Changpeng Wan
Meta Description: China’s food delivery giants wage a costly subsidy war, unexpectedly boosting beverage stocks while threatening profitability. Analysis shows who wins and when relief may come.
Blitzkrieg Discounts Spark Market Turmoil
The streets of Chinese cities transformed into digital battlegrounds on July 5th as e-commerce giants unleashed unprecedented subsidies in a high-stakes food delivery war. Alibaba’s Taobao Quick Deals initiated nuclear-level discounts—”¥25 off 21,” “¥16 off 16,” even “0 yuan orders”—triggering instant consumer frenzy. Within hours, platforms were buckling under tsunami-like demand that mirrored Lunar New Year travel peaks.
Record-Shattering Order Volumes
Meituan achieved astonishing milestones amidst the digital stampede:
– 100 million daily orders by 8:45 PM
– 120 million orders by 10:54 PM
The overwhelming surge triggered protective shutdowns across Meituan’s systems, spawning “Meituan crashed” hashtags across social media. Meanwhile, Taobao Quick Deals claimed 80 million orders and launched a year-long ¥50 billion subsidy campaign, signaling enduring hostilities.
The Casualties Emerge
Capital markets responded with brutal immediacy to the subsidy-driven expenditures:
– Meituan shares plunged 4% to near 52-week lows
– JD.com and Alibaba stocks followed downward trajectory
– Three giants dragged Hang Seng Tech Index to 6-day losing streak
Profitability Under Siege
Goldman Sachs’ analysis revealed staggering costs behind the July fireworks. Quarterly investments totaling ¥25 billion foreshadowed deeper wounds:
“Benchmark scenario projects ¥41 billion annual loss for Alibaba’s food division, ¥26 billion for JD.com, and ¥250 million EBIT erosion for Meituan,”Goldman Sachs Report, July 2025
Surprise Champions Surface
While platform operators bled, beverage stocks harvested windfalls from the subsidy wars. Social media flooded with “free milk tea” screenshots as chains became unintended beneficiaries:
Tea Brewers Strike Gold
Shares soared across China’s beverage sector:
– Chabaidao: +15% intraday
– Gu Ming: +13%
– Naixue’s Tea: +10%
Mixue Bingcheng stores reported order slips stretching three meters long amid “staff crying from overload” viral moments.
The Packaging Windfall
Hengxin Life, disposable packaging supplier, delivered 6 consecutive gains culminating in 16% single-day surge—embodying what traders now dub “food delivery shovel stocks”: companies supplying essential infrastructure to the warring giants.
Strategic Calculus Beyond Subsidies
The User Acquisition Endgame
Goldman analysts decoded the strategic rationale: treat food delivery losses as customer acquisition cost for lucrative cross-selling. Meituan has perfected this—30-40% of food delivery users convert to higher-margin businesses like hotel bookings producing 30-40% EBIT margins.
Tangible Traffic Gains
Data validated the thesis:
– Taobao App DAU grew by 50 million to 410 million
– JD.com’s Main App DAU increased by 50 million to 170 million
JD noted 40% conversion from delivery users to core e-commerce clients.
The War’s Possible Endgames
Goldman outlined three potential outcomes:
Scenario 1: Meituan Holds Dominance
55:35:10 market split favoring Meituan through low-city strongholds. Short-term profitability sacrificed but potentially recovers later.
Scenario 2: Alibaba Ascends
¥50 billion investment creates duopoly with 45:45 share balance leveraging Taobao’s user scale.
Scenario 3: JD Emerges Competitor
150,000-strong dedicated rider army drives JD to sustainable 20% market position.
Long-Term Structural Shifts
While currently bleeding cash, the subsidy war accelerates fundamental industry transformation:
The Instant Commerce Horizon
Long-term projections estimate massive addressable markets:
– Food Delivery: ¥2.4 trillion by 2030
– Instant Retail: ¥1.5 trillion by 2030
Road to Profitability
Goldman anticipates game-changing shifts:
– User acquisition costs transferred to food subsidies
– Emerging profitability by 2027
– Investment loss peak within 12 months
The Optimistic Horizon
Despite massive cash incineration, Goldman Sachs maintains buy ratings across the sector. Strategic pivots highlight hope:
– Meituan’s withdrawal from 18 provinces
– Pinduoduo emerging unscathed
– Toward sustainable pricing by 2026
Tea shops counting profits while tech giants count losses reveals China’s unforgiving platform economics. For investors, beverage stocks offer rare shelter in food delivery’s storm—but watch monitoring demand changes when subsidies inevitably vanish. The ultimate winners will combine operational efficiency with disciplined cash management.
