China’s Biggest Food-Delivery Site Rejects Claims It Exploited Restaurants

(Bloomberg) -- China’s largest food-delivery site Meituan has hit back against allegations that it charged onerous commissions to restaurants during the Covid-19 outbreak, underscoring the delicate balance the company must strike to get its business back on track.

Responding to complaints from a restaurant association in the southern province of Guangdong, Meituan said its average profit per delivery order was less than 0.2 yuan ($0.03) in the fourth quarter, accounting for just 2% of its revenue. After launch, its takeout service lost money for five years before breaking even in 2019, the statement added.

“We need to invest most of our income to help merchants develop professional delivery services, acquire orders, and improve digital infrastructure,” Puzhong Wang, senior vice president who oversees the company’s food delivery business, said in a statement to Bloomberg News.

The catering-industry body said it had received complaints from hundreds of restaurants criticizing Meituan’s business practices, and called on the company not to charge high rates to merchants and free them from the burden of exclusive contracts, local media Sina reported.

Backed by Tencent Holdings Ltd., Meituan said in late March that demand for food delivery was picking up, putting a longer-term recovery for the company within reach. But it also projected an operating loss and revenue decline this quarter, and warned that the full extent of fallout from the pandemic -- particularly on its travel and ride-sharing businesses -- remained uncertain in 2020.

©2020 Bloomberg L.P.

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