China's Food Delivery Giants Under Pressure as Price War Escalates, Regulators Step In
China's online food delivery market is currently embroiled in a fierce "price war" that is significantly impacting the financial health of its major players: Meituan, Alibaba's Ele.me, and JD.com. This intense competition, dubbed the "takeaway war" or "involution," has led to billions of dollars in consumer discounts and merchant subsidies, squeezing profit margins and raising concerns about sustainability.
The Core of the Conflict:
Aggressive Discounting: The primary weapon in this war is massive subsidies and discounts offered to consumers and merchants. In the second quarter of 2025 alone, investment bank Goldman Sachs estimates these discounts and subsidies totaled around US$3.5 billion (25 billion yuan). Other estimates, such as from Nomura Holdings, project even higher figures, with approximately US$4 billion burned by Alibaba, Meituan, and JD.com in the June quarter.
New Entrant Ignites Competition: The escalation of this price war was largely triggered by JD.com's formal entry into the food delivery market in February 2025. Prior to this, Meituan held a dominant position. However, JD.com's aggressive investment plans, including over 10 billion yuan ($1.4 billion) to enhance restaurant quality on its platform, forced rivals to respond. Alibaba, through its Ele.me and Taobao Shangou units, has also significantly boosted its subsidies to compete.
Market Share Grab Drives Volume: The ultimate goal for these giants is to capture a larger share of China's vast and rapidly growing food delivery and "instant retail" market. These aggressive tactics have led to a marked increase in transaction volumes, with daily orders reportedly rising from 100 million at the beginning of the year to over 250 million recently.
Significant Financial Strain: While order volumes have surged, the financial toll on the companies is considerable:
Meituan, despite a 63% year-on-year profit increase in Q1 2025, faces "razor-thin" margins and a challenging Q2 outlook due to the intense competition. Its CEO, Wang Xing, has acknowledged that much of the growth from subsidies is a "bubble" and described the current competition as "irrational," stating they are "prepared to do whatever it takes to win the fight" even if it means significant spending.
JD.com's foray into food delivery is estimated to have led to losses exceeding 10 billion yuan in Q2 2025.
Alibaba's shares have dropped significantly (e.g., 28% from a March high in Hong Kong) due to concerns about the cost of this fight, despite its substantial cash reserves and diversified revenue streams.
Negative Share Price Impact: The "takeaway war" has negatively impacted the share prices of these companies. Alibaba, Meituan, and JD.com, which collectively account for nearly 20% of the Hang Seng TECH index, have seen their stock values decline, leading some to colloquially refer to the index as the "takeaway index" due to its volatility driven by these three major players.
Regulatory Intervention and Tighter Oversight:
SAMR's Warning: China's State Administration for Market Regulation (SAMR), the country's top market regulator, has intervened. On July 18, 2025 (and reiterated on July 21, 2025), SAMR summoned prominent online food delivery companies, including Ele.me, Meituan, and JD.com.
Key Directives from Regulators: SAMR warned against:
Below-cost sales: Engaging in pricing strategies that are unsustainable and primarily intended to eliminate competition.
Opaque algorithms: Expressing concerns about how platform algorithms might prioritize certain merchants or delivery routes, potentially distorting market fairness.
Market distortion: Highlighting the overall negative impact of hyper-competition on the industry's health and competitive landscape.
Fair Competition: Urging companies to adhere strictly to e-commerce, anti-unfair competition, and food safety laws.
"Rational Competition": Encouraging companies to adopt more sustainable and fair business practices that benefit all stakeholders: consumers, merchants, delivery riders, and platform operators.
Beyond Price: Social Responsibilities: Regulators are also emphasizing the need for companies to fulfill their social responsibilities, including addressing concerns about delivery driver health and welfare and ensuring food safety, issues that can be compromised by the relentless pursuit of lower prices and faster deliveries.
Outlook:
The regulatory intervention signals tighter oversight and a concerted push for the industry to pivot towards more sustainable business models after years of rapid, cash-burning growth. While the intense price war has been a temporary boon for consumers enjoying cheap meals, it has created significant financial strain for the delivery giants. The coming months will likely see these companies temper their aggressive promotional activities as they navigate stricter regulations and seek a more balanced path to profitability.
I'm Aisha shehu
Talksocialtalka News
