Meituan's Retail Pivot: How China's Delivery Giant Is Rebuilding After Its Subsidy Era Ends

Inspired by Macrostream — "After Cutting Losses by 9.6 Billion Yuan, Meituan Turns to Retail for Growth"

The End of the Subsidy Cycle

Meituan has entered a new chapter. After years of aggressive subsidies that defined China's food delivery wars, the company is now shifting its strategic focus toward retail — and the numbers suggest the transition is already underway.

In Q1 2026, Meituan reported revenue of 91 billion yuan, up 5.6% year-on-year, with operating losses narrowing to 6.5 billion yuan — a sequential improvement of 9.6 billion yuan from the previous quarter. The adjusted net loss of 4.968 billion yuan beat market expectations. Yet here's the catch: just a year ago, Meituan posted an operating profit of 10.6 billion yuan in the same period. The gap between then and now exceeds 17 billion yuan.

CEO Wang Xing was frank on the earnings call: "Order growth driven solely by subsidies is unsustainable." The message is clear — the era of using discounts to buy GMV is over.

Why This Transition Matters

Three strategic pillars are emerging:

• Unit economics improvement — The focus is shifting from order volume to transaction quality. Higher-value orders with better margins are the new target, even if total order counts grow more slowly.
• Retail expansion — Xiaoxiang Supermarket (小象超市) now operates in 55 cities with over 2,000 pre-warehouses. Approximately 60% of these locations are already profitable — a remarkable achievement for a business that was barely a concept two years ago.
• Operational efficiency — Rather than chasing geographic expansion, Meituan is prioritizing same-store improvement and delivery cost optimization.

The Numbers Behind the Strategy

The first quarter results reveal a company in transition:

Xiaoxiang Supermarket stands out as the most compelling growth story. Revenue of 18 billion yuan with 40.7% year-on-year growth — and most importantly, the business is now cash-flow positive in the majority of its locations.

The Competitive Dynamic

The broader context is important: the food delivery sector's subsidy war is cooling across the industry. When competitors stop trying to outspend each other on discounts, what remains is genuine operational efficiency. This benefits Meituan, which has the largest network and the most refined logistics system in China.

My take: Meituan's competitive moat in 2026 is not the quantity of riders, but the density of its delivery network combined with its growing retail infrastructure. A user who can order groceries, fresh produce, and meals from the same app — with 30-minute delivery — has little reason to switch platforms.

International Caution

Overseas expansion via Keeta is showing mixed results. The platform continues to grow in Hong Kong and Saudi Arabia while maintaining operations in other Middle Eastern markets and Brazil. However, Meituan deliberately delayed its entry into Rio de Janeiro and reduced some local team sizes in Brazil due to intense competition from rivals who signed exclusive restaurant agreements.

Wang Xing's explicit guidance: "This year, we will prioritize operational optimization over expanding into new markets." This is a notable shift from the aggressive international push of 2024-2025.

AI as Long-Term Infrastructure

Meituan's R&D spending reached 7 billion yuan in Q1, up 22% year-on-year. The AI assistant "Xiaotuan" now occupies the primary entry point in the Meituan app. The company also launched LongCat-2.0-Preview in April, a model with over 10 trillion parameters. However, the direct monetization pathway for AI remains unclear — Meituan views AI as a long-term operational efficiency tool, not a short-term revenue driver.

What Comes Next

Meituan appears to have passed the worst point in its restructuring. Losses are narrowing, retail is growing faster than expected, and the competitive dynamics have become more rational. However, the company still faces significant questions:

• Can Xiaoxiang Supermarket maintain its growth trajectory while improving profitability?
• Will the overseas markets ever contribute meaningful revenue?
• When will AI investments translate into measurable efficiency gains?

For now, Meituan is executing a disciplined pivot — away from subsidy-driven GMV and toward a more sustainable model built on retail integration and operational excellence.

Source: Macrostream — "After Cutting Losses by 9.6 Billion Yuan, Meituan Turns to Retail for Growth"