Wang Xing contracted, Meituan defended

The most noteworthy thing about Meituan's 2022 financial report is not scale growth and performance loss, but the decline in users and the stagnation of merchant growth.

Before the crisis, Meituan had made adjustments in advance. Wang Xing temporarily put aside his "boundary theory", and the company turned to defense in an all-round way: core business takeaway, continue to improve profitability; community group buying contracted, taxi business downgraded; The flash sale and grocery shopping business, which relies on Meituan's core distribution system, will be used as a future growth point.

In the face of the counterattack of Ali's local life and the continuous temptation of Douyin, can Meituan keep the ring? The decisive battle has not yet begun, and Tencent, the former major shareholder, chose to reduce its holdings in the form of dividends in order to solve its own problems, adding many variables to this middle battle.

Trade growth for performance

On March 24, Meituan-W (03690.HK) disclosed its Q4 and annual results for 2022, continuing the inertia of "exchanging growth for performance" in recent years.

In the fourth quarter of last year, the company's revenue was 60.129 billion yuan, a year-on-year increase of 21.4% - despite the "black swan" in Q2 2022, the scale growth rate in the first three quarters still reached 23.9%; Net profit was -1.084 billion yuan, a significant decrease from 5.339 billion yuan in the same period of the previous year.

In 2022, Meituan's revenue will be 219.955 billion yuan, a year-on-year increase of 22.8%, compared with 56.0% in the previous year. The net profit for the whole year was -6.685 billion yuan, and the loss was more than 70% lower than the 23.536 billion yuan in the same period of the previous year.

Last year, the company adjusted its business structure and divided the entire Meituan into two segments: core local business and new business. Core local businesses include food and beverage delivery and in-store, hotel tourism and homestay transportation, and Meituan flash sales, which are all businesses with mature business models and already have profit margins; New businesses include Meituan Youxuan, Meituan Grocery Shopping, Catering Supply Chain (Fast Donkey), E-hailing, Shared Bicycles, Power Bank, Restaurant Management System, etc., all of which are in the incubation period.

In 2022, new business will become Meituan's growth driver, while the more traditional core local business is the company's profitability.

For the whole year, the revenue of new business reached 59.196 billion yuan, a year-on-year increase of 39.3%, and the loss range also narrowed; Core local business achieved revenue of 160.759 billion yuan, a year-on-year increase of 17.6%, operating profit of 29.503 billion yuan, a year-on-year increase of 56.8%, and an operating profit margin of 18.4%, an increase of 4.6 percentage points over the previous year.

In the context of sluggish business such as in-store and travel, takeaway has become the core of Meituan. Last year, the peak daily order volume of the company's catering takeaway exceeded 60 million.

It is worth mentioning that Meituan has been widely questioned because of its strength over merchants and takeaway brothers; The 2021 antitrust investigation and hefty fines are also related to this.

Later, Wang Xing publicly promised that he would continue to support merchants and take care of the takeaway brother. However, from the perspective of the increasing profitability of Meituan's core local business sector, this point is not outstanding.

In 2022, the number of Meituan instant delivery transactions was 17,670.2 million, a year-on-year increase of 14.0%; The revenue generated by the company's distribution services was 70.064 billion yuan, a year-on-year increase of 22.7%; During the same period, distribution-related costs (mainly rider costs) were 80.190 billion yuan, a year-on-year increase of only 11.3%.

This means that the amount of money paid per delivery per delivery is increasing, while the cost per delivery for riders is decreasing. Meituan, which is the link, has long made money through platform commissions and advertising in addition to delivery revenue.

Of course, for Meituan, the biggest change in the fourth quarter of last year was the decline in user data. If the first month-on-month decline in Q2 2022 user data was just a wake-up call, Q4 2022 was the beginning of the crisis: in the 12 months ended December 31, the number of corporate trading users was 677.9 million, down 1.8% year-on-year, the first year-on-year decline in user data on record.

At the same time, Meituan's active merchants also stopped growing. As of December 31, 2022, active merchant data was 9.3 million, an increase of only 5.1% year-over-year and 0% month-on-month.

When the growth of Internet users slows down sharply and the involution of the stock era intensifies, head platforms such as Douyin join the competition for local life and are carving up Meituan's basic market.

Of course, Meituan is not alone in the face of growth pressure. In this earnings season, in addition to Alibaba and JD.com, which no longer disclose user data, Internet giants such as Tencent and Station B have also shown more or less pressure on user growth.

However, Meituan's "growth for performance" strategy will still put more pressure on the company.

All-out turn to defense

Compared with Didi's early "coyote"-style ground push and ByteDance's "traffic pool", Meituan's growth path depends on Wang Xing's "boundary theory".

"Everything doesn't really have simple boundaries, so I don't think you have to set limits on yourself. As long as the core is clear – who exactly do we serve? What services are provided to them? We will continue to try various businesses. ”

Under the guidance of this strategic thinking, Meituan started from the earliest group buying business, and continued to start from takeaway, movie tickets, community group buying, instant retail and other businesses. After taking a castle, immediately march to another mountain.

In 2021, Meituan upgraded its corporate strategy from Food+Platform to Retail+Technology, further expanding its products and services to a wider range of retail fields.

Meituan Preferred, Meituan Grocery and Meituan Flash Sale are the three major business modules of the retail strategy. Among them, the preferred focus is community group buying, grocery shopping is a direct-operated vegetable buying platform, and flash sale is a real-time e-commerce platform for all categories.

However, after the company encountered an anti-monopoly investigation and was fined 3.442 billion yuan, when the Chinese Internet no longer believed in the money-burning model, and after Meituan's basic market was besieged, Wang Xing essentially adjusted his "boundary theory", and Meituan chose to shrink and turn to a defensive mode.

In addition to reducing losses by cutting sales and marketing expenses, the biggest changes are reflected in the business level.

Since last year, Meituan Preferred has been shrinking its front; In the fourth quarter, the news of layoffs was directly reported. In March this year, Wang Xing issued an internal letter saying that he would abandon his self-operated taxi business, switch to an aggregation model, and access the Meituan platform.

The reason behind this is that Wang Xing smelled the crisis. Meituan has not yet poached the corners of Alibaba and JD.com like Douyin Kuaishou, and its own base takeaway business has been targeted by short video platforms with multi-line operations.

Meituan narrowed its focus to its core business of food delivery. On the one hand, we will continue to enrich the connotation of the takeaway business, strengthen the afternoon tea, night snack and other scenarios, and strive to tap the value of individual users to maintain overall growth under the premise that the scale of users is difficult to grow.

On the other hand, Meituan flash sale and Meituan grocery shopping under the big retail strategy are actually extensions of the takeaway business. The traditional takeaway business delivers box lunch sets and milk tea, and the instant retail delivers department stores and medicines, making Meituan's delivery network achieve greater value — so when he had to optimize his business, Wang Xing chose community group buying instead of flash sales and grocery shopping based on the company's infrastructure.

At the same time, under the background that the local market has entered a low-growth stage, the company went to Hong Kong to develop the takeaway business and copy the mature operation model to the outside world.

This holistic defensive strategy has begun to show its effects. It not only helps companies optimize their business, but also improves cash flow and balance sheets.

In 2022, Meituan's operating cash flow will be 11.411 billion yuan, a significant increase from -4.011 billion yuan in the same period of the previous year, which has turned positive.

In just a few years, the rivers and lakes have changed. The next focus is no longer Wang Xing's cross-border field, but whether Meituan can successfully defend the ring and stabilize its position as the absolute leader of its takeaway market.