China’s food delivery and quick commerce war does not seem to end any time soon.
It has wiped out Meituan’s Q2 earnings (operating profit dropped by 98%), and taken a dent on Alibaba’s financials too.
Considering that Alibaba only joined the war in May, and the subsidies reached peak levels only in July (i.e. Q3), Meituan is almost certainly going to report a large loss in Q3. Alibaba has announced a commitment of RMB50 billion (US$7 billion) in food delivery and quick commerce subsidies.
With smaller than expected losses and a confident management in the earnings call, Alibaba’s share price rose more than 10% after the earnings, while Meituan’s plunged the same magnitude.
This will have some global implications – amongst which these two are key:
1. Will Meituan slow down Keeta’s global expansion, in order to concentrate resources domestically to fight this war?
2. Should ecommerce platforms globally enter quick commerce? Especially in India, where Flipkart’s Minutes already competes fiercely against Zomato’s Blinkit and Swiggy’s Instamart, as well as startups such as Zepto.
Some of our thoughts based on conversations we have been having with ecosystem stakeholders/observers over the last couple of months, as well as last week’s earnings calls:
1. Alibaba struck a far more confident tone
In the earnings call, Meituan management clearly was frustrated with the “irrational spending in the unsustainable manner” by its peers. They emphasised that “our operational efficiency has always been ahead of competitors, and this advantage is actually expanding during the current intensified competitive period”.
In comparison, Alibaba management sounded much more confident. They clearly articulated the current state and vision for both quick commerce and AI. Almost all the analyst questions were about these two areas, which the management answered very well (the pre-market stock price kept rising as the earnings call went on).
One public market investor recently quipped: “When it comes to earnings calls, Alibaba’s management usually talks a bigger game than they deliver — 60 points of results, but presented as 80. Tencent is more straightforward: 80 delivered, 80 communicated. PDD takes the opposite approach — delivering 80, but only claiming 60.”
Confidence is important especially when you embark on a large undertaking with billions of dollars against a formidable competitor. You need the ecosystem including investors, employees and partner restaurants/riders to rally behind you.
Then you need to deliver.
2. Alibaba has a very clear plan on quick commerce
On that, there is a big question of whether the cash burn is not only achieving intended benefits (user growth, cross sell etc.) but also eventually lead to sustainable unit economics.
On this point, Jiang Fan, who leads Alibaba’s ecommerce business, laid out a very clear plan during the earnings call. He started by saying:
“I believe efficiency cannot be discussed in isolation from scale. In the past, our order volume was only one-third of our peers. In many provinces and cities, our share was even below 20%. Under such a huge market share gap, it made no sense to talk about efficiency. At present, Taobao Flash Sales has already reached a leading scale, and we will quickly improve our operational efficiency.”
Explaining that there is ‘narrow this gap” of efficiency with peers, Jiang Fan explained his short term plan to reach breakeven from several aspects: 1) optimisation of user structure by improving retention; 2) increasing share of high-value orders and overall AOV; and 3) optimisation of fulfillment efficiency and costs. He is confident to “cut UE losses by half” while “maintaining the current levels of consumer incentives”.
For the long term, continued optimisation of logistics costs and merchant operations. “Scale is the primary factor determining efficiency, and with our new scale and market share, we are confident that in the long run we can achieve industry-leading efficiency levels”.
The remarks are very structured, and delivered with a confident tone. He addressed the elephant in the room that Meituan was indeed much more efficient than Taobao, and highlighted commitment to bring the efficiency level on par.
Whether he is able to eventually pull it off remains a question mark. However, it is a commitment Meituan has to take very seriously.
3. Will Keeta slow down?
Asked about Keeta during the earnings call, Meituan management mentioned a few times that it is “not in a hurry”. Here is a specific response from the management:
“(for Keeta) we are very optimistic about the long-term growth potential. Our plan is to get to 100 billion run rate GMV in 10 years. Since we started in Hong Kong in May 2023, the 10-year goal is set for May 2033. So we are not in any hurry. We will take into consideration all the recent situations in both domestic and international markets, and we will grow in our existing markets and make a good preparation for launch in new markets. So that’s the overall strategy.”
Looks like setting the expectation of potential moderating pace of Keeta’s expansion, while reiterating the commitment to make Meituan a global company.
4. How will this end?
Nobel literature prize laureate Gabriel García Márquez wrote “it is easier to start a war than to end it” in his masterpiece One hundred years of solitude. Wars in business are hard to finish as well – especially when those who launch it have already committed to a specific goal.
How will this end?
At the end of June 2025, Meituan had a reserve of about RMB 170 billion cash and short term investments, while Alibaba had RMB 586 billion “cash and other liquid investments”.
In a war of attrition where two belligerents have equal efficiency, the one with far superior resources will eventually win. The question here again becomes whether Alibaba can, within a few quarters, drastically improve its quick commerce efficiency, as mentioned in point 3 above.
Will the government intervene? We think while the government has (and will continue to) set boundaries, it is unlikely they would outright stop the competition.
In the end, economic and organisational considerations of the players will determine the call. In this regard, the ball is in Alibaba’s court.
5. Would Tencent and ByteDance sit idle?
In the meantime, we should not forget that Alibaba and Meituan are not the only big techs out there in China. Tencent and ByteDance, both printing money through their vast and sticky customer base, would unlikely sit idle to watch Alibaba win this war.
Tencent was once the largest external shareholder of Meituan – and ByteDance, through Douyin, had a large presence in local services, and competes against Alibaba on ecommerce.
While they are watching this fight very carefully, they probably have not reached the conclusion on how this will evolve. If Alibaba does show a sign of edging Meituan out of competition, one of them might do something about it.
6. PDD’s cash
As for the rumours of PDD entering quick commerce – we have already said it is quite unlikely.
That said, PDD’s cash reserves of RMB 387 billion, made it quite hard for Alibaba, JD or any other ecommerce platform to launch a war of attribution against it.
7. Where is JD?
It seems that by now, many observers have forgotten about JD, which initially launched this quick commerce war. In fact, it had also released their Q2 numbers, showing a RMB14.8 billion operating loss from its “new businesses” segments (mainly food delivery).
It also seems that neither Alibaba nor Meituan took JD seriously as competition.
A photo we took in Beijing this May illustrates the contrast – a JD rider arguing with the restaurant receptionist about a glitch in the system, while an ele.me (i.e. Taobao) rider sits leisurely waiting for his order to be prepared:
8. JP Morgan’s Deepseek moment
In Alibaba’s earnings call, a JP Morgan analyst pointed out this was not the first time Alibaba attacked Meituan, asking:
“I asked Deepseek why Ele.me couldn’t beat Meituan, and Deepseek said: “A pampered son can’t beat a hungry wolf.” This time, what new thinking do we have? What’s different this time that could maximize ROI?”
To this question, the management answered: “Maybe you could ask Deepseek again” before adding that ele.me’s infrastructure has improved significantly over the years. However, to maximise ROI, the business needed enough users, merchants and riders.
“Only when all these come together, the investment can make sense.” That is the current approach, by combining Taobao’s user base and ele.me’s merchant base/fulfilment network, makes sense.
“The investment logic is not only food delivery, but also short, medium and long term returns in ecommerce. This is different from how we approached it previously, but we still have a lot of work to do,” Jiang Fan concluded.
The post The global stakes of Alibaba’s quick commerce bet first appeared on The Low Down - Momentum Works.
