Citi: Mainland China's regulation on takeout subsidies upgraded, the catering industry welcomes new profit opportunities

Citi published a report stating that the State Council has initiated an antitrust investigation into the competition in the food delivery industry. This move marks an escalation in the regulatory stance towards the long-standing "food delivery subsidy war" and could become a critical turning point in reversing the competitive ecology of the mainland catering industry and promoting the recovery of corporate profitability.

In the past year, the State Administration for Market Regulation (SAMR) has held two rounds of discussions with Meituan (03690.HK), Alibaba (09988.HHK), JD.com (09618.HK), and others regarding the subsidy issues of food delivery platforms, but subsidies for food delivery or instant retail continue. Citi emphasized that "this time is different." The investigation is initiated by the "Antitrust Committee," which is directly accountable to the State Council, and its authority and clarity of objectives far exceed previous efforts.

History serves as a mirror; this committee previously led the antitrust investigations against Alibaba and Meituan regarding the "choose one of two" practice, ultimately imposing hefty fines of RMB 18 billion and RMB 3.4 billion, respectively. The report points out that platform giants are well aware of the serious potential consequences of such investigations and anticipate that their responses will be more cautious.

The bank believes that the purpose of the mainland food delivery subsidy war is for platforms to compete for more orders, while restaurants must fulfill these orders. Given the limited overall growth rate of the catering industry (with catering revenue only growing by 3% year-on-year in the first 11 months before 2025), restaurants can only choose price wars to maintain market share.

At the same time, excessive reliance on low-priced food delivery orders has led to a decrease in dine-in traffic, disrupting the profitability balance of "dine-in + delivery." This phenomenon also affects the upstream supply chain, as sales of condiments and frozen foods are impacted by reduced home cooking