Source | Bohu Finance (bohuFN)

Recently, Meituan unveiled its 2024 annual financial report, showcasing impressive results that undoubtedly pleased investors. The company reported a total revenue of RMB 337.6 billion, marking a 22% year-on-year increase. Net profit surged 158.4% to RMB 35.8 billion, while the annual transaction user count surpassed 770 million. The number of annual active merchants rose to 14.5 million, and user purchase frequency hit a new high.

More significantly, these achievements came after intense competition with Douyin. In 2024, Douyin's aggressive push into on-site services significantly rattled Meituan, prompting significant organizational and strategic shifts. Firstly, Meituan merged its on-site and home delivery businesses into a core local commerce segment, with Wang Puchong, renowned for his combativeness, at the helm. Secondly, on the user front, Meituan revamped its membership model, comprehensively upgrading the "Super Member" program to steer high-quality food delivery users towards on-site services.

These measures not only helped Meituan withstand Douyin's challenge but also enhanced the synergy between its various businesses.

A prime example is Meituan's food delivery business, which has long been known to operate at a loss. The high-frequency food delivery service was designed to drive traffic to higher-margin on-site services. Higher conversion efficiency translates to lower losses per order for Meituan's food delivery segment. In the first half of 2024, the revenue per order was RMB 3.86, while the cost per order was RMB 4.13, resulting in a loss of RMB 0.34 per order, compared to RMB 0.39 in 2023.

With its domestic market firmly established, Meituan can now focus more energy on other areas. During the financial report conference, Meituan emphasized its AI strategy. Wang Xing stressed that the company would actively invest in cutting-edge technologies such as artificial intelligence, drone delivery, and autonomous delivery vehicles, accelerating their application.

However, another area of aggressiveness lies in globalization. For a long time, the public has attributed Meituan's success to the "miracle" of the Chinese market. Therefore, when Meituan's food delivery platform Keeta launched in Hong Kong in May 2023, optimism was scarce.

In an article titled "Why is Meituan Entering Hong Kong? What are the Odds of Success?", we discussed the complexities of the Hong Kong market, which had led to a vicious cycle of high-priced food delivery: strict tram management, high labor costs, resulting in high delivery fees, which weakened consumers' willingness to order food delivery, leading to insufficient order volume, making it difficult to achieve scale, preventing merchants from offering discounts, and the platform's earnings falling far short of expectations. Moreover, Meituan had to contend with two international rivals, Deliveroo and Foodpanda.

But soon, a miracle unfolded. According to a report by consumer data company Measurable AI, one year after entering Hong Kong, Keeta broke the duopoly of Foodpanda and Deliveroo, ranking first in order volume by May 2024.

On March 10 of this year, Deliveroo announced its withdrawal from the Hong Kong market due to financial reasons, stating that "Hong Kong lags behind our major markets, with a challenging market and intense competition."

Meanwhile, armed with its Hong Kong market experience, Keeta entered Saudi Arabia and became the third-largest food delivery platform there within just four months.

Huang Zheng of Pinduoduo once publicly stated on a program: "Our generation of internet entrepreneurs has a broader global vision and greater opportunities for globalization. If I were Zhang Yiming, I would be more aggressive in promoting globalization."

Now, Meituan is officially embracing globalization.

01 Confidence in Accelerating Overseas Expansion Rooted in Hong Kong

Previously, Meituan was quite cautious about "going overseas," but this year, it has hit the accelerator.

According to LatePost reports, Meituan has designed a "three-year plan" for the Middle East market. Within the next three years, Keeta plans to cover the Gulf Cooperation Council (GCC) countries (Saudi Arabia, the United Arab Emirates, Qatar, Kuwait, Oman, and Bahrain), exporting its experience accumulated in Saudi Arabia. Notably, Keeta only launched in Saudi Arabia in September last year.

This confidence was first established in the Hong Kong market.

On one hand, it entered the market with "price wars," continuously offering discounts and subsidies to seize market share in food delivery. For instance, upon entering Hong Kong, Meituan launched a HK$1 billion incentive plan, where each new user registration could receive HK$300 worth of coupons for discounts and delivery fees, with offers such as HK$50 off on orders over HK$80, effectively a 40% discount.

On the other hand, to address the pain point of high minimum order thresholds on food delivery platforms, Keeta launched the "One Person Dining Hall" section, creating an all-inclusive (including meal and delivery fee) food delivery meal plan section, reducing the original price of food delivery orders, which could reach HK$160-180, to just HK$60.

This strategy was brilliant. According to reports, Keeta doubled the local food delivery order volume, from 150,000-200,000 orders previously to over 300,000 orders per day on average.

An employee from one of Keeta's competitors noted that his company has been under tremendous pressure since Keeta's entry, saying, "We really can't compete..."

Simultaneously, to further enhance the consumer experience, Keeta not only improved delivery speed but also provided a guaranteed on-time delivery service. With such a robust strategy, Keeta became the industry leader within just one year.

However, as Wang Xing said, Hong Kong shares similarities with the mainland in terms of culture, language, and financial infrastructure, making it suitable as the first stop for overseas expansion. While actively exploring the Hong Kong market, Meituan will also maintain prudent investment, "therefore, its impact on the company's profitability is very limited."

Indeed, this is the case. The overall daily order volume of the Hong Kong food delivery market is less than 1 million, while the peak daily order volume of catering food delivery in mainland China reached 78 million in the third quarter of 2023. Hong Kong consumers are more accustomed to dining in or directly contacting restaurants to order self-delivered takeout food.

After achieving success in the Hong Kong market, Meituan turned its focus to Saudi Arabia.

02 Fast, Fast, Fast

Reports indicate that Meituan's expansion is still accelerating, with plans to cover 80% of Saudi Arabia by July 2025 and begin expanding to other Middle Eastern countries and North Africa next year.

Contrary to popular belief, the food delivery market in Saudi Arabia is quite promising.

Firstly, there are numerous players. Brands under Delivery Hero, Hunger Station, and the local brand Jahez occupy 70% of the market share. The local brand MR.SOOL had over 18 million registered users in 2023, gaining popularity among locals for its same-city express delivery of any item. Other players include Wukong Delivery and Germany's Deliveroo.

Secondly, Saudi Arabia is full of appeal. The reason for the gathering of these food delivery platforms is straightforward: favorable policies and huge demand.

To reduce dependence on oil, Saudi Arabia launched the "Vision 2030" to promote economic development and has introduced a series of preferential policies to attract foreign investment, such as tax exemptions and land concessions.

Meanwhile, according to Qiu Guangyu (head of Meituan's overseas business), the Saudi food delivery market will maintain an annual growth rate of no less than 20%, benefiting from a large population of tech-savvy young people, accelerated urbanization, and increasing demand for convenient services among citizens.

To put it in perspective, Riyadh, the capital and largest city of Saudi Arabia, has a population of over 7.8 million, surpassing Hong Kong. Its per capita GDP is USD 32,000 - for comparison, Beijing's per capita GDP just exceeded USD 30,000 in 2024.

Similarly, GF Securities' research report points out that the food delivery market in the Middle East comprises multiple local and international players, with Talabat, Jahez, and Hunger Station being the main local food delivery platforms. Among them, the top players in Saudi Arabia are Hunger Station and Jahez, which together accounted for 70% of the country's food delivery market share in 2023.

However, Meituan's methodology remains highly effective.

On one hand, it attracts consumers with substantial subsidies. In Saudi Arabia, Keeta has indicated plans to invest SAR 1 billion (USD 267 million). Keeta offers vouchers worth SAR 100 (USD 26.65) upon registration, with a 50% discount on the first order.

On the other hand, it emphasizes timeliness. The high consumption level and income of local Saudi residents drive the platform's average revenue per user to be among the highest globally. However, high delivery fees and delivery delays in the Saudi food delivery market have always been criticized by consumers.

To this end, Keeta provides free delivery services for over 90% of the restaurants on its platform. Secondly, delivery delays are another common issue. "We use advanced technology to improve on-time delivery rates, and if the delivery is delayed by more than 15 minutes, compensation will be provided."

These are experiences that local Saudi food delivery platforms have never offered before. The top three players, Hunger Station, Jahez, and Careem, previously occupied about 80% of the market share, with delivery fees of SAR 15-20 per order, equivalent to around RMB 30-40, and frequent delivery delays.

Launched in Saudi Arabia only last October, Keeta has already captured 10% of the orders in the Saudi food delivery and catering delivery market, becoming the third-largest food delivery platform there.

Moreover, Keeta aims to do more in Saudi Arabia.

Over the past two years, the number of Chinese people traveling to Saudi Arabia has rapidly increased, and Chinese restaurants have also multiplied, allowing Meituan to see opportunities in Saudi Arabia's local life. In response, Meituan Flash and Xiaoxiang Supermarket have sent teams to Saudi Arabia to prepare new supplies for Keeta to increase frequency, which will be launched in the first and second quarters of this year.

While it may seem like a "dimensionality reduction strike," the challenges hidden behind Keeta cannot be ignored. For example, subsidies and discounts cannot last forever, and Keeta will eventually have to compete on equal footing with other platforms.

And for the sake of delivery efficiency, Keeta is genuinely investing heavily. Faster delivery speeds come from a large team of riders.

Moreover, Deliveroo's withdrawal from the Hong Kong market was largely due to profit pressure. According to reports, in 2024, Deliveroo's Hong Kong market accounted for about 5% of its global total transaction value, and the market's adjusted earnings before interest, taxes, depreciation, and amortization (adjusted EBITDA) remained negative.

It's worth noting that, according to Measurable AI, Keeta's annual average order value (AOV) in Hong Kong is approximately HK$102, while its competitors' average order values are typically between HK$170 and HK$180.

Even though, based on Meituan's domestic scale, "overseas" revenue has a minor impact on the company's overall finances, internationalization is already one of Meituan's last "hopes." Keeta staff in Riyadh also indicated that the company realizes that the approach of "growth before profit" cannot be a long-term global strategy.

03 Final Thoughts

According to LatePost reports, Qiu Guangyu discussed "what we rely on to win" in an internal interview.

'Product and technological capabilities, more efficient order dispatching, and more accurate delivery time calculations; operational and sales management methods, "start early, summarize late," quickly improving user experience; focus on customers. When overseas is still in the stage from 0 to 1, we need to be more agile in discovering user problems and live like locals.'"

Whether it's launching the "One Person Dining Hall" section in Hong Kong, doubling the local food delivery order volume, or addressing the characteristics of local food delivery delays by setting higher requirements for rider management in Saudi Arabia and deploying more riders in specific areas to ensure that most orders arrive within the estimated time on the Keeta system.

Overall, Keeta is currently doing well overseas.

Reference Sources:

1. LatePost Exclusive | Meituan Internal Communication Meeting: Grocery Retail, Internationalization, and AI are the "New" Directions Wang Xing is Focusing On

2. Caixin Weekly: Meituan Races to Overseas Markets

3. Rest of World: Can Keeta, Meituan's Global Brand, Use the Middle East as a Springboard for Other International Markets?

4. Miaotou APP: "Meituan's Turnaround"

The copyright of the cover image and accompanying images belongs to the copyright owner. If the copyright owner believes that their work is not suitable for public browsing or should not be used for free, please contact us promptly, and this platform will immediately make corrections.