THE CHINESE GOVERNMENT ENDS THE FOOD DELIVERY WAR

This morning, I spoke with a Reuters reporter about the unprecedented war in China’s food delivery / instant retail market. One of the things I mentioned was that I was expecting the whole thing to end when the government would step in.

Recently, several articles have appeared in Qiushi, the official theoretical journal and news magazine of the Chinese Communist Party, criticising price wars and ‘involution’. Several trade organisations and retail networks had also spoken out against the volume-driven madness. But this morning I mentioned that thing would probably really stop if the SAMR (State Authority of Market Regulations), would take action.

And it happened today.

SAMR summoned Alibaba’s Eleme, Meituan and JD, and ordered them to:

▶️ strictly abide by the "E-Commerce Law of the People's Republic of China", "Anti-Unfair Competition Law of the People's Republic of China", "Food Safety Law of the People's Republic of China" and other laws and regulations

▶️ further standardise promotional behaviours

▶️ participate in rational competition

▶️ jointly build a good win-win ecology for consumers, merchants, food delivery riders and platform companies

▶️ promote the standardised, healthy and sustainable development of the catering service industry.

Earlier this week, Latepost interviewed Wang Puchong, CEO of Meituan’s Local Business division. In the interview, he had made it very clear that he didn’t want this war because it was pointless and only burning millions of cash reserves. Investors must have agreed with him because stock prices had taken a dive in recent weeks.

Latepost: "The total market volume of instant retail has doubled from an average of 100 million orders per day at the beginning of the year to 250 million orders last Saturday (July 12). How much of this is a bubble?" Wang Puchong: "Most of it is a bubble."

When I posted this quote on Twitter, someone corrected it to ‘Most of it is bubble tea’. That’s not far from the truth because the enormous increase in orders we have seen on the ‘Super Saturdays’, July 5th and 12th, were mostly created by heavily subsidised milk tea and coffee orders.

Wang had said that there were only three ways this war would end: 1) one side would be defeated or acquired, 2) a mutual retreat or 3) intervention from a higher authority. The first option would be very unlikely in the short term. The very rare interview by a top manager of Meituan seemed to invite Alibaba for option 2. But in the end, it was the third option, which I expected, that stopped the madness.

I guess we won’t see another ‘Super Saturday’ battle tomorrow.

-Ed