Alibaba to combine food delivery services into one business

China’s food-to-flight services platform, Meituan-Dianping has been witnessing fast growth posing threat to larger rivals such as Alibaba (BABA). And Alibaba is now hoping to combine its food delivery services into one business as well as raise funds for it, in a move to tackle this new threat.

The on-demand service, which is a huge business in China today, is seeing a growing rivalry between  Meituan-Dianping, which is backed by Chinese Internet services giant Tencent Holdings Group Ltd,  and Ele.Me, the food delivery app Alibaba acquired for $9.5 billion this year.

Alibaba is contemplating on combining its food delivery platform Ele.me and food and lifestyle services firm Koubei into one business, according to Reuters. Alibaba also plans to raise close to $3 billion to $5 billion for the merged entity, which is valued at $25 million. SoftBank Group Corp.’s Vision Fund is said to lead the funding.

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Despite their popularity, both Ele.me and Meituan are running into huge losses, mainly due to the heavy discounts offered on food.

Food-delivery business in China is booming

According to a report by Meituan Waimai, a food delivery firm, there was a 23% rise in the online food delivery to 204.6 billion yuan (about $31.9 billion) in 2017. And nearly 300 million users have ordered food using online services.

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Due to this, both the rival companies are now pumping money into this business and are working towards expanding their offerings.  Currently, they offer a wide range of services right from food delivery to restaurant reviews to groceries.

In fact, Meituan-Dianping has also forayed into the bike-sharing sector by acquiring Mobike for $3.7 billion. Mobike’s main rival is Ofo, backed the Alibaba.