This is an English adaptation of a FoodBud historical article originally published on October 25, 2021.
As online traffic growth plateaued and antitrust scrutiny intensified, Meituan began looking offline for incremental growth. One path was operating its own small restaurant brands; another was investing in foodservice chains that could capture sector growth.
Recent media reports said Meituan had opened restaurants called Chan A Li in Zhengzhou and Beijing, focused on mala xiangguo. The move suggested an early test of a self-operated chain restaurant model.
According to Tianyancha, the Chan A Li trademark had been filed by Beijing Sankuai Technology Co., Ltd., Meituan's operating entity. The Beijing store's business license listed Beijing Shixiu Catering Management Co., Ltd. as the operating company, with Kang Kai as legal representative. Public information identified Kang Kai as general manager of Meituan Waimai's innovation business unit.
The test did not appear immune to normal restaurant execution risk. Even as a Meituan-linked store, Chan A Li had a Dianping score of only 3.7, and poor performance still drew negative reviews.
This was not Meituan's first move into offline restaurant outlets. In 2019, Meituan opened Meixiang Xiaochu in Beijing's Wangjing area, focused on Sichuan cuisine, and also launched its own milk tea brand, Meixiang Meicha. Meixiang Xiaochu had since closed.
In October 2021, Meituan had just absorbed a major antitrust penalty. On October 8, China's State Administration for Market Regulation fined Meituan RMB 3.442 billion, equal to 3% of its 2020 domestic revenue, over exclusivity practices known as "choose one from two."
Since Meituan's Hong Kong listing at HKD 69 in 2019, its share price had first fallen below the IPO price to around HKD 40, then surged during the pandemic bull market from roughly HKD 70-80 to about HKD 450. Antitrust and labor-compliance concerns later pushed it down to around HKD 180; after the fine was settled, the price recovered to roughly HKD 290.
In food delivery, Meituan held a dominant position. Its market share had stayed above 60% in recent years and approached 70% in 2020. From 2018 to 2020, Meituan's share of restaurant delivery was 62%, 64%, and 69% respectively.
Its rider network also gave it a major infrastructure advantage over Ele.me. Around mid-2021, Meituan had 1.2 million daily active riders, while Ele.me's Fengniao network had 850,000 monthly active riders in the same period a year earlier.
Meituan's bargaining power came not only from the traffic of the Meituan and Dianping apps, but also from delivery infrastructure and scale effects. Exclusivity helped defend against competitors, but more importantly it expanded the merchant pool available to attract users and improve conversion from traffic to transactions.
After the antitrust reset, the core question became how Meituan's delivery business could keep growing.
According to Meituan's public communications, Meituan Delivery had developed nearly 10,000 delivery stations and front-warehouse network sites nationwide. Its network covered 2,800 cities and counties, serving 6.3 million merchants, 460 million consumers, nearly 4 million riders, and other ecosystem partners.
Meituan was investing in smart pickup cabinets and intelligent delivery, including drones and autonomous vehicles. The underlying goal was labor reduction. If automation reached a sufficient level, a network that once required 1.2 million riders might need only a quarter of that number, with human riders used for peak-load supplementation.
Beyond reducing labor and improving efficiency, Meituan was also working to bring more large chain restaurant companies onto its platform. But given Meituan's existing influence, continued high-speed merchant growth in China would be difficult; overseas expansion would likely be required for that scale of growth.
Another route was to create affiliated restaurant brands, like Chan A Li, to increase the platform's own merchant supply.
With its large volume of delivery data, Meituan could know which products sell best in which districts and at what times. If exclusivity was no longer available, operating affiliated merchants could become another way to compete with smaller merchants on the platform.
Prepared dishes also made this more feasible. As central kitchens and factory production lines matured, standardized products could be mass-produced, then finished with a final heating step in ghost kitchens before delivery to consumers.
Under that model, Meituan could consolidate more merchant-side profit. It could also address a second problem: if Meituan's own user base, or the broader delivery market, hit a ceiling, these affiliated merchant brands could potentially also operate on Ele.me and compete for users and orders there.
Cold chain infrastructure represented another growth path. Meituan had already been building in cold chain, and cold chain plus prepared dishes and ingredients could serve not only restaurant supply-chain needs but also household demand.
For restaurant brands, Meituan operating its own chains would create tension. As the platform referee in food delivery, becoming a restaurant operator as well could alienate merchants. This "referee and player" model was common among internet companies, but it often frustrated the operators competing on the platform.
Building chain restaurant brands was not Meituan's core capability. Small-scale experiments were manageable, but the larger strategic opportunity may have been investment.
With access to large volumes of restaurant data, Meituan could use its information advantage to invest in foodservice companies with the potential to become major players, sharing in the industry's growth. Other internet giants were pursuing similar logic.
Meituan's Longzhu Capital had invested in several high-profile restaurant and beverage companies, including Mixue Bingcheng, Guming, Manner, and Heytea. At the time, Heytea, Manner, and Mixue Bingcheng were all subject to IPO rumors, while Mixue Bingcheng's listing process was more concrete because it had already entered IPO tutoring.
When online traffic is peaking and monopoly behavior is under regulatory scrutiny, moving offline for incremental growth becomes attractive. If Meituan cannot build the brands itself, funding the operators may be the more practical path.
Note: IPO, share-price, investment, regulatory, and market-share figures are historical as of the original article date, October 25, 2021.