Source: Bohu Finance

On April 18,$MEITUAN-W (03690.HK)$In an internal email issued by CEO Wang Xing, a new round of structural adjustments was announced: the previously integrated Meituan platform, in-store business group, home business group, and basic R&D platform will be merged into the “core local business” sector, and it is Wang Puzhong who will become the core local business CEO.

At the same time, Meituan will no longer set up an in-store business group or a home delivery business group; the various departments under the original jurisdiction of the two business groups will be adjusted to directly fall under the “core local business.” In addition, Meituan has also carried out extensive transfers and rotation of middle management personnel and set up several sub-departments.

It is worth noting that this is Meituan's fourth structural adjustment this year. The last round of structural adjustments was in 2017.

The industry believes that when considered from a longer-term perspective, Wang Puzhong may be the final choice for the long-term adjustment of Meituan's core management since Wang Huiwen retired.

Why is the organizational structure being intensively adjusted?

In 2020, Douyin officially established a local lifestyle team. By 2022, Douyin Life's GMV had increased sevenfold over the same period last year, covering more than 370 cities and more than 2 million stores. According to data from Haitong International Research Report, Douyin Local Life GTV will reach 200 billion yuan in 2023, about 1/3 of Meituan's, and the vast majority will be completed by in-store operations.

The dispute over local life has been disrupted by Douyin.

At the beginning of this year, Zhang Chuan, then the president of Meituan's Arriving Business Group, called the competition for local life on platforms such as Douyin “a cruel and painful trench war” in an internal letter. Ten days later, Meituan's stock price broke.

The competitive power created by friends and merchants represented by Douyin is indeed threatening Meituan.

In the past few years of fighting, Meituan did not have the upper hand. The countermeasure was to find tricks and compete in the direction led by Douyin.

For example, Douyin is subsidizing merchants and consumers, and Meituan is also stepping up efforts. In 2023, Meituan's marketing expenses increased by 18.9 billion yuan over the previous year, and the marketing expenses rate increased by 3 percentage points. The sharp increase in marketing investment led to a gradual decline in Meituan's quarterly profit from about 7.7 billion yuan in the second quarter of 2023 to 5.7 billion yuan in the third quarter and 4.4 billion yuan in the fourth quarter.

In addition, in August 2022, Meituan began testing the short video function, and the short video portal was added to the app at the end of 2023

The tab bar at the bottom of the homepage; in March of this year, a new “theater” channel was added, bringing together all kinds of short dramas. It has the charm of creating a “Douyin” in Meituan.

Under this kind of coping strategy, Meituan is slightly “passive” in competition. And this has something to do with Meituan's internal organizational structure.

Since 2015, Meituan has adopted a business group system, gradually forming two major business groups: home and in-store, plus the Meituan platform, smart transportation platform, and basic R&D platform, as well as business divisions such as review, selection, grocery shopping, and quick donkey. These businesses present a relatively independent state of operation, with heads of different business groups. In other words, Meituan's in-store and home-delivery businesses have reported separately to the two managers for a long period of time. There may be delays in resource scheduling and management collaboration, and it is impossible to fully unleash combat effectiveness.

According to people familiar with Meituan previously revealed to the outside world, group buying and takeout are highly supply-focused, and internal efforts have also been made to promote collaboration between in-store and home-delivery businesses to meet similar consumer needs through different contract fulfillment methods. “Takeout, group buying, and wine travel have always been Meituan's important high-frequency businesses. Integrating the platform with R&D shows Meituan's determination to further improve organizational efficiency and upgrade the product experience.”

Overall, Meituan focuses on local commercial businesses centered on in-store and home-delivery. The intention is to integrate the original independently developed in-store and home-delivery businesses to develop collaboratively, concentrate superior resources to implement more efficient decisions, and better cope with changes in the external world.

What kind of imagination does the adjusted Meituan have?

After this round of major battle structure adjustments, what are the highlights of Meituan's next development? We are trying to see Meituan's next development through several aspects.

Wang Puzhong is undoubtedly the biggest highlight of this structural adjustment.

Wang Puzhong was born in 1984 and was responsible for takeout at Baidu. After joining Meituan in 2015, he mainly focused on the home segment, helping Meituan Takeout beat Are You Hungry, and leading Meituan Flash Shopping to gain a foothold in the instant retail sector.

In January 2018, Wang Puzhong was promoted to senior vice president and became the youngest member of S-team of Meituan's core management group; in October, Meituan established the Home Business Group, and Wang Puzhong became the president.

Wang Puzhong was highly praised within Meituan. “Late LatePost” once reported that a Meituan person commented that Wang Puzhong is smart, has a realistic style, and has a grounded view of the pace of business development. “For example, in the takeout war, when to do supply and when to work hard for delivery, the timing and rhythm are very well controlled, not just follow what the opponent does, or do whatever they think they should do.”

Over the past two years, Douyin's local lifestyle has risen strongly. Although the home-delivery business, which Wang Puzhong is responsible for, has slowed down, it has maintained a significant market advantage.

Seizing the timing and pace and taking the initiative in competition is an ability that Meituan urgently needs right now, and Wang Puzhong may be able to fill this gap in ability.

The moat that Meituan built in the past will also continue to play a key role. The distribution network made up of millions of takeaways is Meituan's real moat.

Snowball creator Viscosity Forest believes that Meituan has the most efficient distribution system and scale advantages, and has a deeper moat for traditional e-commerce and live e-commerce. “Meituan uses offline physical space to connect user needs, and opponents cannot compete with it. Content platforms can generally become e-commerce trading platforms if they have traffic. However, e-commerce is different in a timely manner, because you need a supply chain and distribution system; these are piled up little by little by little by little with money. Later rivals will actually kill 500 enemies and damage 1,000 themselves.”

However, there are also opinions that there is one variable in Meituan's moat, that is, are you hungry? “If Hungry opens its own delivery system to the outside world, of course, Hungry also develops in that direction, then the instant delivery system will be the same as today's express logistics for e-commerce, and it will no longer be a threshold.”

According to financial reports, Meituan's revenue in 2023 was 276.7 billion yuan, up 25.8% year on year; net profit was 13.9 billion yuan, while loss in 2022 was 6.7 billion yuan; adjusted net profit was 23.25 billion yuan, compared to 2.83 billion yuan for the same period in 2022. Among them, Meituan's core local business division earned 38.7 billion yuan. Although its new business reduced losses, the loss still reached 20.2 billion yuan.

Judging from this financial report, Meituan clearly withstood the pressure. Revenue and net profit both exceeded expectations, turning losses into profits throughout the year. This also confirms that Meituan's basic market is stable enough. But at the same time, with operating profits heavily discounted, Meituan does need to unleash more combat power. Under the new structure, it may usher in a stronger counterattack.

The battle for local life has further intensified.

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