Meituan Stock Price Tumbles, Govt Requires Service Fees to Be Lowered

China’s national Development and Reform Commission and other departments issued new guidelines on Friday, asking food delivery platforms to cut fees for restaurants to reduce their business costs.

At the “Two Sessions” meeting in 2021, the All-China Federation of Industry and Commerce has submitted a proposal, suggesting that take-out platforms should cut their fees. According to the proposal, it is acceptable for restaurants to charge a 10-15% delivery fee, but, in practice, the actual commission of small catering enterprises with limited brand influence reached as much as 18-20%.

After the document was released, Meituan‘s stock price fell 14.86% to HK $188 per share, leaving the company with a total market value of HK $1.15 trillion, a decrease of HK $200 billion from the day before.

Food delivery is the core income source for Meituan. According to its financial report, its revenue from its food take-out business in the third quarter last year was 26.48 billion yuan, accounting for 54.3% of the company’s total revenue. In the third quarter of 2021, the commission income of Meituan‘s food delivery business was 23.22 billion yuan. The number of orders completed in the quarter was 4.01 billion, with an average commission income of 5.787 yuan per order.

Online food delivery platforms were also told to give preferential fees to restaurants in regions hit by the pandemic.

Public financing guarantee institutions were encouraged to provide financial support for qualified small and medium-sized catering enterprises, especially those hit by recent outbreaks.

With regard to nucleic acid testing, the document pointed out that qualified catering enterprises are encouraged to carry out regular nucleic acid testing for employees free of charge, and subsidies are given to support them. In 2022, in principle, catering enterprises should be given subsidies of not less than 50% for the nucleic acid testing of regular employees.

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Meituan‘s share price has fallen to its lowest point since July 2020, and today happens to be the birthday of Wang Xing, founder of Meituan.