Alibaba Acquires Majority Stake in Chinese Supermarket Chain Sun Art

Alibaba's e-commerce rivals in China have made similar forays into brick-and-mortar retail.

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Alibaba Acquires Majority Stake in Chinese Supermarket Chain Sun Art

Shares of Sun Art soared more than 20 percent at the open on Monday after Alibaba made the announcement

Highlights
  • Alibaba will raise its stake to around 72 percent through the acquisition
  • Alibaba is taking the stake from Auchan Retail International SA
  • Alibaba operates 214 Freshippo outlets as of its recent earnings report

Alibaba said on Monday it will invest $3.6 billion (roughly Rs. 264,24 crores) to boost its stake in hypermarket operator Sun Art, gaining further ground in China's retail market.

The e-commerce giant is hoping to further leverage its digital presence to support Sun Art's 481 hypermarkets and three mid-size supermarkets in China. The move comes as Alibaba steadily expands its presence in China's offline retail sector, as growth in traditional e-commerce slows.

Alibaba, which already owned 21 percent of Sun Art through a unit, will raise its stake to around 72 percent through the acquisition of a similar stake in A-RT Retail Holdings, who owns 51 percent of Sun Art.

The company is taking the stake from Auchan Retail International SA, the French multinational that launched two of China's largest supermarket chains.

"As the COVID-19 pandemic is accelerating the digitalisation of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience," Alibaba Chairman and Chief Executive Officer Daniel Zhang said in a statement.

Alibaba added that Peter Huang would be appointed chairman of Sun Art on top of his current role as chief executive officer.

Shares of Sun Art soared more than 20 percent at the open on Monday after Alibaba made the announcement.

Alibaba has expanded outlets across China for Freshippo, a supermarket chain that doubles as an online delivery service. Alibaba operates 214 Freshippo outlets as of its most recent earnings report.

It also has worked with mom-and-pop convenience store owners to offer technology and data analytics services.

Alibaba's e-commerce rivals in China have made similar forays into brick-and-mortar retail.

Online retailer JD.Com runs a brick-and-mortar grocery store called 7Fresh.

Pinduoduo, the fast-growing e-commerce site known for budget deals on bulk purchases, bought a stake in home-appliance retailer Gome in August for $200 million (roughly Rs. 1,468 crores).

The deal also marks another retreat of a major overseas retailer from China's ultra-competitive market.

In 2019 French hypermarket chain Carrefour sold an 80 percent stake in its China division to electronics retailer Suning.com.

© Thomson Reuters 2020


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