Meituan Phone Conference Record: Everything arrives home, flash sale is the new star sea of Meituan?

Highlights:

1. In 2021, the total number of annual transactions of takeaway reached 4.4 billion, an increase of 13% year-on-year;

2. Meituan Flash Sale: The peak single-day order volume in December 2021 exceeded 6.3 million, and the number of annual active buyers reached 230 million. The medium-term goal is more than 10 million transactions per day;

3. The in-store business showed strong resilience, with GTV and revenue increasing by more than 30% year-on-year.

The following is the content of the $Meituan-W.HK 2021 fourth quarter conference call, if you want to refer to the interpretation of the financial report, please click "The loss is decisively narrowed, and the execution of the Meituan is about to be worshipped again".

Management states incremental information:

Takeaway business

In 2021, the total number of annual transaction users of takeaway reached 440 million, an increase of 13% year-on-year.

The takeaway supper and healthy eating categories reached a two-year growth rate of 45%, and the peak single-day order peak exceeded 50 million in August 2021, among which the two-year growth rate of the supper and healthy eating categories reached 45%.

Launched takeaway butler service to help merchants improve operational efficiency: takeaway butler service, which helped merchants increase the value of transactions by 75% during the implementation period; takeaway butler service has covered more than 50 cities; Q4 the number of high-quality merchants increased by nearly 45%.

Shop and hotel business

In 2021, the number of domestic hotel room nights increased by 34.5%, and the number of room nights in high-star hotels accounted for more than 16.5%.

New consumer trends such as pet care, healthcare, and lifestyle services showed strong growth momentum, with revenue by 60% year-on-year in all categories.

New business

$Meituan (ADR). US Flash Sale: Single-day orders peaked at more than 6.3 million in December 2021, with 230 million annual active buyers; categories such as flowers, supermarkets and convenience stores continued to maintain high growth momentum; 24-hour drug delivery services were launched, and the number of 24-hour pharmacies opened reached a new high in Q4, with an average triple-digit year-on-year increase in both daily night orders and night-time prescription drug orders

Meituan Preferred: For the first time, the operating loss has narrowed continuously, indicating the continuous improvement of product structure and operating efficiency

Meituan Grocery: GTV increased by 160% year-on-year and the number of users increased by 80%.

Others: B2B food delivery services, ride-hailing services, RMS business, etc. to improve operational efficiency

Analyst Q&A section:

Q: So given the recent regulatory guidance, will you further reduce the takeaway commission rate?

A: The company released the latest takeaway commission model in May 21, and also carried out a corresponding split in the performance report, which is divided into technical services and takeaway services:

a Fixed percentage of the commission for technical service fees;

b The Company charges a performance service fee for the use of the Company's delivery service, which is charged by the Company according to the distance, price and time period. After changing the commission model, the commission calculation is more transparent, the merchant can also choose whether to use our delivery service, for SMB merchants, the delivery fee within 3km is reduced, and after the disclosure of the spin-off, everyone can also see our cost and income structure more clearly.

Takeaway revenue is split into:

1) Catering takeaway delivery service, as long as you want the merchant and 1P delivery order user terminal

2) Commission income, technical service fees from our merchants and 3P merchants using our takeaway platform;

3) Online marketing services

Our 1P model accounts for 67% of takeaway transactions, we charge delivery fees to merchants and users, but we also need to give users preferential treatment to stimulate consumption, 21Q4 catering takeaway delivery service revenue is 14.3 billion, less than the associated cost of 18.3 billion, we will continue to improve our delivery network and capabilities, this business is not yet profitable.

The company has always been committed to creating value for merchants, especially SMB merchants. The company maintains an active dialogue with the regulator and has issued our merchant support policy under the guidance of the company to support SMB merchants affected by the epidemic and reduce technical service fees.

In 2021, the company has launched a new commission model in several directly operating cities, small and medium-sized merchants have benefited, and this year we will cooperate with agents in lower-tier cities to ensure that the new commission model will cover the whole country by the end of the year. In 2022, we will keep in touch with merchants to solve the pain points and difficulties of their operations.

Q: What was the reason for the slowdown in the growth of major businesses during the quarter? As the growth of major businesses faces challenges, will we still consider reducing investment in new businesses?

A: Mainly due to strict epidemic prevention and control measures, the macro environment also has some negative impact on our business. The takeaway business has grown more resiliently than other consumer-related businesses.

The scale of medium and high frequency users continued to increase, the stickiness and transaction frequency of takeaway members continued to increase, and the average transaction frequency of annual trading users increased by 25% year-on-year.

In December, the daily trading volume reached a new high, exceeding 53 million / day, milk tea increased by 100% + year-on-year, cakes and snacks increased by more than 50% year-on-year, and the proportion of high-frequency user orders increased significantly.

For the in-store and wine and travel business, the recurrent epidemic and the macro environment have had a great impact on hotel bookings and travel, and consumer demand for long-distance and business-related travel continues to be significantly suppressed.

But our in-store business showed strong resilience, with GTV and revenue up more than 30% year-over-year. Transaction volume, GTV and annual active merchants continue to reach new heights in-store business.

We have around 20 service categories that cover the full price range and offer an attractive package of discounts. In the context of a poor consumption environment, consumers are turning to more cost-effective local service consumption. As a result, our in-store business is more resilient to the macro environment. However, in medium- and high-risk cities where local service providers are strictly controlled by the epidemic, the in-store business has been seriously affected. Still, once outbreak control measures become less stringent, we see business often gradually recovering.

The year-on-year growth of our main business in January and February was stable, and compared with the previous quarter, the in-store business saw strong consumer demand, especially in February, the growth rate of the takeaway business recovered around the Spring Festival, and the leisure and entertainment transaction volume during the Spring Festival holiday also increased significantly.

However, since March, the epidemic has spread rapidly in several first-tier cities such as Shenzhen and Shanghai, and stricter epidemic control policies have been implemented throughout the city, resulting in major businesses being affected in March.

Overall, given the short-term headwinds, we will now focus more on high-quality growth and improved operational efficiency. At the same time, with the normalization of prevention and control measures, combined with policies to promote economic and consumption recovery, the main business will return to the normal growth track in 2022 and achieve steady growth.

In terms of new business, we will also consider new business opportunities investment in the long term and allocate resources according to cash, cash flow and main business conditions.

We will prioritize the development of our retail business, focus on high-quality development and improvement of UE, operating efficiency, and we expect the operating loss of new businesses to narrow year-on-year in 22 years.

Q: How do you see the UE and order growth of the food delivery business in 2022? Does the external environment affect order volume and long-term profitability?

A: We remain confident in order growth and the unit economy. In terms of order growth, taking into account the inconvenience of food delivery services, macro weakness, and user dependence during the epidemic prevention and control period, we plan to focus more on tapping and meeting the needs of medium and high frequency users, and improving their trading frequency and stickiness. In addition, we will accelerate the provision of low-cost takeaways to our consumers. In 2021, the conversion volume, frequency and stickiness of medium and high frequency users will be further improved, and the demand elasticity and consumption power of these services will be greater.

While COVID-19 measures will have a negative impact on order volume growth in 2022, we believe that order volumes will gradually pick up after medium- and high-risk areas are controlled, as evidenced by more than 2 years, as the recovery rate in those affected areas is actually very fast once unblocked.

In the long term, we believe that takeaway is a big consumer trend, penetration continues to increase, there is still a lot of room for growth, and we continue to move towards our goal of 100 million transactions per day.

We will also continue to explore on the path of high quality and low price to provide more kinds and more models, including group purchase models, to help us expand the scale of our business.

On the UE side, we want to achieve high-quality growth in difficult environments, so we expect the percentage of user subsidies in 2022 to be lower than in previous years. At the same time, we expect advertising revenue to grow steadily.

Regarding merchant support, we recently announced a new initiative for 2022, and while it will have a negative impact on monetization rates in the short term, we believe it will be good for the ecosystem in the long run.

We strongly and fully support the policy on social security for food delivery workers, and we expect that a detailed guide on accident insurance may be published and piloted in several provinces in a few months. Overall, we remain confident of achieving our profitability targets.

Q: Considering the competition with short video traffic platforms, what is the long-term strategy and business prospects of in-store and wine travel?

A: First of all, I would like to emphasize that according to our past track records, people have realized the value of the store business. Even in a difficult macro environment, we are also seeing growth in business resilience, which is important for urban users and merchants.

We already have good advantages, such as the number of merchants and user reviews, we have accumulated more than 10 billion user reviews in more than 200 categories, providing comprehensive services for the supply and demand side.

Compared with other short video traffic platforms, we have accumulated a lot of user behavior insights, which enables us to enrich product supply and improve service quality.

For consumers, we are the only in-store platform that can provide detailed information on millions of local service merchants, and we have a strong brand awareness and consumer mentality. I think this is a high barrier to entry for short video platforms.

At the same time, we are constantly improving our advertising product tools to help small and medium-sized businesses predict ROI. Through our LBS system, we help users instantly match their differentiated needs with merchants, which I think is one reason why our transaction volume continues to grow at a high level. We also actively explore new categories and integrate internal and external resources to carry out promotional activities to meet the marketing needs of merchants.

We are open to other platforms entering this market because it's a big market and there's a lot of demand from merchants, but we're definitely the platform that can provide the most comprehensive service for merchants.

We plan to continue to meet the needs of users and merchants and launch a variety of products. We will also continue to strengthen the penetration of lower-tier cities, we have built a strong self-camp push team, before they focused more on mid- and high-tier cities, now we plan to enter lower-tier cities. We are confident that our business will continue to grow healthily.

At present, the penetration rate is still very low, and the penetration rate of different categories is also different, and the long-tail and high-margin categories still need to explore how to operate online, giving us potential business space.

With the emergence of new consumption, we will better explore new categories, especially entertainment categories that young people like.

Q: The growth rate of the community e-commerce business has slowed down a lot compared to previous quarters, have you reassessed the current market potential of the business? What is Meituan's preferred operating plan for 2022 and beyond?

A: 2021 is a year of rapid growth of community e-commerce business, and the business has also undergone rapid iteration, completing the national coverage of logistics chains and warehouses.

We continue to optimize our instant delivery while enriching our product selection for our users and achieving market size leadership while maintaining solid growth in strict compliance with regulatory guidelines.

The ever-changing regulatory environment has made the competition of community e-commerce more rational, and all participants have begun to build long-term development capabilities, which is conducive to the long-term health of the industry.

In the first quarter of 2022, the value of Meituan's preferred and other retail businesses became more apparent during the recent outbreak in many provinces in China. People work from home, and the demand for groceries purchased online has also increased dramatically. When offline shopping becomes inconvenient or inaccessible, our various retail operations provide consumers with extremely convenient and affordable food and other goods, especially in cities such as Shanghai that have been affected by the epidemic.

We also continue to optimize our SKU selection, with a steady increase in unit prices and a significant improvement in unit economy. In 2022, we will continue to focus on high-quality growth, allocate resources more efficiently, and develop long-term capabilities rather than short-term scale growth.

In the long term, we will maintain our market leadership and continue to enhance our competitiveness by improving our operational capabilities and providing an optimized customer experience; further refine our logistics network and continue to iterate on our supply chain capabilities; continue to enrich our SKU selection while maintaining a competitive pricing strategy; strengthen our supply chain capabilities, build a better headmaster ecosystem, and allocate resources to a better user experience to drive healthy growth in business size and continuous improvement of UE; in addition For the promotion of rural e-commerce, we will continue to broaden the various channels for farmers to sell products and increase income, and further support the rapid development of rural areas.

Q: What are your thoughts on meituan's recent performance? What is the strategy for 2022? What are the focus and areas of investment?.

A: In the long run, we are confident that Meituan Flash Sale will become another major consumer channel, and our medium-term goal is to exceed 10 million transactions per day, compared with 100 million takeaway orders per day.

However, Flash Sale is developing faster, and in order to increase the conversion of user traffic on our platform, we will deepen cooperation with regional supermarket chains, open up new categories, further enrich SKU selection, and meet the changing and enhanced needs of consumers.

Especially during the Lunar New Year period, GTV grew by about 80% year-on-year, and AOV also continued to rise as we saw explosive demand for New Year purchases. During the festival, the value of other gifts such as flowers also reached a new high. Consumers ordering more kinds and higher value products under fresh and urgent circumstances have been accelerated by this year's Spring Festival and the like.

For instant retail this year, we are focused on strengthening consumers' mental cultivation and using Meituan Preferred as the preferred platform. We believe this is a market of more than 1 trillion.

At present, there are more than 230 million active transitional users in Flash Sale, and GTV has reached about 12% of the takeaway GTV in 2021. By 2022, this share will grow larger, as flash sale retail will grow faster than takeaway.

We will also strengthen cooperation with merchants and brand partners to allow more high-quality takeaway consumers to use Meituan Flash Sale when retailing. We will be adding SKUs through partnerships with more brand stores in hypermarkets, while introducing new merchants to more categories that were previously underexplored due to fulfillment or operational complexity.

We will also continue to accelerate on the supply side and empower merchants to operate digitally. We hope that the selection of SKUs will gradually expand to a wider product range. From a business perspective, we believe this has great potential and creates tremendous value for society through our high-density, low-cost instant delivery network.

We've built very efficient and relatively low-cost delivery services in cities that potentially connect all consumers with a variety of local retailers and really help people when they need it, a great experience for both consumers and merchants, and we're very confident that we're on the right track to try this brand."