If you have been in China in recent years, you’ll likely have seen the ubiquitous, yellow-jacketed delivery drivers that work for Meituan Dianping (HKEX: 3690).
But is the company merely a food delivery app? Some readers may be surprised to know that it has a sizeable presence in the online travel market in China as well as entering the highly lucrative online grocery market too.
Whether you are thinking of investing in the company or just curious about what it does, here’s everything that investors need to know about Meituan Dianping and its many exciting businesses.
Meituan Or Dianping?
Meituan Dianping’s history is fascinating as its business has morphed over the years. Today’s company can actually be traced back to a 2015 merger of two separate companies; Meituan and Dianping.
Meituan, itself founded in 2010, was a Groupon-like (group-buying) company that was backed by one of the OGs of the China tech scene; Alibaba. Meanwhile, Dianping was originally a restaurant review smartphone app that was backed by WeChat and gaming giant Tencent.
The decision to merge came as both companies wanted to avoid a “cash burn” situation and a combined entity would better be able to fend off competition.
Scaling that growth has been impressive. Meituan’s founder and the company’s current CEO, Wang Xing, has helped transform the business into a food delivery and online travel heavyweight.
In 2018, the company listed its shares on the Hong Kong Stock Exchange, pricing its IPO at HK$69. Today, shares are more than double the listing price with Meituan Dianping’s current stock price sitting at around HK$170.
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Getting Meals And Goods To People
Meituan Dianping has become the default option for Chinese residents when it comes to food delivery. And with a population size of about 1.4 billion, that is a huge feat. According to the company 6M2022 announcement, it has 684.7 million Annual Transacting Users and 9.2 million Annual Active Merchants as of June 30, 2022. The Company operates in over 2,800 cities and counties in China. The numbers are huge and impressive.
It has also served a critical need for delivering meals to residents who have been locked down by China’s stringent Zero-COVID policy.
That’s one key reason why the company has managed to keep growing revenues throughout the Covid-19 pandemic while other Chinese tech giants have seen their top lines slow. In the third quarter of 2022, Meituan managed to post an impressive 28% year-on-year increase in its revenue to RMB 62.6 billion (US$12.2 billion).
Its main competitor in the food delivery segment is Alibaba-backed Ele.me but Meituan has managed to maintain its dominant position in the space with a market share of around 70%.
A lot of this was driven by its food delivery service but also by its highly-popular Meituan Instashopping service.
Launched in 2020 to deliver a range of goods to consumers, Meituan Instashopping has become a go-to platform for many Chinese consumers looking to buy everything from cosmetics to electronics.
That’s because Meituan strikes up partnerships with retailers to offer their goods on its platform but the firm’s highly-efficient delivery network in urban areas can get these products to consumers within an hour of them ordering.
The Meituan Instashopping service has continued to onboard new merchants at a fast clip and has expanded into categories such as supermarkets, flowers, liquor and beverages, non-food specialty stores, and pet care, among others.
Expanding Into Online Travel Services
When we think of Meituan Dianping, travel probably doesn’t come to mind. Yet the company has innovated to place itself in China as a key hotel booking platform.
By initially focusing on signing deals with smaller hotels in China’s lower-tier cities (a long-neglected sector) all the way back in 2013, Meituan’s online travel arm has managed to gain significant market share.
Dominating local hotel bookings, Meituan has become a serious competitor to the leader in the space – Trip.com – when it comes to hotel bookings within China.
In recent years, a move into securing higher-end hotels as partners has also seen some success for the company as it recently struck up collaborations with hotel brands like the Marriott Group.
While its travel arm has undoubtedly suffered from the Zero-COVID policy in China, Meituan’s hotel booking platform is also primed to benefit now that China is reopening to the world.
Getting Into The Groceries Business
While Meituan has its fingers in many pies, that doesn’t mean it’s slowing down when it comes to exploring new opportunities.
Companies like Meituan, and competitor Pinduoduo, have managed to erode the dominance of e-commerce giants like Alibaba and JD.com by pursuing a so-called “group-buying” strategy in the groceries market.
Essentially, Meituan has allowed residents in more rural areas to pool together in local communities – on Meituan’s platform – to purchase groceries and other daily essentials at bulk discount prices.
By empowering individuals with rising incomes, this form of social commerce has taken off and is now common throughout Chinese cities.
In the second half of 2022, Meituan took the step of rebranding its group-buying platform – Meituan Select – to Mingrida Supermarket as it ups its focus on the groceries market in China.
China’s fresh groceries market was estimated to be worth a whopping RMB 9 trillion in 2022 and is still expected to grow in the coming years.
A lot of this spending is still carried out in physical brick-and-mortar stores, creating a compelling growth opportunity for the likes of online providers like Meituan.
Meituan Is Capitalising On Multiple Levers Of Growth In China’s Digital Economy
Meituan started out as a minnow and any observer would willingly admit that what the company has achieved is impressive. That’s because it has operated and succeeded in an environment that has been dominated by megacap tech companies like Tencent and Alibaba.
However, Meituan’s innovation and willingness to enter new markets have benefitted the business as well as investors who bought the stock early on.
With multiple avenues for further growth in China’s burgeoning digital economy, Meituan is certainly a HK-listed tech stock to watch in the coming years.
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