Tencent-backed Meituan’s losses balloon in duel with Alibaba

HONG KONG • Meituan Dianping is reaping the benefits of scale in its core food delivery division as it feels the pain of competition from arch-foe Alibaba Group Holding Ltd in smaller businesses such as hotel bookings.

While revenue almost doubled in the December quarter, its net loss widened 57% to 3.4 billion yuan (RM2.08 billion) as profitability shrank in travel and bike-sharing.

To keep a lid on swelling costs, Meituan said it’s kicked off a restructuring that will see loss-making bikerental subsidiary Mobike pull out from most of its overseas markets.

Backed by WeChat-operator Tencent Holdings Ltd, Meituan is spending heavily to wage a pitched battle with Alibaba’s Ele.me and Fliggy in a cut-throat arena for on-demand services. That’s taken a toll on its bottom line and share price, which is down 15% since the company raised US$4.2 billion (RM17.18 billion) in a 2018 initial public offering. Billionaire founder Wang Xing pledged to ramp up cost discipline as the growth of its bread-and-butter meal delivery business begins to subside.

“Growth is decelerating. The industry will continue a modest growth rate in 2019,” the CEO told analysts on a conference call.

The company will be “more disciplined and selective as to where and when to allocate capital”.

Meituan intends to focus on food-related initiatives — such as restaurant management — that can augment and complement its core business, Wang said. And it will keep trying to reduce losses by curbing subsidies in areas such as car-hailing and bike-sharing. Its hotel business, which goes up against Alibaba’s Fliggy, is already profitable, he added.

Revenue climbed to 19.8 billion yuan in the fourth quarter from 10.5 billion yuan a year ago. — Bloomberg