Chapter 4

Demand Engine

The recovery the price already discounts rests on one thing being true: that the demand underneath Meituan is large, under-penetrated, and still growing. Through 2023 the primary record supports that — on-demand delivery transactions grew 23.9% to 21.9 billion, and instant retail grew faster off a smaller base [1]. The catch is that Meituan stopped publishing the hard demand metrics after 2023, so the most important years of the war can only be read through management's phrase "historic highs." Financials are in renminbi (¥).

A large market, lightly penetrated

Meituan's addressable market is the digitization of Chinese local services — restaurants, groceries, pharmacies, hotels, and the errands people once did on foot. At the 2018 listing, the company sized the consumer service industry at ¥18.4 trillion in 2017, growing to a projected ¥33.1 trillion by 2023, a 10.2% compound rate, per the iResearch report it commissioned [2]. The load-bearing number is not the size but the penetration: of that ¥18.4 trillion, only ¥2,705 billion of gross transaction value had moved to consumer-service e-commerce in 2017 — roughly one-seventh online [3]. A large market that is mostly still offline is the definition of a long runway.

That runway is management's own recurring theme, not a one-off IPO claim. Five years on, the FY2023 report still described "tremendous room" for the online penetration of local services and called the sector's digital transformation "inevitable" [4]. The framing is credible because it matches the mechanism: local-service merchants are fragmented, low-margin, and slow to digitize, so the online share moves up over years, not quarters.

One caveat belongs here in plain terms. The precise market-size figures above are dated — they come from the 2018 prospectus, and a current third-party estimate of China's instant-retail or local-services market was not available in this corpus. The direction (large, under-penetrated, growing) is well supported across the filings; the exact 2025 magnitude is not something the primary record pins down.

The engine, while it was visible

Demand growth on Meituan comes from three multiplying levers: more users, higher frequency, and more categories per user. For the years the company disclosed them, all three moved the right way.

Source: FY2023 Annual Report, Operating Metrics; FY2022 Annual Report, Operating Metrics [5][6].

On-demand delivery transactions — the count Meituan defines as food delivery plus Instashopping — rose from 15.5 billion in 2021 to 17.7 billion in 2022 and 21.9 billion in 2023, with 2023 growth accelerating to 23.9% [7][8]. Underneath that, the user and frequency levers were both live.

Sources: FY2021 Annual Report, Operating Metrics [9]; FY2022 Annual Report, Operating Metrics [10]; FY2023 Annual Report [11].

Transacting users grew 35.2% in 2021 to 690.5 million, then dipped 1.8% to 677.9 million through the 2022 pandemic year [12][13]. With the user base near saturation of China's mobile-internet population, the growth shifted to frequency: the average transacting user placed 40.8 orders in 2022, up 14.1% from 35.8 the year before [14]. That is the healthier engine for a platform this large: a mature user typing in one more order a week compounds faster, and cheaper, than chasing the next marginal user. Food delivery's peak daily order volume tracked it — above 50 million in 2021 and past 60 million in 2022 [15][16].

Instant retail is the second, faster gear

The part of the demand story that is genuinely company-specific — and that most distinguishes Meituan from a mature food-delivery utility — is instant retail: groceries, medicine, flowers, electronics, and daily necessities delivered in under an hour through Meituan Instashopping and its InstaMart ("閃電倉") warehouse network. It runs on the same rider fleet as food delivery, so incremental demand lands on an asset that is already paid for.

The growth rates are a step above the platform average. Instashopping's highest daily order volume climbed from above 6.3 million in December 2021 to above 11 million in December 2022, and full-year order volume then grew "over 40%" in 2023 [17][18][19]. By 2023 the InstaMart format covered more than 200 cities and its active-merchant base grew nearly 30% in a year [20]. Management notes the users are worth more than food-delivery users — higher stickiness, stronger purchasing power, skewing younger — which matters because instant retail carries a larger basket than a single meal [21].

Source: FY2021 and FY2022 Annual Reports, Chairman’s Statement [22][23].

The strategic point is one Meituan made as early as 2021: it believes "the endgame of the retail industry is 'Everything Now'" — same-hour delivery of anything, not just food [24]. By 2024 the report was describing on-demand retail as "a new lifestyle," with InstaMart growing fastest in lower-tier cities — the least-penetrated part of the map [25]. By 2025 InstaMart and the self-operated Xiaoxiang Supermarket were labelled "important supply pillars for quick commerce" [26]. Instant retail is where the runway from the previous section actually gets consumed: food delivery in top-tier cities is a frequency game, but quick commerce still adds categories and geographies.

The demand pull shows up in the reported revenue line, even in the profit trough. Core Local Commerce revenue grew 20.9% in 2024 to ¥250.2 billion, which the company attributed to "further online penetration and strong consumer demand" — not to price [27]. The top line kept growing at a double-digit rate through 2025; what broke was margin, not demand — the distinction the Delivery War turns on.

What you can no longer see

Here is the honest limit on this chapter. Meituan disclosed a clean operating-metrics table — transacting users, transactions per user, on-demand delivery transactions — through its FY2023 report, and then stopped. The FY2024 and FY2025 annual reports carry no user count, no frequency figure, and no order count; the demand engine is described only in words. For 2025 the chairman's statement says annual transacting users, transaction frequency, and ARPU "all reached historic highs," but attaches no number to any of the three [28].

Two things follow. First, the disclosure thinned exactly when it mattered most, so an outside analyst has to take the 2024–2025 demand trajectory partly on trust. Second, whatever order growth did occur in 2025 was inflated by the subsidy war — some of it is ¥2 coffees bought because they were nearly free, not durable demand — and management has flagged that second-half 2026 order growth could turn negative against those subsidy-fattened comparisons (Delivery War). Volume in 2025 is not a clean read on structural demand.

The through-line question — whether 2025 is a durable impairment or a defensible trough — needs the demand base to be intact and still growing. The evidence through 2023 says the runway is real and instant retail is extending it; the post-2023 disclosure gap and the subsidy distortion mean that read now rests more on the mechanism (a large, under-penetrated market with a maturing frequency engine and a faster instant-retail gear) than on a fresh, verifiable count. The mechanism is sound; the confirming numbers are, for now, withheld.