Alibaba merges food delivery units Ele.me and Koubei amid price war with Meituan in China’s on-demand market

Chinese e-commerce giant Alibaba Group Holding will merge its food delivery service Ele.me with food and lifestyle unit Koubei amid intensifying competition with rival Meituan Dianping.

Alibaba will establish a “local service company” comprising Ele.me and Koubei, the Hangzhou-based firm announced on Friday. The two business units currently operate in a total of 676 cities with 3.5 million merchants signed up.

“The goal of the local service company is not only for the food market, but to take on the bigger mission to redefine urban life and to make it better and more convenient,” Daniel Zhang Yong, Alibaba’s chief executive, said in the statement.

Ele.me chief executive Wang Lei will head the combined unit, and Koubei head Fan Chi will report to Wang and continue to lead the Koubei business.

The new company, which does not yet have an official English name, will leverage Alibaba’s capabilities in new retail, membership systems, marketing, logistics, finance and other areas that centre on urban living, according to the statement.

The new venture was backed by more than US$3 billion in investment commitments, including funds from Alibaba and Japan’s SoftBank Group Corp, Alibaba announced in August. 

Alibaba and Meituan Dianping are engaged in a price subsidy war in China’s on-demand market, providing everything from food delivery to restaurant reviews and even massage services, with profitability relegated to the back seat in the short term.