Alibaba Looks for Billions to Expand its Food Delivery Options

July 19, 2024         By: Steven Anderson

Food delivery, along with mobile order-ahead, is a service tailor-made for mobile payments. This is likely not a lesson lost on Alibaba who recently picked up Ele.me as a means to take on the food delivery market. Now, it’s looking for some cash to help support Ele.me’s position in the field, to the tune of a $2 billion influx.

The move, reports note, would allow Ele.me to better take on its competitors in the field, particularly its biggest rival Meituan Dianping, which enjoys backing from one of Alibaba’s biggest competitors, Tencent. The reports also note that Ele.me—which translates into “hungry yet?”—is “burning enormous amounts of cash,” which would make the hefty $2 billion influx of cash likely a necessity. Both Ele.me and Meituan Dianping have been offering deep discounts to call in customers, a development which can’t keep going for long.

It’s unclear just how much of the company Ele.me is planning to offer for that $2 billion, but given that Alibaba bought the whole thing outright for $9.5 billion just a few months ago, it’s a safe bet that it’s a hefty portion. Given that more and more Chinese citizens are turning to their smartphones to not only order food but also schedule personal care treatments and even bring in domestic help, having a stake in food delivery is probably a good plan.

The issue, of course, is that it’s going to have a tough time getting new investors to go in on a business that’s clearly burning cash like it’s trying to stave off freezing to death. However, those who do buy in are buying in on a potential gold mine; Meituan Dianping reported a loss of 19 billion yuan in 2017, but when it went after an IPO in Hong Kong, showed that revenue had doubled to 33.9 billion.

There’s a lot of room for opportunity here; Chinese consumers are clearly interested in food delivery, and given how many Chinese are clustered in cities, a food delivery presence should do brisk business once the initial customer gathering phase is over. The food delivery services just need cash to weather the storm of customer gathering, and those who stick around should reap significant benefits.