articles Ratings /ratings/en/research/articles/210602-bulletin-execution-risk-builds-as-china-s-meituan-ramps-up-community-buying-11983236 content esgSubNav
In This List

Bulletin: Execution Risk Builds As China's Meituan Ramps Up Community Buying

Root and Branch - July 2021: ELFA Survey, Greenium and KPIs


COVID-19 Impact: Key Takeaways From Our Articles


Bulletin: Neoenergia S.A.'s Mid-Year Results On Track To Meet Expectations Despite Higher Energy Costs


U.S. Satellite Providers Diverge In The Struggle To Stem A Shrinking Market: An In-Depth Peer Comparison Of DISH DBS Corp. And DirecTV Entertainment Holdings LLC

Bulletin: Execution Risk Builds As China's Meituan Ramps Up Community Buying

HONG KONG (S&P Global Ratings) June 2, 2021--S&P Global Ratings today said that execution risks are rising for Meituan (BBB-/Negative/--) as it continues to incur substantial cash outflow to build up its presence in a promising but unproven business model. China's biggest food delivery firm is accelerating investment in community buying, an emerging retail model involving bulk buying online. The buildout led to a sharp operating loss in the first quarter of 2021, which we anticipate could persist for the next two years until the segment reaches critical mass. Community buying is attracting more competition, forcing early entrants such as Meituan to invest ever larger sums to keep up.

Meituan's financial discipline during this build-out phase and the intensity of its competition will play an important role on our investment-grade ratings on the firm. Meituan's operating loss widened to Chinese renminbi (RMB) 4.8 billion in the first quarter of 2021, from a loss of RMB2.9 billion in the fourth quarter last year. This was largely due to investments in its community buying vehicle, Meituan Select, and was within our expectations.

The firm's losses will likely worsen over 2021. Meituan is on track to record negative EBITDA of RMB15 billion-RMB20 billion in both 2021 and 2022. It should also see free operating cash outflow of RMB23 billion in 2021, and RMB9 billion-RMB14 billion in 2022.

The solid performance of Meituan's food delivery, and in-store hotel and travel segments have been insufficient to offset investment spending associated with community buying. Even without locking merchants in by forcing them to choose just one platform, Meituan saw healthy growth in users and merchants in the past quarter.

The negative outlook on our ratings on Meituan reflects the high execution risk involved in Meituan Select, which could incur larger losses in free operating cash flow over a longer period than we now expect.

Community buying generally involves a network of shoppers working with a leader to find items and take delivery. Meituan charges a price mark-up for offering the platform on which transactions take place and providing warehouse and logistics services.

Related Research

This report does not constitute a rating action.

Primary Credit Analyst:Aras Poon, Hong Kong (852) 2532-8069;
Secondary Contacts:Ava Chang, Hong Kong (852) 2533-3530;
Sandy Lim, CFA, Hong Kong + 852 2533 3578;

No content (including ratings, credit-related analyses and data, valuations, model, software or other application or output therefrom) or any part thereof (Content) may be modified, reverse engineered, reproduced or distributed in any form by any means, or stored in a database or retrieval system, without the prior written permission of Standard & Poor’s Financial Services LLC or its affiliates (collectively, S&P). The Content shall not be used for any unlawful or unauthorized purposes. S&P and any third-party providers, as well as their directors, officers, shareholders, employees or agents (collectively S&P Parties) do not guarantee the accuracy, completeness, timeliness or availability of the Content. S&P Parties are not responsible for any errors or omissions (negligent or otherwise), regardless of the cause, for the results obtained from the use of the Content, or for the security or maintenance of any data input by the user. The Content is provided on an “as is” basis. S&P PARTIES DISCLAIM ANY AND ALL EXPRESS OR IMPLIED WARRANTIES, INCLUDING, BUT NOT LIMITED TO, ANY WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE, FREEDOM FROM BUGS, SOFTWARE ERRORS OR DEFECTS, THAT THE CONTENT’S FUNCTIONING WILL BE UNINTERRUPTED OR THAT THE CONTENT WILL OPERATE WITH ANY SOFTWARE OR HARDWARE CONFIGURATION. In no event shall S&P Parties be liable to any party for any direct, indirect, incidental, exemplary, compensatory, punitive, special or consequential damages, costs, expenses, legal fees, or losses (including, without limitation, lost income or lost profits and opportunity costs or losses caused by negligence) in connection with any use of the Content even if advised of the possibility of such damages.

Credit-related and other analyses, including ratings, and statements in the Content are statements of opinion as of the date they are expressed and not statements of fact. S&P’s opinions, analyses and rating acknowledgment decisions (described below) are not recommendations to purchase, hold, or sell any securities or to make any investment decisions, and do not address the suitability of any security. S&P assumes no obligation to update the Content following publication in any form or format. The Content should not be relied on and is not a substitute for the skill, judgment and experience of the user, its management, employees, advisors and/or clients when making investment and other business decisions. S&P does not act as a fiduciary or an investment advisor except where registered as such. While S&P has obtained information from sources it believes to be reliable, S&P does not perform an audit and undertakes no duty of due diligence or independent verification of any information it receives. Rating-related publications may be published for a variety of reasons that are not necessarily dependent on action by rating committees, including, but not limited to, the publication of a periodic update on a credit rating and related analyses.

To the extent that regulatory authorities allow a rating agency to acknowledge in one jurisdiction a rating issued in another jurisdiction for certain regulatory purposes, S&P reserves the right to assign, withdraw or suspend such acknowledgment at any time and in its sole discretion. S&P Parties disclaim any duty whatsoever arising out of the assignment, withdrawal or suspension of an acknowledgment as well as any liability for any damage alleged to have been suffered on account thereof.

S&P keeps certain activities of its business units separate from each other in order to preserve the independence and objectivity of their respective activities. As a result, certain business units of S&P may have information that is not available to other S&P business units. S&P has established policies and procedures to maintain the confidentiality of certain non-public information received in connection with each analytical process.

S&P may receive compensation for its ratings and certain analyses, normally from issuers or underwriters of securities or from obligors. S&P reserves the right to disseminate its opinions and analyses. S&P's public ratings and analyses are made available on its Web sites, (free of charge), and and (subscription), and may be distributed through other means, including via S&P publications and third-party redistributors. Additional information about our ratings fees is available at

Any Passwords/user IDs issued by S&P to users are single user-dedicated and may ONLY be used by the individual to whom they have been assigned. No sharing of passwords/user IDs and no simultaneous access via the same password/user ID is permitted. To reprint, translate, or use the data or information other than as provided herein, contact S&P Global Ratings, Client Services, 55 Water Street, New York, NY 10041; (1) 212-438-7280 or by e-mail to:

Register with S&P Global Ratings

Register now to access exclusive content, events, tools, and more.

Go Back