BEIJING (BLOOMBERG) – Alibaba Group Holding will invest about US$3.6 billion to double its stake in Sun Art Retail Group, taking control of one of China's largest hypermart operators to try and fend off rivals like JD.com in e-commerce's hottest growth arena.
Alibaba will raise its direct and indirect stake in the grocery chain to about 72 per cent by acquiring equity from Auchan Retail International, then make a general offer to shareholders to buy out the rest of Sun Art. The latter's Hong Kong-listed stock leapt as much as 30 per cent on Monday (Oct 19), its biggest intraday gain since 2011.
The deal signals the intention of Asia's most valuable corporation to try and dominate one of Chinese e-commerce's largest untapped frontiers. Alibaba chief executive officer Daniel Zhang has made expansion into physical retail and the grocery business in particular a cornerstone of his growth strategy, an effort that paid off during the coronavirus pandemic.
Sun Art already operates 484 hypermarkets across China under the Auchan and RT-Mart brands, a massive distribution and storage network that can supplement Alibaba's own efforts in fresh produce.
The Chinese e-commerce giant is now grappling with intensifying competition from the likes of JD, food delivery giant Meituan and start-ups such as Tencent Holdings-backed Missfresh, all chasing a market for groceries and fresh produce that HSBC expects to grow 2.5 times to 690 billion yuan (S$139.8 billion) by 2022 from 2019. Alibaba was among the pioneers in that arena, announcing in 2017 it would spend about US$2.9 billion for 36 per cent stake of Sun Art.
The deal "suggests that the tech giant seeks to further expand its one-hour home grocery delivery services such as Taoxianda, leveraging the grocer's extensive offline hypermarts across China," Bloomberg Intelligence analyst Kevin Kim said. "This could capture consumers flocking to online platforms, further induced by Covid-19 early this year, yet may hurt foot-traffic to the grocer's physical stores."
Mr Zhang has been directly involved in the expansion into what the company calls its "new retail" strategy, combining e-commerce with physical stores. He helped launch a startup called FrRead More – Source
