Chapter 3

Meituan's advantage is a density edge: the largest connected pools of consumers, merchants and couriers in China, all feeding one delivery network. That density is what lets it earn the thin per-order margin traced in Unit Economics — a rival at a fraction of the order volume serves each order at higher cost. The 2025 subsidy war tested exactly this. It showed the edge protects profitability rather than share: well-capitalised rivals bought volume at will, but Meituan says its cost-per-order lead widened, not narrowed.

What the density is made of

Meituan is a three-sided marketplace, and the sides reinforce each other. More consumers draw more merchants; more merchants draw more consumers; the combined order flow keeps a dense courier fleet busy, which shortens delivery times and lowers cost per drop, which draws more consumers again. The scale of each side is now very large. More than 800 million consumers use Meituan's services, and daily active users on the app grew over 20% year over year in the third quarter of 2025 [1]. The platform helps over 10 million merchants generate income [2]. And the courier fleet is counted in the tens of millions: Meituan's occupational-injury insurance program alone covered over 16 million couriers across 17 provinces and cities by the end of 2025 [3].

Sources: consumers and DAU growth, Q3 2025 earnings call [4]; merchant count, Q3 2023 earnings call [5]; 16 million insured couriers, FY2025 Annual Report [6].

The self-reinforcement is visible in the operating record. Meituan has, for years, attributed its results to the same three-part phrase — its "competitive strength in consumer base, merchant base and delivery network" in 2021 [7], and "competitive advantage in merchants, consumers and delivery network" a year later [8]. By 2025 the same flywheel produced annual transacting users, transaction frequency and ARPU all at record highs, even in the worst profit year in the company's history [9]. Consumer engagement kept rising while the economics were under attack — a sign the demand-side moat held even as the profit pool did not.

Density is the cost advantage

The reason density matters for a professional investor is that it converts directly into cost per order. A courier who can chain several nearby deliveries on one trip costs far less per order than one idling between distant drops; a dispatch algorithm improves as it routes more orders across more couriers and merchants in the same neighbourhood. Meituan describes its dispatch system as "the world's most efficient" and says it can support over 150 million peak daily orders [10]. That is the mechanism behind the roughly ¥4.7 per-order delivery cost dissected in Unit Economics: it is low because the network is dense, and it would be higher for anyone operating at a fraction of the volume.

Order density has compounded over the cycle. Peak daily order volume moved from above 50 million in 2021 [11] to above 60 million in 2022 [12] and surpassed 150 million on a single day in July 2025 during the war [13].

The 2025 peak was inflated by war-time subsidies across all platforms and is not a clean run-rate. Sources: FY2021 [14] and FY2022 [15] Annual Reports; Q2 2025 earnings call [16].

The 2025 stress test

The war is the clearest evidence on both sides of the moat question, and it cuts two ways. Against the moat: density did not stop entry. As set out in The Business, JD.com launched food delivery in early 2025 and Alibaba escalated through Taobao Instant Commerce and Ele.me; industry order volume spiked to the 150-million-per-day level as three well-funded platforms subsidised consumers at once. A leader with more than half the market, tens of millions of couriers and a decade of dispatch data could not price the entrants out — they simply funded losses to buy volume. Meituan's own filings capture the result only as "intensified competition," but the cost is explicit: selling and marketing spend rose 60.9% and Core Local Commerce swung to an operating loss [17]. A moat that can be flooded with enough capital is not an entry barrier.

For the moat: Meituan says it fought the war from a lower cost base, and the war widened rather than closed the gap. Management stated its "unit economics advantage" — the per-order cost-and-revenue gap versus rivals — "has further widened amid intensified competition" [18], and framed the outcome as a defence built on "competitive moat across supply, user base and fulfillment" that lets it "sustain leadership with higher subsidy and operational efficiency" [19]. The recovery pattern is consistent with a lower-cost operator outlasting subsidised entrants: the Core Local Commerce quarterly operating loss narrowed to ¥10.0 billion in the fourth quarter of 2025 from ¥14.1 billion in the third [20], and management reported per-order unit economics improving significantly quarter over quarter into early 2026 [21].

These two readings are not contradictory. The density moat looks real as a cost moat and weak as a share moat: it does not prevent a capitalised rival from contesting the profit pool, but it does mean that rival contests it at a worse per-order economics than Meituan — so a war of attrition costs the challenger more. On that logic Meituan is the likely last one standing, but only after a stretch of collectively unprofitable competition it cannot unilaterally end.

The transferability tell

The strongest evidence that the advantage is operational skill, not just incumbency, comes from outside China. Keeta, Meituan's overseas delivery brand, rebuilt density from scratch in Hong Kong and reached positive unit economics there in the fourth quarter of 2025 [22], with management citing improving operating efficiency across all its markets [23]. A playbook that can be exported and turned profitable in a new city is capability, not merely a home-turf lead. The counter is that Keeta remains small and loss-making in aggregate, with heavy upfront investment in the Gulf and Brazil still ahead — evidence of transferable skill, not yet of transferable profit.

What is asserted versus disclosed

The moat case leans on figures Meituan no longer publishes. It stopped disclosing standalone food-delivery order counts and segment margin after 2022 (see Unit Economics), so the central claim — that its per-order economics beat rivals' — is management's assertion, not an audited number a skeptic can independently check. The efficiency lead is plausible on the mechanics of density and consistent with the loss narrowing, but it is asserted.

Part of the 2025 cost increase is also structural rather than transient subsidy. Cost of revenue rose 22.2%, and management attributes it partly to "enriched benefits for couriers" and expansion of overseas businesses, not only to incentives [24]. A denser network is cheaper per order, but the courier base that creates the density carries a welfare cost that is now rising and unlikely to reverse.

On the evidence, the density moat is real but bounded: it makes Meituan the low-cost operator and the probable survivor of a price war, yet it is a margin moat, not a share fortress — a rival with a deep balance sheet can contest the profit pool whenever it chooses, and did. The read would change if post-war food-delivery share settled durably below half, or if a competitor demonstrated comparable per-order economics; it would strengthen if Meituan restored a positive Core Local Commerce margin while holding share once subsidies normalised. Meituan set itself the yardstick at its 2018 IPO — 100 million daily orders at ¥1 of profit each; by 2025 it had passed 150 million orders but not the ¥1, and management now expects to reach both together only after several more years [25]. That gap — volume proven, per-order profit still to be re-earned — is the moat question stated in the company's own numbers.