As the Spring Festival approaches, a significant development has emerged in the internet sector. On February 5th, MEITUAN-W (3690.HK) announced its intention to fully acquire Dingdong (Cayman) Limited for $717 million. This transaction stands as the most substantial deal in the local services sector at the beginning of 2026, signaling a major acceleration in the prolonged competition among fresh produce e-commerce platforms and the rivalry over front-end warehouses. It can be viewed as the concluding major battle of the first phase of the fresh produce e-commerce era.

According to the announcement, upon completion of the transaction, Dingdong will become an indirectly wholly-owned subsidiary of MEITUAN-W, and its financial performance will be consolidated into the group's financial statements. This acquisition represents a critical step for Meituan, transitioning its instant retail strategy from aggressive cash-burning for market share to a phase of ecosystem integration.

This announcement follows the release of Meituan's challenging third-quarter 2025 financial results, which showed nearly stagnant revenue growth. The core local commerce segment swung from profit to a significant operating loss of 14.1 billion yuan, with an adjusted net loss reaching 16 billion yuan.

Through a series of strategic shifts—including the shutdown of its multi-day delivery platform "Tuán Hǎo Huò," the scaling back of its community group buying service "Meituan Youxuan," and now the full acquisition of leading fresh produce e-commerce platform Dingdong (Cayman) Limited—Meituan is reallocating resources away from businesses misaligned with its core strengths to concentrate fully on the instant retail battlefield.

Internally, Dingdong (Cayman) Limited issued a company-wide letter regarding the acquisition. Founder and CEO Liang Changlin acknowledged that the news might cause employees to feel "surprised" and "uneasy," but he systematically outlined the rationale for choosing Meituan.

Liang stated that following the merger, Dingdong's three core competencies—superior product capability, service that exceeds expectations, and extreme efficiency achieved through its supply chain system—would not diminish but would instead create greater value on a larger platform.

Why was Dingdong (Cayman) Limited the target? As competition in instant retail intensifies, the focus is shifting from traffic and subsidies to empowering merchants, managing product supply chains, and maintaining the overall health of the retail ecosystem. Acquiring Dingdong represents a precise strategic move for Meituan to strengthen its weaknesses.

The fresh produce category is a core, high-frequency, essential, and relatively high-margin battlefield within instant retail, crucial for user acquisition and retention. However, managing its supply chain is complex, demanding high standards for storage, delivery, and quality control.

Dingdong is a leading player in this sector, with its primary advantage lying in its supply chain—featuring a high direct procurement rate from production origins and a rich portfolio of private-label products. As of September 2025, it operated over 1,000 front-end warehouses in China, forming a dense last-mile fulfillment network.

While Meituan possesses a powerful delivery network and massive user traffic, its depth in fresh produce supply chains and product capability has lagged behind specialized vertical e-commerce platforms. The acquisition grants Meituan immediate access to a mature and efficient fresh produce supply chain, addressing a key短板 (shortcoming).

This move aligns perfectly with Meituan's current strategic pivot to "fully focus on instant retail." Following the shutdown of non-core businesses, freed-up resources are being channeled into its instant retail system, which is built on two pillars: "Meituan Instashopping" and its self-operated fresh grocery brand, "Little Elephant Supermarket." Dingdong's integration is set to significantly bolster the supply chain for Little Elephant Supermarket.

In the internal letter, Liang Changlin further elaborated on the advantages, highlighting that Dingdong has built a robust supply chain with over 85% direct sourcing of fresh produce, 12 self-operated factories, and 2 self-operated farms. He noted that Little Elephant Supermarket has also experienced very strong growth in recent years, and the combined strengths of both entities will be amplified on a larger platform.

Liang also assured employees of stability, stating that Dingdong's business and team would remain intact, offering a stable development platform. He emphasized that Meituan's vast business landscape would open up greater career opportunities for Dingdong's staff.

Meituan's acquisition is not an isolated event but a key strategic move in the long-term contest for instant retail dominance. The year 2025 marked a watershed for China's instant retail market, which approached the trillion-yuan threshold, prompting major platforms to heavily invest. The competition evolved beyond simple "delivering everything via courier" to a deeper battle within supply chains.

Early in 2025, JD.com entered the food delivery arena, triggering a nationwide instant retail war. Meituan responded by launching its instant retail brand "Meituan Instashopping," promising average delivery times of 30 minutes. Alibaba's Taobao and Tmall upgraded their "Hourly Delivery" service to "Taobao Instashopping," integrating resources from brand warehouses and offline stores.

This fierce competition led to hundreds of billions in combined spending on sales and marketing by the three giants in Q3 2025, primarily on subsidies for delivery services. Consequently, profitability across the sector declined sharply. Meituan's adjusted net loss reached 16 billion yuan in Q3 2025, a stark contrast to its 12.83 billion yuan net profit a year earlier. Net profits for Alibaba and JD.com also fell significantly year-over-year.

As the incumbent facing aggressive challenges, Meituan's previous dominance was no longer assured, necessitating a new strategy to maintain its edge. The acquisition of Dingdong signals a new phase in instant retail competition, shifting the narrative from "capital-driven subsidy wars" to "capability-driven supply chain battles."

While the past year's intense subsidies rapidly educated the market, players recognized the unsustainability of burning cash for scale. A J.P. Morgan report anticipates a moderation in high subsidies by Q1 2026. Future competition will focus more on deepening capabilities on the supply side (merchants and products). Recent initiatives from Meituan and Alibaba reflect this trend, with efforts to build integrated retail ecosystems and strengthen supply-side infrastructure.

In this context, vertical integration and supply chain depth will be key strategies for giants to fortify their moats. Meituan's acquisition of Dingdong is a proactive move in this direction. It is foreseeable that competitors like Alibaba and JD.com may also seek to bolster their supply chain capabilities in specific categories through investments or acquisitions.

For Meituan, this acquisition serves both defensive and offensive purposes. Defensively, it strengthens Meituan's position in the critical fresh produce category, protecting a high-frequency entry point to its local生活 ecosystem against aggressive moves by competitors like Alibaba's Taobao Instashopping and JD.com. Offensively, it is a crucial piece in Meituan's ambition to build a "30-minute everything-to-home" retail empire. By integrating Dingdong, Meituan can offer a wider, higher-quality selection of fresh goods, increasing average order values and user loyalty, thereby expanding the instant retail market and achieving more sustainable growth and profitability.

The ultimate outcome of the instant retail war is unlikely to be a single winner but a contest between entire ecosystems. With the acquisition of Dingdong, Meituan has secured a significant asset for this higher-dimensional ecosystem battle.

Following the announcement, inquiries were made to Meituan for further comment, but the company stated that no additional information is available for disclosure at this stage.