CNBC AI News – July 7th: A fierce battle for food delivery dominance erupted late on July 5th, as titans Alibaba and Meituan unleashed a barrage of aggressive discounting and deep-cut coupons, dramatically reshaping the landscape of online ordering.
Both platforms flooded the market with substantial value, offering coupons like “save 21 on orders over 25” and “save 16 on orders over 16,” with some deals even enabling “zero-cost purchases.” This sudden surge in subsidies sent user traffic soaring, with Meituan experiencing temporary outages due to the overwhelming demand.
Internal reports from Meituan indicated that as of 10:54 PM on July 5th, their instant retail platform had processed over 120 million orders for the day, with food delivery orders alone exceeding a staggering 100 million. This underscores the intensifying competition within the sector.
Goldman Sachs data reveals that investment in the food delivery space by the top three players in the second quarter alone reached an eye-watering 25 billion yuan, a significant escalation from previous periods.
The investment bank’s latest report forecasts that this price war will continue its trajectory, potentially peaking in September and signaling a turning point in the latter half of the year. However, the report also issues a stark warning regarding short-term profitability, predicting that under a baseline scenario, Alibaba’s food delivery arm could see a 41 billion yuan loss in the next 12 months, JD.com a 26 billion yuan loss, and Meituan’s EBIT profit could decline by 25 billion yuan.
Notably, Pinduoduo appears to be a relative beneficiary, having largely abstained from direct participation in this promotional war.
Goldman Sachs has outlined three potential competition scenarios:
Scenario One (Baseline): Meituan successfully defends its leading market share.
Leveraging user loyalty, its robust delivery network, and strong positioning in lower-tier cities, Meituan is projected to maintain a market share of 5.5, with Alibaba at 3.5 and JD.com at 1. In this scenario, Meituan would sacrifice short-term profitability, with EBITDA per order for food delivery and instant retail dropping to 0.7 yuan and 0 yuan respectively, though long-term recovery to 1.0 yuan is anticipated.
Scenario Two: Alibaba secures significant market share through continued investment of 50 billion yuan.
Buoyed by the synergies of integrating Taobao’s instant commerce with Ele.me, and Taobao’s daily active user base which doubles that of Meituan and JD.com, a duopoly is foreseen with Alibaba and Meituan holding a 4.5 share each, and JD.com remaining in third place.
Scenario Three: JD.com achieves a 5:3:2 competitive landscape through improved merchant coverage and the deployment of 150,000 full-time couriers.
JD.com’s food delivery business EBITDA per order is expected to improve from a negative 6.2 yuan in 2025 to a positive 0.5 yuan in the long run.
Goldman Sachs analysis suggests that the ultimate objective of this fierce promotional activity is not immediate profit from food delivery itself, but rather to capture high-frequency user engagement and leverage this traffic for cross-selling into their more lucrative e-commerce and travel services. The report anticipates that losses in food delivery investments will likely peak within 12 months, setting the stage for a potential stock price inflection point in the latter half of the year.
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