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Alibaba is pouring billions into the food delivery business

Alibaba is spending billions of dollars to take control of one of China's biggest online food delivery services....

Posted: Apr 2, 2018 12:28 PM
Updated: Apr 2, 2018 12:28 PM

Alibaba is spending billions of dollars to take control of one of China's biggest online food delivery services.

China's biggest e-commerce company said Monday that it will buy all the outstanding shares it doesn't already hold in Ele.me, a startup whose Chinese name roughly translates to "Hungry?"

Alibaba and one of its affiliates already own 43% of Ele.me, according to a company statement. The deal, which values Ele.me at $9.5 billion including debt, enables Alibaba to bring the startup deeper into its huge web of internet businesses that touch many areas of Chinese' consumers' lives.

Related: China's answer to Groupon and Yelp is now worth $30 billion

Tech companies are eager to cash in on China's growing online food delivery market, which is expected to grow 18% to 241 billion yuan ($38 billion) this year, according to research firm iiMedia.

Tencent, China's biggest tech company by market value, has pumped billions of dollars into Meituan-Dianping, another leading delivery startup.

Meituan-Dianping enables users to make lunch reservations, order food and buy movie tickets through a single mobile app. A funding round in October valued it at roughly $30 billion, making it one of the most valuable startups in the world.

China's largest ride-hailing company, Didi Chuxing, is also on the verge of launching food delivery services in China, according to local media reports.

A similar trend is playing out in the United States. Amazon, the company with which Alibaba is most often compared, teamed up with online food delivery company Olo in September in an effort to expand its Amazon Restaurants service. It's a market where the likes of GrubHub and Uber Eats are already important players.

For Alibaba, buying Ele.me is part of the e-commerce company's efforts to connect smartphone users with real-world services. Alibaba is already mixing online and offline shopping with its brick-and-mortar grocery store chain, Hema.

Related: It's not just Amazon: Chinese tech giants are selling groceries too

Alibaba said it will combine Ele.me with its own restaurant review and local services platform Koubei, which means "Word of Mouth."

Ele.me and Koubei have overlapping services. But after the takeover, Ele.me will focus on delivering food to people's homes, while Koubei will focus on getting people to buy goods and services online, and pick them up or consume them at physical stores or restaurants.

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