---
title: "Meituan Loses 15.6 Billion Yuan in a Year, Begins to 'Hibernate'"
description: "Meituan founder and CEO Wang Xing has been keeping a low profile and encouraging reading over the past six months. In 2021, he became more cautious, spending more time reading, meeting quietly, and reflecting. The company reported a net loss of 15.6 billion yuan for 2021, largely due to a 3.4 billion yuan fine and heavy investment in new businesses like community e-commerce."
author: "苗正卿"
publisher: "New Distribution"
email: "zhaobo258@gmail.com"
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published: "2022-03-30"
language: "en"
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# Meituan Loses 15.6 Billion Yuan in a Year, Begins to 'Hibernate'

> Meituan founder and CEO Wang Xing has been keeping a low profile and encouraging reading over the past six months. In 2021, he became more cautious, spending more time reading, meeting quietly, and reflecting. The company reported a net loss of 15.6 billion yuan for 2021, largely due to a 3.4 billion yuan fine and heavy investment in new businesses like community e-commerce.

Meituan founder and CEO Wang Xing has been keeping a low profile and encouraging reading over the past six months.
An internet veteran who has known Wang Xing for over 20 years revealed that in 2021, Wang Xing was more "low-key" than before. "He declined multiple gatherings, avoided several events, and became more cautious when chatting with friends." Another person familiar with Wang Xing revealed that this former internet celebrity, known for "daring to speak and act," spent more time in 2021 reading, meeting guests quietly, pacing alone, or sitting in meditation.
**The 43-year-old Wang Xing developed a stronger interest in philosophy and history.** He strongly recommended to those around him the "dtv-Philosophielexikon" (published by German publisher dtv in 1991); and in 2021, another book he recommended within Meituan on a small scale was "The Boiling New Decade," which reviews the internet development history of the past decade, as he believed it "helps to see the past clearly."
Over the past year, the business world Wang Xing inhabits has undergone dramatic changes. Founders such as Huang Zheng, Zhang Yiming, and Su Hua successively resigned as CEOs. The state introduced new policies on key aspects such as the treatment of food delivery riders, "choose one of two," and platform commissions. Consumers and employees born after 1995 and even after 2000 began to flood into the internet world...
△Image source: Visual China
Recurring epidemics and a weak consumption market have made business difficult. Wang Xing became one of the few "counter-cyclical investors" in the internet circle: in less than a year, Meituan expanded its workforce by about 55,000 people and added net investment of about 30 billion yuan.
This pushed Meituan into a loss cycle that occurs only once every few years.
On the evening of March 25, Meituan released its 2021 financial report, showing annual revenue of 179.1 billion yuan and an adjusted net loss of 15.6 billion yuan. Compared with 2020, Meituan's revenue increased by 56% year-on-year, but its profit situation deteriorated—at the end of 2020, Meituan's adjusted net profit was still 3.1 billion yuan.
The fine in October 2021 was one of the key reasons for Meituan's substantial loss; at that time, Meituan was fined 3.4 billion yuan for "monopolistic behavior of choosing one of two." **The huge investment in new businesses further exacerbated Meituan's profit pressure.** The financial report showed that the operating loss of Meituan's new businesses and other segments expanded from 10.9 billion yuan in 2020 to 38.4 billion yuan in 2021, with the operating loss rate expanding by 36.6 percentage points year-on-year.
User growth is the most important signal in this annual report. In the past year, Meituan added 179 million annual transaction users. As of the end of 2021, Meituan's total user count reached 690 million, meaning Meituan's user base continues to rank after Alibaba and Pinduoduo but before JD.com.
Multiple analysts told Huxiu that due to the new policies for food delivery riders and adjustments to platform commission policies, **Meituan is facing greater cost pressure, and the ongoing epidemic and weak consumption market have further increased pressure on Meituan.** Since the fourth quarter of 2021, **Meituan has begun to slow the expansion of some business lines and started optimizing business profit models.**
"In the short term, Meituan will hold its ground and expand cautiously, waiting for the market to recover," said one analyst. Businesses like Meituan Select, which are "money-burning," have begun to adjust some strategies: **cost reduction and efficiency improvement have become key propositions.**
******The "Expensive" Retail Dream**
Wang Xing has a retail dream.
At the Q1 2021 earnings meeting, Wang Xing pointed out that the community e-commerce business could bring 300-400 million new users to Meituan, when Meituan's user base was about 570 million.
Using community e-commerce to attract new users proved feasible in Q2 2021. At that time, Meituan added 58.7 million new users in three months, and Wang Xing publicly stated that about half of the new users came from community e-commerce.
2021 became the fastest year for user growth in Meituan's history, and the community e-commerce business based on Meituan Select played a crucial role. **But this is a money-burning business.** In about a year, Meituan spent over 20 billion yuan on community e-commerce, with subsidies and infrastructure construction being key investments.
A source revealed that the scale of cold chain logistics construction exceeded Meituan's initial expectations. As the community e-commerce business deepened, Meituan found that without basic logistics, the business could not be carried out at all.
For example, some fresh produce, which serves as "traffic-driving products" in community e-commerce, must rely on cold chain logistics. Meituan's investment in community e-commerce is not limited to cold chain logistics.
Taking SKUs as an example, within a year, Meituan raised its community e-commerce SKU variety to the forefront of the market, achieving more than 1,300 SKUs in most cities. Expanding SKUs means Meituan needs to invest more BD resources for promotion and build capillary-like networks at more endpoints.
Focusing on community e-commerce was Meituan's key strategy in 2021. The logic behind it is: the lower-tier market is widely regarded by internet giants as a key potential user pool. **Through community e-commerce, Meituan can quickly "gather" a group of highly price-sensitive users in the lower-tier market.** When they are introduced to the main app, they become "cost-effective" new traffic for other consumption scenarios.
The core factor that made Meituan dare to "burn money" to expand its community e-commerce business is that its food delivery and in-store businesses have become increasingly mature.
Taking Meituan's food delivery catering business as an example, in 2021, Meituan's revenue from this segment reached 96.3 billion yuan, a year-on-year increase of 45.3%; net profit increased from 2.8 billion yuan in 2020 to 6.2 billion yuan.
After the adjustment of food delivery rider policies, Meituan stabilized this segment by optimizing its profit model. It is worth noting that after a year of adjustment, Meituan's operating profit margin for food delivery catering rose from 4.3% to 6.4%.
Meituan's in-store, hotel, and travel businesses also showed a similar trend: the basic market is becoming increasingly stable, and the profit model is gradually optimizing.
In 2021, despite the impact of recurring epidemics in some tourist areas, Meituan's revenue from this segment still reached 32.5 billion yuan, a year-on-year increase of 53.1%. It is worth noting that the profit of this segment has exceeded that of food delivery catering. In 2021, Meituan achieved an operating profit of 14.1 billion yuan through in-store, hotel, and travel businesses.
In contrast, **Meituan's new businesses, mainly community e-commerce, have not yet entered the "mature period."** In 2021, the operating loss rate of Meituan's new businesses expanded by 36.6 percentage points year-on-year. Although the operating loss rate narrowed quarter-on-quarter in Q4, **it remains Meituan's number one "money-burning project" to this day.**
Two deep-seated problems are hidden behind Meituan's continuous user acquisition through community e-commerce.
First, **Meituan's new user growth rate is showing a slowdown trend in 2021.** By Q4, the situation of "adding 50 million users in three months" no longer occurred. Although this is related to factors such as the weak macro consumption market, as a new traffic engine, **the sustainability of community e-commerce user acquisition deserves re-examination.**
In addition, **the 179 million new annual transaction users have not truly converted into Meituan's monthly active users.**
In March 2021, Meituan's MAU was about 160 million, while in January 2022, it was about 120 million. The difficulty of conversion can be more intuitively felt from the user growth of Meituan's food delivery catering: in 2021, Meituan's annual transaction users grew by 35.2% year-on-year, but the annual transaction users of food delivery catering grew by only 13%.
It is worth noting that **to improve "conversion and user acquisition efficiency," Meituan is adopting a more "aggressive" marketing strategy.**
In Q3 2021, Meituan's sales and marketing expenses reached 11.4 billion yuan, and in Q4, this expenditure still reached 11.2 billion yuan. It is worth noting that a large portion of Meituan's sales and marketing expenses is used for "user incentives," which are common subsidies.
This will also be a key issue Meituan faces in 2022: how to efficiently convert new users attracted by the community e-commerce business into users of other Meituan consumption scenarios.
**And the "winter" in the catering industry is making things more complicated.** A source told Huxiu that one of the reasons Meituan increased subsidies starting in Q3 2021 is that **some offline merchants began to adjust food delivery prices due to rising raw material costs, and under the weak consumption trend, some consumers are extremely price-sensitive.** This means the platform needs to alleviate the "price pressure" of some users through subsidies.
At the beginning of 2022, with the complex and changing international situation, prices of raw materials such as wheat, coffee beans, and paper rose rapidly, and some products showed no downward trend in the short term.
This will be a key challenge for Meituan: once more catering merchants raise prices due to cost pressure, will the "conversion" process of the "highly price-sensitive users" attracted by community e-commerce become more difficult?
******Testing Meituan's "Digestive Capacity"**
The seats in Meituan's meeting rooms are still hard.
After Meituan completed the largest expansion in its history in 2021, these cheap chairs, averaging no more than 65 yuan, became the target of "complaints" from about 55,000 new Meituan employees.
But such complaints quickly disappeared. Most newcomers saw or heard about founder Wang Xing's daily routine: he can sit on these cheap chairs for hours without changing expression, listening to reports ranging from "department adjustments" to "cabbage transportation."
**"Saving money" can almost be considered one of the most frequent words within Meituan in 2021.** After being fined 3.4 billion yuan in October 2021, **Wang Xing and Meituan's frugality became more pronounced.** For example, after the surge in employee numbers, the number of microwave ovens provided for heating lunch did not increase explosively, and some old microwave ovens were "repaired" and continued to be used rather than replaced with new ones.
With about 55,000 newcomers joining, Meituan's employee size doubled in less than a year. This brought the "digestion" test: these employees include not only post-95s who just graduated, but also internet veterans who have worked at major companies like ByteDance and JD.com for more than ten years.
Meituan tried to eliminate differences in newcomers' personalities, mindsets, and even temperament and values through the "most systematic" "new employee training" in the internet circle: among today's internet giants, Meituan conducts training in a "5-day full-pay" model and holds exams after each training segment.
But some differences may not be eliminated through 5 days of intensive training. For example, when a group of post-95s full of "big factory dreams" enter Meituan, they are having an "impact" on Meituan's existing characteristics of "enduring hardship, fighting hard battles, taking initiative, and wolf culture."
A post-95 new employee told Huxiu that when she saw Meituan's gym, she was slightly disappointed—she had visited ByteDance's gym and seen Ant's gym in her classmates' Moments. In comparison, Meituan's gym was "slightly" small.
This post-95 described her original big factory dream: "It not only has a bright financial prospect, but also has better hardware facilities and office environment than most companies." But her "disappointment" was soon dispelled by a surprise: after a month of employment, she found that Meituan does not work overtime on weekends.
Meituan has no 996 culture, and even internally does not encourage "formal overtime philosophy." "Our younger generation longs for life not to be swallowed by work, at least to have a few hours of free time after work."
What Meituan needs to "digest" is not only the younger generation, **but also the veterans who carry the "cultural genes" of various major companies.**
A local BD who previously worked at another major company joined Meituan in 2021. This person told Huxiu that "upward management" is not very meaningful at Meituan; instead, two factors are more important: **achieving the ultimate goal, and saving money to the utmost in the process.**
Meituan needs to digest not only "people." With the adjustment of food delivery policies and community group buying policies, Meituan needs to adapt to a new "profit model." A source familiar with Meituan Select said that starting in the second half of 2021, Meituan Select has been increasing its emphasis on "profitability."
In the "key goals" set at the beginning of 2021, key indicators were mainly order volume, GMV figures, and user numbers. "This is an expansionary goal system, whose core logic is rapid expansion to increase market penetration." But in the second half of 2021, some goals were optimized, such as "loss rate" beginning to be emphasized in some cities, and the gross profit of some basic products became the focus.
The logic behind this is that under the multiple impacts of macro policy changes and overall weak consumption, **the cost pressure on business lines like Meituan Select is increasing.** Continuing the "money-burning expansion" to pursue coverage is no longer the best choice at the moment. After "digesting" these new variables, Meituan redesigned its goals and models.
A deeper issue is that Meituan is trying to "digest" the new users added in 2021: relying on new businesses like community group buying, Meituan added more than 100 million new users (annual active users) in one year. But from MAU and DAU data, another side can be seen—after these new users were attracted to Meituan's traffic pool by high-cost-performance products (such as vegetables), they have not yet been 100% converted into key users of other "Meituan scenarios."
In Meituan's most fundamental logic, these new traffic sources from community e-commerce should have been more efficiently converted into new increments for businesses like food delivery, travel, and in-store services. From the current state, Meituan still needs more time to "digest" and fully complete the conversion of new users.
At present, a critical year lies ahead for Wang Xing and Meituan. In the community e-commerce market, Meituan needs to complete deep cultivation while maintaining its existing market advantages, optimizing profitability on one hand and improving "consumption scenario conversion efficiency" on the other.
In the food delivery market, Meituan needs to further bear the pressure from high raw material prices, ongoing epidemics, and weak consumption under a thin-profit model, and continue to optimize costs and profit models based on this.
**In the short term, the burden on Wang Xing's shoulders even tends to increase.** A source revealed that after Wang Huiwen exited Meituan, the number of projects Wang Xing personally oversees increased. In 2021, he devoted more energy to company meetings, listening to reports, or directly participating in business strategy discussions.
He may not always sit at his workstation on the second floor of Hengdian Building, but he often shuttles between Meituan's various "office buildings." The project that costs Wang Xing the most effort is Meituan Select—the key to Meituan's community e-commerce business. During the most intense phase of business expansion, Wang Xing even personally participated in business meetings every morning.
This may be Wang Xing's "normal state" in 2022.
As he liked to say in early interviews—"War consists of waiting and suffering"; and as the five most frequent words in Meituan's Wangjing headquarters say, "Long-term patience."
Source: Huxiu APP (ID: huxiu_com)
**Are you "watching" me?**


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