Coffee at 30 cents escalates into billion-dollar burn for JD.com, Meituan, and Alibaba

In China’s fiercely competitive market, the latest price war is playing out in the growing “instant commerce” sector, where companies are launching massive subsidies and other incentives to get consumers to spend.

The ‘instant commerce’ sector is backed by massive networks of scooter drivers that quickly transport everything from food and drink to fast fashion and gadgets.

The space is mostly occupied by three main players, including the established e-commerce heavyweights JD.com and Alibaba, as well as delivery platform Meituan, which has historically focused heavily on food delivery. 

Competition between these companies has intensified this year, with all three expanding their delivery networks and pledging billions in subsidies to merchants and consumers. 

The result — insanely fast and cheap offers. Perusing through JD.com’s delivery platform on Friday, CNBC found coffee as cheap as 10.9 yuan, or $1.50, including delivery fees. Meituan was offering a 13 yuan set of steamed buns and a 26.8 yuan McDonald’s breakfast set.

However, despite the benefits for Chinese consumers, the price war has also weighed heavily on investors and the earnings outlook. Meituan and JD.com, for example, have seen their shares fall by about 22% and 10%, respectively, this year, according to LSEG data. 

China’s e-commerce players have consistently competed on delivery times, supported by the country’s large labor force and gig economy. By building out a strong logistics network, JD had set a standard in the market for same-day or next-day delivery of packages, pressuring competitors like Alibaba.

However, China’s latest ‘instant commerce’ battle appeared to start after JD.com’s move into the takeout dining market in February, entering a space dominated by Meituan, the market leader, and Alibaba’s food delivery platform Ele.me.

Then, in April, Meitaun launched its own challenge to JD.com with a new 24/7 “flash shopping” platform that included categories like groceries, alcohol, and electronics and promised deliveries within 30 minutes. 

Tensions grew as the companies engaged in direct competition. Eventually, both companies accused each other of using anti-competitive practices to block riders from accepting orders on rival platforms. It was around that time when JD began hiring more full-time drivers, and founder Richard Liu was photographed delivering food orders in Beijing in a viral publicity stunt. 

That month also saw JD.com announce a first round of subsidies worth 10 billion yuan, which went towards a food delivery discount program.

Subsidies and massive discounts are commonplace in China’s competitive tech sector, and a cause for concern for Beijing.

China’s top market regulator summoned JD.com, Meituan, and Alibaba’s Ele.me in May, urging them to follow the law and compete fairly. Retail groups also voiced concerns about JD.com’s subsidy program and the knock-on effects of plummeting prices. However, the pushback had little effect on slowing the price war. 

On Tuesday, JD.com announced yet another 10 billion-yuan investment under its “Double Hundred Plan,” intended to provide targeted support to merchants on the platform.

It came after Alibaba’s Taobao Instant Commerce announced on Saturday a subsidy program valued at 50 billion yuan (about $7 billion), to be distributed over the next year. It added that it had reached 200 million orders per day shortly after.

The same day, discounts and coupons offered on Meituan had seen prices of a cup of coffee drop to as low as 2 yuan ($0.28), according to local media. 

As a result, the company said that it received a record 120 million orders that Saturday — so much that it suffered a temporary breakdown of its servers in certain areas. 

While all the companies have boasted about increases in their instant commerce user bases in recent months, it remains unclear how much the price war will impact their earnings. 

Meituan reported that its profits for the first quarter of 2025 were 10.2 billion yuan, up about 63% year over year. However, it warned that the following quarter would likely be impacted by increased competition in instant retail. 

In May, JD.com reported that its operating profit rose by 31.4% year over year to 11.7 billion yuan in the first quarter of 2025. However, economists polled by LSEG expect second-quarter profits to fall on both a yearly and quarterly basis.

JD’s push into food delivery may have generated a loss of more than 10 billion yuan in the second quarter, according to Nomura’s analysis published Thursday. The analysts estimate JD has gained about 10% of the instant delivery market with 20 million orders a day.

Looking ahead, “we think JD may have to re-examine its ambition,” the analysts said. They pointed out that in light of Alibaba’s ramped-up spending on subsidies, JD might have to burn through all the profits generated by its core retail business — for several quarters — if it wants to compete with the two market incumbents.