00:00China's top food delivery group, Meituan, has seen profits crumble amid growing competition and intense price wars within the sector.
00:09On Wednesday, Meituan reported its adjusted net profit had fallen by 89% in the second quarter of this year,
00:17despite an almost 12% rise in revenue in the three months to June the 30th.
00:23Well, the delivery app, which also offers other services like bike sharing, ticket booking and maps, currently has a market of 60% to 70% in China.
00:34Well, regardless of this dominance, Meituan is staving off rising competition in the instant retail sector.
00:41Its biggest rivals, JD.com and Alibaba's LME, are making aggressive moves, both pledging billions of dollars in subsidies to boost sales.
00:53Well, for more of this, let's speak to the restaurant delivery strategist, Peter Backman.
00:58Peter, thank you very much indeed for joining me.
01:00What's gone so wrong?
01:02Hello, Jeff.
01:04What's gone wrong is what you have just pointed out, that there is immense and growing competition in the market.
01:12With Meituan, as you said, around about 65%, LME having most of the remainder, but JD.com entering the market earlier this year.
01:25So, competition has really been ramping up.
01:29Sale overall, the market is growing, but Meituan have needed to protect their position.
01:36And they've done that by pressing down on prices, which has had this huge, huge impact on their profits.
01:46And you can see what a tough market it is, can't you, Peter, when you walk around Beijing at dinner time.
01:51And there are hundreds and hundreds of delivery drivers, and they're all running.
01:56They're all running as fast as they can, because they have to deliver within a certain amount of time, otherwise people will go to their competitors.
02:04So, it is a very, very tough market, isn't it?
02:07It really is, not least driven by the activities of the delivery platforms themselves.
02:19You know, they've been offering lower and lower prices.
02:23You can get a coffee delivered for one yuan, for example, which is nuts.
02:30And you can see what happens when you drive prices down.
02:38Customers expect to pay less.
02:40If they expect to pay less, they're actually going to buy more, which drives up more delivery, more demand for drivers.
02:47So, it's a self-fulfilling rota that's driving the market as much as anything else at the moment.
02:57What do you think Meituan should do now?
03:00I think they've got to sit it out.
03:04They can wait until the competition is no longer so fierce, and they've got a lot of money to do that.
03:12I mean, although their profits fell in the last quarter, they're still profitable, and they've got quite a lot of money available.
03:25And the other thing that they can do, and which they are doing, is expanding overseas there into Saudi Arabia and Brazil at the moment, and that's only the start.
