Meituan Margins Collapse as China's Food Delivery Wars Return

China’s food delivery sector is once again caught in a cycle of profitability and destructive price wars, highlighting the challenges of sustaining long-term stability in the industry.

Despite regulatory attempts to rein in “disorderly competition,” major players like Meituan continue to experience sharp swings in margins as competition intensifies whenever financial performance improves. Meituan’s local commerce business, a key revenue driver, has seen its operating margin collapse from a four-year average of 19 percent to just 5.7 percent, underscoring the intensity of renewed price competition. Historically, whenever margins begin to recover, companies re-enter aggressive expansion phases, offering heavy discounts and subsidies to capture market share.

Key Highlights

• Meituan’s local commerce margin dropped from 19 percent to 5.7 percent
• China’s food delivery industry stuck in profit-price war cycles
• Regulators struggle to prevent disorderly competition

This cycle erodes profitability, creating a boom-and-bust pattern that regulators have struggled to break.

Analysts suggest that without fundamental structural reforms, such as sustainable pricing mechanisms or industry-wide agreements, Chinese food delivery giants will remain locked in this destructive loop. The sector’s reliance on high consumer demand, combined with low switching costs for customers, incentivizes platforms to continuously undercut one another.

Also Read: Alibaba Launches Membership, Escalates Meituan Rivalry

This recurring cycle highlights a broader challenge in China’s platform economy: balancing growth, profitability, and regulatory oversight in hyper-competitive markets. Without new measures, companies may continue to alternate between short-lived periods of profitability and destabilizing price wars, raising concerns over long-term industry health.