Meituan willing to sacrifice profitability for growth as business model shifts from subsidies to investments

Chinese food-delivery giant Meituan Dianping will continue to prioritise investments in new food-related businesses over profitability after reporting wider losses in the fourth quarter on Monday, according to its chief financial officer.

“Profitability is not our most important goal in the short term, and we’ll continue to invest in areas such as our restaurant management system, and build up our ecosystem for the users and the merchants,” said Chen Shaohui, CFO and senior vice-president.

Meituan’s net loss widened 57 per cent to 3.4 billion yuan (US$508 million), dragged down by its bike-sharing service Mobike, while revenues in the fourth quarter grew 89 per cent to 19.8 billion yuan and number of users grew 30 per cent to 400 million.

Some business segments, including hotel bookings, are already profitable, which proves that previous investments can yield positive returns, Chen said in an interview on Tuesday. “We need to think long-term and see the value in our losses. In 2019 we plan to increase investments in food-related services, while cutting investments in non-food segments.”

Yet, investors were uncertain of Meituan’s path to profitability as its Hong Kong-listed shares plunged 11.12 per cent to close at HK$52.35 on Tuesday.

A key contributor to the losses was dockless bike sharing firm Mobike, which Meituan acquired in April for US$2.7 billion. The unit was responsible for a loss of 4.55 billion yuan, over half of the adjusted net losses for Meituan in the 2018 financial year, excluding changes in fair value.