China’s Alibaba, Meituan Escalate Free Drinks Subsidies Amid Truce

China's delivery giants Alibaba and Meituan are waging a "free drinks war" with subsidies to boost customer loyalty amid economic slowdowns, escalating promotions in 2025. Regulatory warnings prompted a truce, but subtle incentives persist, benefiting consumers while straining merchants and profitability.
China’s Alibaba, Meituan Escalate Free Drinks Subsidies Amid Truce
Written by Dorene Billings

In the cutthroat world of China’s delivery giants, a seemingly innocuous perk—free drinks—has become the latest battleground in a high-stakes war for customer loyalty. Alibaba Group Holding Ltd. and Meituan, two behemoths dominating the food delivery and local services market, have escalated their rivalry by doling out complimentary beverages as part of aggressive subsidy campaigns. This tactic, aimed at luring users amid sluggish economic growth, underscores how tech firms are resorting to creative incentives to boost order volumes and market share.

The strategy gained momentum in early 2025, with both companies integrating free drinks into their apps’ promotional arsenals. Alibaba’s Ele.me platform, for instance, began offering gratis sodas or teas with meal orders, while Meituan countered with similar deals tied to its vast network of partnered eateries. Insiders say these promotions are not mere gimmicks but calculated moves to drive daily active users, especially in urban centers where competition is fiercest.

Escalation of the ‘Free Drinks War’

Recent reports highlight how this “free drinks war” intensified over the summer, evolving from isolated offers into widespread campaigns. According to a detailed account in the South China Morning Post, the past week alone saw an uptick in such promotions, with Meituan subsidizing drinks at thousands of outlets to undercut Alibaba’s pushes. This mirrors broader price skirmishes, where subsidies have slashed coffee prices to as low as 30 cents, as noted in a CNBC analysis from July.

The financial toll is immense. Analysts estimate that these giants are burning through billions in subsidies annually, with Meituan’s daily orders surging to 150 million by mid-July, per industry tracking. Alibaba, not to be outdone, reported combined orders on its Taobao Instant Commerce and Ele.me platforms exceeding 90 million over consecutive weekends, fueling what some dub a “digital feeding frenzy.”

Regulatory Intervention and a Fragile Truce

The frenzy drew scrutiny from Chinese regulators, who warned against “disorderly competition” that could harm merchants and distort markets. In early August, Alibaba, Meituan, and rival JD.com pledged a truce, committing to rational practices and curbing excessive subsidies. A South China Morning Post report detailed how JD.com vowed an “anti-involutionary” stance, avoiding bubble-creating tactics, while Alibaba phased out free lunch promotions—though free drinks lingered as a subtler tool.

Despite the pledges, enforcement remains uncertain. Posts on X (formerly Twitter) reflect mixed sentiment: some users hail the consumer windfalls, with one viral thread noting Meituan’s AI tools aiding small merchants amid the chaos, while others decry the margin squeeze on restaurants. A recent X post from a tech watcher highlighted ongoing “sweet” promotions, suggesting the rivalry simmers beneath the surface.

Impact on Merchants and Consumers

For small businesses, the war is double-edged. Meituan’s new subsidies, offering up to ¥50,000 per store and free AI marketing tools, aim to support over 100,000 eateries by year-end, as per industry buzz on X. Yet, merchants complain of dependency on platforms, with commissions eating into profits. Consumers, meanwhile, revel in bargains—free drinks have sparked a “summer of free lunch” vibe, per an EyeShenzhen article—but experts warn of eventual price hikes once dominance is secured.

Alibaba’s restructuring of its local services unit, merging Koubei with other arms to combat Meituan and ByteDance’s Douyin, signals deeper strategic shifts. A Moomoo report outlines how this consolidation targets efficiency in the “instant commerce” sector, where speed and incentives reign supreme.

Broader Implications for China’s Tech Sector

This drinks-fueled feud reflects wider pressures in China’s tech industry, where economic slowdowns have forced pivots from growth-at-all-costs models. Meituan, with its roots in group buying, now processes millions of orders daily, dwarfing global peers like India’s Zomato, as noted in comparative X discussions. Alibaba, facing antitrust echoes, is betting on integrated ecosystems to retain users.

Looking ahead, the truce may temper overt wars, but subtle incentives like free drinks could persist. Regulators’ push for “healthy competition,” as echoed in a BizToc summary, aims to stabilize the sector, yet insiders predict ongoing battles in AI-driven personalization and logistics. For now, as one X post quipped, the competition has indeed “gotten a lot sweeter,” but at what long-term cost to profitability?

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