Meituan’s Deep Loss Highlights the High Cost of China’s ‘Milk Tea’ Subsidy Battle

Meituan has found itself slipping into a significant quarterly loss as China’s increasingly aggressive food delivery competition reaches new heights. At the heart of this struggle is an expensive subsidy fight with Alibaba’s fast-growing instant commerce arm, a rivalry that has reshaped how millions of young consumers order everything from milk tea to quick lunchboxes. While the strategy aims to secure long-term loyalty, the immediate financial impact has been severe.

The company reported revenue of 95.5 billion yuan for the quarter ending in September, a small two per cent increase from a year earlier and below analyst expectations. The modest growth reflects a market where expansion now depends heavily on price cuts and incentives instead of natural demand. To keep its lead, Meituan has poured billions into subsidies, promotions and delivery discounts, creating a model where financial pressure grows even as customer activity rises.

The most striking figure in the latest results is the operating loss of 19.8 billion yuan. This dramatic shift from previous profitability shows how the subsidy war has transformed what was once a stable business into a costly battleground. Industry analysts note that the scale of subsidised milk tea orders alone has reached levels previously unseen in China’s delivery ecosystem. With younger consumers favouring low cost treats and convenience, both Meituan and Alibaba have been pushing higher delivery volumes while absorbing the additional cost themselves.

Alibaba’s instant commerce operation, which integrates food delivery, groceries and convenience items into a single fast response network, has become one of Meituan’s fiercest challengers. Its rapid rise has forced Meituan to defend its turf more aggressively. Every discounted drink or meal becomes part of a larger calculation about future dominance. The rivalry is not only about customer service but also about capturing the new generation of digital spending habits.

Behind the numbers lies a deeper change in China’s urban lifestyle. Consumers have become accustomed to ordering milk tea, snacks and meals at low subsidised prices multiple times a day. This shift has dramatically increased demand but created an environment where platforms feel compelled to offer even deeper incentives to remain competitive. What once were profitable order categories have become cost centres used mainly for attracting and retaining customers.

For Meituan, the challenge is to balance long term strategic goals with short term financial strain. While the company believes that investing in user growth is essential, continued operating losses could limit its ability to innovate or expand into other areas. Investors are watching closely to see whether the current approach will lead to sustainable market leadership or simply ballooning costs.

The broader takeaway from Meituan’s performance is that the subsidy driven delivery economy may be entering a new phase. Companies are realising that maintaining growth through price reductions alone is becoming increasingly unsustainable. How Meituan and Alibaba navigate this tense competition will influence not only their futures but also the direction of China’s entire on demand service industry.