and room renovation solutions, enhancing operational efficiency.

④ New Business Initiatives:

Meituan Optimal Business: Optimizing warehouse operations and resource allocation, reducing user subsidies, significantly improving fulfillment costs, and reducing operational losses.

Others: Fast Donkey, Meituan Bike, power bank services, etc., made healthy progress in the first quarter, improving operational efficiency.

Successfully operated KeeTa in Hong Kong for over a year, drawing on experience and actively exploring overseas markets such as the Middle East, Europe, and Southeast Asia.

⑤ Future Outlook: Continuously adapting to macroeconomic environments and changes in consumer habits, refining products and operational strategies, providing diverse marketing tools and solutions, strengthening collaboration and integration among different business units through organizational restructuring.

2.2. Q&A Analyst Interactions

Q: In the recent restructuring, what operational changes have been made in the food delivery, hotel, and travel businesses? When can we expect to see the synergies brought by the restructuring? How will these effects be reflected in the revenue and profit margins of the core local business segment? How can these synergies be quantified?

A: We are optimizing the organizational structure to strengthen support and integration in the core local business segment. In the future, we will gradually introduce new operational measures with the goal of covering all categories and scenarios of local services, achieving a seamless solution from demand discovery to service completion, ensuring that each service can provide a high-quality and comprehensive experience. This restructuring is not just about merging hotel and travel businesses but more importantly, it will promote synergy between our main platform and infrastructure platform with core business, integrating demand and supply sides for more efficient operationsWe are exploring comprehensive marketing and operational solutions for merchants to enhance their marketing efficiency and transaction conversion rates. In addition, we are researching more systematic subsidy and promotion strategies to better meet the needs of users in different consumption scenarios. Starting from mid-May, we upgraded the membership program in some pilot cities, expanding member benefits from takeout to in-store, hotels, and travel services, with plans to gradually extend this program to a wider area. By integrating marketing activities and membership programs, we hope to strengthen cooperation with merchants and provide members with more diverse and valuable goods and services.

We believe that these synergies will help increase our revenue growth and profitability, although it will take several quarters to fully realize these potentials.

Q: What are the latest developments in takeout and Meituan Flash Purchase? Given the current macroeconomic environment and consumer sentiment, how should we predict the order growth and financial situation of these two major businesses in the second quarter and full year of 2024?

A: Despite the impact of the macroeconomic environment on demand, the business has maintained healthy growth recently. In the second quarter, with the advantage of no longer having a low base from last year, the year-on-year order growth rate is expected to return to normal levels, more accurately reflecting the current consumption situation.

Regarding the takeout business, we will continue to optimize services to adapt to diverse consumption scenarios, which is expected to drive the growth of medium to high-frequency users and increase purchase frequency. In the first quarter, the order growth rate of medium to high-frequency users has exceeded the average level. The promotion of the "Pinhao Fan" model will allow us to serve price-sensitive consumers more efficiently, with significant growth in user base and purchase frequency over the past few quarters.

As for Meituan Flash Purchase, the order volume is expected to be significantly higher than takeout in the second quarter and full year, possibly doubling. We believe that instant retail will continue to benefit from digital transformation, enriching product categories and quality through cooperation with more high-end brands and offline retailers to meet consumer needs in urgent situations such as travel. On the consumer side, we will convert more high-frequency takeout users into Flash Purchase users and increase their purchase frequency as promotions and platform supply improve.

In response to the macro environment, we will continue to adjust the takeout business strategy, with ARV expected to gradually return to normal in the second half of the year. We are confident in finding a balance between business growth and profitability, expecting healthy growth in operating profit in the second quarter and full year. With the strengthening demand for restaurant, retail, and brand advertising, we see further potential for advertising monetization. At the same time, we will continue to optimize subsidy strategies and achieve more operational efficiency as the business scales.

Q: How will consumer downgrading affect the growth of our in-store hotel and travel business? Can we maintain high GTV growth in the coming years? TikTok recently adjusted the organizational structure of local services, do we have corresponding strategic adjustments?

A: Despite consumers being more price-sensitive in the current economic environment, leading to a year-on-year decrease in the average order value of our hotel and travel business, local service demand remains strong. Young people are willing to allocate more budget for experiences and travel, and an increasing number of people are looking for discounts through online channels, which helps us enhance online penetration and drive business growth. Our platform covers over 200 categories, meeting the needs of different consumersWe will continue to optimize our services, provide competitive prices and diverse packages, and attract consumers through live streaming and special promotions. We have also adjusted our business model to better serve the needs of lower-tier cities.

As a market leader, we expect our user base and Gross Transaction Value (GTV) to maintain healthy growth in the coming years. With the maturation of industry competition, we believe that major players will shift from subsidy-driven to growth strategies focused on return on investment (ROI). We are focused on building long-term competitive advantages rather than just pursuing market share. On the merchant side, we provide comprehensive solutions to meet their diverse needs from daily operations to short-term promotions, and explore synergistic marketing strategies between takeout and dine-in to improve supply quality and operational efficiency. On the consumer side, we have tested comprehensive membership programs and optimized our intelligent recommendation system to better meet consumer needs.

Q: How should we predict the operating profit margin of the hotel and tourism business in 2024 and the medium to long term?

A: Looking ahead, we will continue to optimize our operational strategies, strengthen synergies with core local businesses, and enhance our recommendation algorithms to improve the performance of the hotel and tourism business. In 2023, we have strengthened our competitive advantages, and we expect strong growth in GTV in 2024. In the long term, with the introduction of new products and services, especially the online penetration in lower-tier cities, we expect GTV growth to exceed expectations. Despite profit fluctuations in the past few quarters due to seasonality and business model adjustments, we expect healthy growth in operating profit for the hotel and tourism business in 2024, and operational efficiency will gradually improve. We remain confident in the long-term revenue and profit potential of this business.

Q: The hotel and tourism business has performed well recently, but competitors are also growing rapidly. How do we view this competitive situation and what strategies have we formulated? Will our GTV be affected this year amid changes in the macroeconomic and consumer trends?

A: We recognize the tremendous growth potential of the hotel and tourism business, especially as consumer demand for experiential consumption continues to grow. They not only increase their travel budgets, but also demand more diverse experiences, bringing us rich opportunities.

In terms of competition, we have different value propositions and competitive advantages compared to other OTAs. We have significant advantages in lower-tier cities and the mid-to-low-end hotel market, and by continuously optimizing supply, pricing, and services, we meet the needs of consumers in different price ranges and consumption scenarios, while providing personalized recommendations and high-quality travel experiences. We focus on the digital transformation of the lower-end hotel market, providing efficient marketing and operational tools for businesses to attract traffic, improve cost structures, and enhance operational efficiency. Additionally, we offer room renovation solutions to meet consumer demands for quality and diversity. In the high-end market, we leverage our platform advantages to launch "Hotel +X" products, not only meeting consumers' demand for one-stop travel experiences, but also deepening cooperation with high-end hotels to help them expand revenue sourcesLooking ahead, we are optimistic about the growth and profitability of the hotel and tourism business in 2024 and the long term. Despite a high base last year, we expect growth to normalize this year due to supply and demand balance. We are confident that by focusing on investment returns, seizing market opportunities, and driving business growth, we can achieve our goals.

Q: How has the growth of Meituan Optimal been since the business adjustment? How often do we evaluate its strategic and investment performance in the early stages? Losses in the first quarter have significantly reduced, what can we expect in the coming quarters?

A: Online groceries are crucial for Meituan, and despite numerous challenges, we are determined to continue optimizing. Since the beginning of the year, competition in community e-commerce has become more rational, and Meituan Optimal has focused on efficiency improvements. We have implemented various measures since February, effectively reducing quarterly and annual operating losses, which have had a positive impact on the financial condition of new business segments. In the first quarter, we raised prices for individual items, reduced subsidies, and closed some inefficient warehouses and pickup points. Although this has had a short-term impact on scale, it helps focus on natural retention and long-term growth of core users.

Looking ahead, we will continue to execute a high-quality growth strategy, aiming to reduce losses and improve efficiency throughout the year. We expect losses to continue to decrease in the second quarter, with a significant narrowing of operating losses in the second half of the year. In the long term, the online grocery market is vast and aligns with Meituan's corporate mission. We will explore the market through different business models such as Meituan Optimal, dynamically adjusting resource allocation based on business performance and investment returns. We will also maintain flexibility in strategic iterations and continuously optimize the user experience.

Q: Regarding the recent entry into the Middle East market, could you share the development plan for the delivery business? Additionally, what are the criteria and strategies for future expansion into other regions? How should we evaluate the investment scale of overseas business this year and its impact on the operating losses of new business segments?

A: We launched Kee Ta in Hong Kong in May last year, and after operating for over a year, the progress in Hong Kong has given us more confidence in establishing a delivery business in overseas markets. As a leading delivery platform in mainland China, we see a widespread demand for delivery services globally, including in Hong Kong and other countries. Our goal is to bring products and services to a wider global audience and provide better service experiences for global consumers and merchants.

Currently, we are actively evaluating multiple markets, including the Middle East and Southeast Asia. When selecting new markets, we conduct in-depth analysis based on various factors such as market openness, existing competitors, market size, penetration potential, competitive landscape, average order value, and cost structure. We are still in the preliminary research stage and have not made any final decisions.

Undoubtedly, global expansion is crucial for Meituan's long-term growth, and we will proceed cautiously. Financially, we will carefully assess opportunities, maintain financial discipline, and focus on investment returns.

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