China’s food delivery business gets a jolt after Alibaba-owned Ele.me commits to investing ‘billions’ of yuan

Alibaba Group Holding-owned food delivery platform Ele.me will invest “billions” of yuan to further expand its business in China, according to a company statement.

Ele.me’s announcement comes three months after Alibaba acquired full control of the food delivery app operator, for an undisclosed price, valuing the business at US$9.5 billion.

“The determination of Alibaba gives Ele.me confidence,” Alibaba vice-president Wang Lei, who is also Ele.me’s chief executive, said in the statement. “Ele.me is not only going to win this summer’s battle [in food delivery], it will also take the crown in the local services and new retail sector. We have sufficient capital and traffic."

Alibaba is not the only player eyeing the food delivery business. Meituan-Dianping, China’s on-demand service giant that filed for a Hong-Kong initial public offering two weeks ago, controls 59.1 per cent of the market, according to the China-based market research firm iResearch.

Didi Chuxing, China’s ride-hailing giant, is the latest entrant in the already competitive food delivery business with a stand-alone platform called “Didi Foodie” launched in April. Didi Foodie currently operates in four mainland Chinese cities, including Nanjing, Taizhou and Chengdu, using heavy subsidies to reduce the cost of a customer order of rice to as low as two yuan (US$0.3), including delivery.

Ele.me's pledge to invest billions of yuan also demonstrates Alibaba's ambition to amass more bricks-and-mortar assets and further develop its short-distance logistics system. Fengniao, Ele.me's logistics system, has established around 3,000 distribution stations across the country. Ele.me's supply chain will also be connected with Tmall, one of Alibaba's two major Chinese online retail platforms, according to the company statement.