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Meituan steers onto collision course with Alibaba
[HONG KONG] Meituan-Dianping is steering onto a collision course with Alibaba. China's US$30 billion food delivery outfit is making deals that could make it all-in-one consumer services app. That pits it squarely against Jack Ma's e-commerce giant.
The Beijing-based group led by entrepreneur Wang Xing boasts a roster of heavyweight backers, including Web titan Tencent and the Canada Pension Plan Investment Board. Last year, it raised some US$4 billion; it is now gearing up for a blockbuster flotation in Hong Kong later this year, Reuters reported.
The app, whose mission is "We Help People Eat Better, Live Better", connects 320 million active users with more than four million restaurants, cinemas, karaoke bars and other merchants as part of its local services offering. It already boasts a leading market share in food delivery, but Mr Wang has also charged into online travel, ride-hailing, and is eyeing a push into offline retail. Earlier this month, he snapped up bike-sharing app Mobike in a deal sources told Reuters was worth US$2.7 billion.
Meituan's ambition to become a "super app" for Chinese consumers has caught the attention of the US$441 billion Alibaba, which is trying to extend its online shopping monopoly into bricks-and-mortar retail and local services. Recently, Alibaba said it will buy out the rest of food delivery company Ele.me, Meituan's biggest rival. It has placed other bets on restaurant reviews, online travel, supermarkets, and owns a stake in Mobike rival Ofo.
Taking on Alibaba, which enjoys steady revenues from its e-commerce sites, looks daunting at first glance. Meituan lacks a comparable stable core business, and it has sprawled into bleeding-edge industries prone to cash-burning subsidy wars - like ride hailing. Revenue more than doubled to US$5.4 billion last year, the company says. But it has not been consistently profitable, and its food-delivery unit was loss-making as of February, sources told Breakingviews.
The underdog has one ace up its sleeve, however: the backing of US$494 billion Tencent, which is also stepping up investments to take on Alibaba. With Tencent's financial firepower in reserve, Meituan could become a real pain for Alibaba.