Analysis: Dingdong Acquisition Set to Bolster Meituan’s Online Grocery Business

1. Meituan has agreed to acquire the Chinese operations of Dingdong (Cayman) Ltd. for $717 million, consolidating two major competitors in China’s fresh grocery e-commerce market. The merger will strengthen Meituan’s competitiveness against larger rivals such as Alibaba’s Freshippo and Walmart’s Sam’s Club, improving Meituan’s market positioning in a rapidly changing industry [para. 1].

2. The terms of the acquisition, announced on February 5, involve Meituan buying all shares of Dingdong Fresh Holding Ltd., the entity responsible for Dingdong’s business in China [para. 2]. Competing bidders for Dingdong included JD.com and DCP Capital (Sun Art Retail’s controlling shareholder), but Meituan secured the agreement with a higher offer [para. 3].

3. The leadership of Meituan and Dingdong stated that both companies share similar missions and philosophies. They believe the merger will enable them to leverage combined strengths and increase market share, with Meituan emphasizing the transaction aligns with its long-term strategic goals in grocery retail [para. 4].

4. According to industry analysts, had Meituan and Dingdong not merged, neither could have sustained growth in Shanghai or East China due to intense competition. In Shanghai’s market, Freshippo and Sam’s Club currently control 30% each, with Dingdong at 20% and Meituan’s Little Elephant Supermarket holding 10%. The acquisition lifts Meituan’s share to 30%, allowing it to directly rival top competitors and avoid costly market share battles [para. 5].

5. Dingdong, founded by Liang Changlin in 2017, innovated with a direct sourcing model and neighborhood warehouses for rapid grocery delivery. Its business surged during the Covid-19 pandemic, with 2020 revenue growing nearly 200% year-on-year to 11.34 billion yuan ($1.6 billion). Even so, Dingdong reported a 3.18 billion yuan net loss for that year [para. 7][para. 8].

6. Dingdong went public in June 2021, with annual revenue rising to 20.12 billion yuan but also expanding net losses (6.43 billion yuan in 2021). Strategic retrenchment followed amid stiff competition, as Dingdong exited certain regions in 2023 to focus on profitability [para. 9].

7. In 2024, Dingdong posted its first annual profit, achieving a 15.5% revenue increase to 23.1 billion yuan and a gross merchandise value (GMV) of 25.6 billion yuan. Non-GAAP net profit reached 420 million yuan. By Q3 2025, Dingdong had twelve consecutive profitable quarters, though recent growth slowed considerably due to intensifying competition [para. 10][para. 11].

8. Larger players, such as Freshippo (Alibaba) and Sam’s Club (Walmart), dominate Shanghai’s market through a network of about 70 warehouses, claiming over 60% of market share. Freshippo surpassed 75 billion yuan in GMV (up 38.9% year-on-year) for the 2025 fiscal year, while Sam’s Club contributed to Walmart China’s revenue growth of 21.9%, reaching $6.11 billion in Q3 FY2026 [para. 13][para. 14][para. 15].

9. Dingdong’s expansion was hampered by a lack of major investor backing and intense regional competition, making it difficult to break into other areas outside East China. China’s fresh grocery market features strong regional players like Beauty Mart, Pupu, and Wumart, adding to operational challenges faced by Dingdong [para. 16].

10. For Meituan, the acquisition offers a rapid expansion opportunity, as Dingdong had over 7 million active users and 1,000 warehouses in nearly 30 cities by September 2025. Acquiring these assets jumpstarts Meituan’s ambition to cover all first- and second-tier cities amid financial pressures, including weakened profitability from food delivery subsidy wars [para. 18][para. 19][para. 20].

11. Meituan’s food delivery business, historically dominant, has seen its market share erode from about 70% to roughly 55%–58% in 2025 due to heightened competition, notably from Alibaba’s Ele.me and JD.com’s recent entry [para. 21][para. 22]. Sun Art Retail is also pivoting to multi-format strategies and online integration, targeting 40%-50% online sales within three years [para. 23].