Battle between Alibaba and Tencent for the coffee drinking consumers in China
Sep 07, 2018 (China Knowledge) - Chinese tech giant, Alibaba Group Holding Ltd <BABA:NYSE> and Tencent Holdings Ltd <0700:HKD> are actively seeking partnership with coffee chains in China, to mint money from the growing demand and consumption of coffee in the country.
Market research suggests growth rate of coffee consumption in China is around 20% annually, 2% above the global growth rate. Coffee consumers spent USD 10.5 billion in 2015 alone, this amount is expected to reach USD 150 billion by 2025, according to International Coffee Organisation.
Tencent and Luckin Coffee announced about their partnership yesterday on their respective WeChat accounts.
Both companies agreed to explore and integrate AI and other technology into Luckin operation in areas such as delivery and payment system. Besides that, Luckin can take advantage of Tencent's database, to predict and meet the demand and preference of coffee consumers.
Luckin Coffee, a home-grown brand, has only been in operation for a year. Ever since, the company has expanded to having 1003 stores across 13 cities in China. Back in July, Luckin has also completed its A round of financing worth USD 200 million, financed by Dazheng Capital, Joy Capital, the Government of Singapore Investment Corporation (GIC) and Legend Capital.
Earlier last month, Starbucks struck a deal with Alibaba in China, to compete against Luckin Coffee and to drive growth. The partnership will cover delivery with Alibaba-owned Ele.me, a virtual store and collaboration with Alibaba’s new retail Hema stores. Starbucks is also planning to build its application on Alibaba’s e-commerce sites such as T-mall.
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