China’s grocery delivery battle heats up with Meituan’s entry

Fast, affordable food delivery service has been life-changing for many working Chinese, but some still prefer to whip up their own meals. These people may not have the time to pick up fresh ingredients from brick-and-mortar stores, so China’s startups and large companies are trying to make home-cooked meals more effortless for busy workers by sending vegetables and meats to apartment doors.

The fresh grocery sector in China recorded 4.93 trillion yuan ($730 billion) in total sales last year, growing steadily from 3.37 trillion yuan in 2012 according to data collected by Euromonitor and Hua Chuang Securities. Most of these transactions still happen inside wet markets and supermarkets, leaving online retail, which accounted for only 3 percent of total grocery sales in 2016, much room for growth.

Ecommerce leaders Alibaba and JD.com have already added grocery to their comprehensive online shopping malls, nestling in the market with more focused players like Tencent-backed MissFresh (每日优鲜), which has raised $1.4 billion to date. The field has just grown a little more crowded with new entrant Meituan, the Tencent-backed food delivery and hotel booking giant that raised $4.2 billion through a Hong Kong listing last year.

meituan grocery

Screenshots of the Meituan Maicai app / Image: Meituan Maicai

The service, which comes in a new app called “Meituan Maicai” or Meituan grocery shopping that’s separate from the company’s all-in-one app, set out in Shanghai in January before it muscled into Beijing last week. The move follows Meituan’s announcement in its mid-2018 financial report to get in on grocery delivery.

Meituan’s solution to take grocery the last mile is not too different from those of its peers. Users pick from its 1,500 stock keeping units ranging from yogurt to pork loin, fill their in-app shopping carts and pay via their phones, the firm told TechCrunch. Meituan then dispatches its delivery fleets to people’s doors in as little as 30 minutes.

The instant delivery is made possible by a satellite of physical “service stations” across neighborhoods that serve warehousing, packaging and delivering purposes. Placing offline hubs alongside customers also allows data-driven internet firms to optimize warehouse stocking based on local user preferences. For instance, people from an upscale residential area probably eat and shop differently from those in other parts of the city.

Meituan’s foray into grocery shopping further intensifies its battle with Alibaba to control how Chinese people eat. Alibaba’s Hema Supermarket has been running on a similar setup that uses its neighborhood stores as warehouses and fulfillment centers to facilitate 30-minute delivery within a three-kilometer radius. For years, Meituan’s food delivery arm has been going neck-and-neck with Ele.me, which Alibaba scooped up last year. More recently, Alibaba and Meituan are racing to get restaurants to sign up for their proprietary software, which can supposedly give owners more insights into diners and beef up customer engagement.

As part of its goal to be an “everything” app, Meituan has tried out many new initiatives in the lead-up to its initial public offering but was also quick to put them on hold. The firm acquired bike-sharing service Mobike last April only to shutter its operations across Asia in less than a year for cost-saving. Meituan also paused expansion on its much-anticipated ride-hailing business.

But grocery delivery appears to be closer to Meituan’s heart, the “eating” business, to put in its own words. Meituan is tapping its existing infrastructure to get the job done, for example, by summoning its food delivery drivers to serve the grocery service during peak hours. As the company noted in its earnings report last year, the grocery segment could leverage its “massive user base and existing world’s largest intra-city on-demand delivery network.”

Alibaba and Amazon move over, we visited JD’s connected grocery store in China

The FT is buying another media startup: Deal Street Asia

Fresh from picking up a majority stake in Europe-based The Next Web, the Financial Times is buying another tech blog. The newspaper, which was founded in 1888, is adding Singapore-based Deal Street Asia to its roster with a deal expected to close in April, according to three sources with knowledge of discussions.

Founded in 2014 by Indian journalists Joji Thomas Philip and Sushobhan Mukherjee, Deal Street Asia mixes Asia startup news with updates from Asia’s financial markets and business verticals. It has around a dozen reporters across Southeast Asia and India, as well as a license to use content from wires. Its investors include Singapore Press Holdings, Vijay Shekhar Sharma, the founder of Alibaba-backed Paytm, the Singapore Angel Network and Hindustan Times, the Indian media firm that operates Mint, which is a Deal Street Asia content partner.

The company never disclosed its total fundraising, although TechCrunch wrote about an undisclosed round that closed in late 2015.

The deal is led by Nikkei, the Japanese parent of the FT, which has agreed to buy at least one-third of Deal Street Asia, one source told TechCrunch, but the total stake could reach 51 percent (as was the case with The Next Web) depending on which investors decide to sell. A separate source said the investment is worth at least $5 million. That would represent a positive return for all investors with early backers potentially banking 4-5X. That’s a pretty handsome result for an investment in a media business, which are often efforts to spark an ecosystem or at least include a lower expectation on a return.

“The FT is not involved in plans to acquire Deal Street Asia,” an FT spokesperson told TechCrunch.

Deal Street Asia declined to comment. At the time of writing, Nikkei’s press department had not responded to a request for comment that was sent yesterday at 20:31 Japanese time.

TechCrunch understands that the deal for Deal Street Asia will be similar to that of The Next Web. That’s to say that one of the primary interests is adding the company’s events business to its roster to help to break into the conference scene in Southeast Asia.

Deal Street Asia’s events are targeted at a business crowd. For example, its main summit in Singapore in September costs upwards of $1,000 and features senior executives from the likes of DBS, Grab, Sea, GGV, Allianz and IFC.

The startup uses a subscription business for its website, which is priced upwards of $89 for three months of complete access. Its paywall is a selective one that keeps some stories locked for subscribers, whilst others are left open for all readers.

Deal Street Asia’s upcoming Asia PE-VC Summit takes place in Singapore in September

This far from it for the FT in terms of deals. TechCrunch understands that the company is actively seeking acquisition and investment opportunities in media startups across the world. Beyond augmenting its existing events business, one source told TechCrunch that the FT is considering a new media subscription business which could bundle some of its acquisitions together. That’s very much an ongoing work in progress as seeks additional deals to plump up that potential subscription offering.

Aside from The Next Web and Deal Street Asia, the FT has acquired content startup AlphaGrid, intelligence service GIS Planning and research firm Longitude. The FT itself was bought by Nikkei from previous owner Pearson for $1.3 billion in 2015.

Disclaimer: The author is a former employee of The Next Web

Alibaba continues to gain cloud momentum

When Alibaba reported its earnings yesterday, the cloud data got a bit buried in other stories, but it’s worth pointing out that its cloud business grew 93 percent in the most recent quarter to $710 million. That’s down a smidgen from the gaudy triple digit growth of last report, but their market share has doubled in just two years, and they are growing fast.

As John Dinsdale, principal analyst at Synergy Research, a firm that keeps a close eye on the cloud market points out, the dip in growth is all about the law of large numbers. Alibaba couldn’t sustain triple digit growth for long.

“Microsoft Azure and Google Cloud Platform have recently seen similar reductions in growth rates, and if you go back far enough in time, AWS did too. The key thing is that the market for cloud infrastructure services is now very big, yet is still growing by 50% per year — and the leading players are either maintaining or growing their market share,” he said.

Back in 2015, when the Chinese eCommerce giant launched a big cloud push as part of an effort to expand beyond its eCommerce roots, Alibaba Cloud’s president Simon Hu bragged to Reuters, “Our goal is to overtake Amazon in four years, whether that’s in customers, technology, or worldwide scale.”

That is obviously not happening, but the company has managed to move the market share needle, doubling from just 2 percent of worldwide cloud infrastructure market share in 2016 to 4 percent today. That’s nothing to sneeze at, according to Dinsdale, but it’s also worth pointing out that most that business is in Asia, and of that, most of it is in its native China.

Like all its cloud competitors, the company is concentrating on some key technologies to drive that growth including big data analytics, artificial intelligence, security and Internet-of-Things, all of which are resource intensive and help grow revenue quickly.

To sustain its growth, however, Alibaba needs to begin to develop markets outside of China  and Asia. Dinsdale thinks that could happen as Chinese customers expand internationally. He also recognizes the political realities that the company faces as it tries to move into western markets. “Alibaba has what it takes to seriously challenge the top four cloud providers — despite some inevitable political headwinds that it will face,” he said.

While Alibaba might not reach the lofty heights of catching AWS any time soon, or probably ever, it has a good shot at IBM and Google Cloud Platform and for a company that just started taking the cloud market seriously in 2015, that’s amazing progress.

LemonBox brings US vitamins and health products to consumers in China

China is rising in many ways — the economy, consumer spending and technology — but still many of its population looks overseas, and particularly to the West, for cues on lifestyle and health. That’s a theme that’s being seized by LemonBox, a China-U.S. startup that lets Chinese consumers buy U.S. health products at affordable prices.

Indeed, the recent scare around Chinese vaccinations, which saw faulty inoculations given to babies and toddlers in a number of provinces, has only fueled demand for overseas health products which LemonBox founder Derek Weng discovered himself when his father was diagnosed as having high blood sugar levels. Weng, then working in the U.S. for Walmart, was able to look up and buy the right medicine pills for his father and bring them back to China himself. He realized, however, that others are not so fortunate.

After polling friends and family, he set up an experimental WeChat app in 2016 that dispensed health information such as articles and information. Within a year, it had racked up 30,000 subscribers and given him the confidence to jump into the business fully.

Today, LemonBox allows Chinese consumers to buy its own-branded daily vitamin packs from the U.S.. Further down the line, the goal is to expand into more specific verticals, including mother and baby, beauty and daily supplements, according to Weng, who believes that the timing is good.

“For the first time in China, people are taking a major interest in health and are working out, while society is becoming more developed,” he told TechCrunch in an interview. “We estimate that Chinese consumers are investing 30 percent of their income in health.”

The LemonBox daily pack of vitamins.

Since its full launch three weeks ago, LemonBox has pulled in 700 customers with 40 percent purchasing a three-month bundle package and the remainder a monthly order, Weng said. Typical basket size is around 300 RMB, or nearly $45.

To get the business off the ground, Weng needed expert support and his co-founder Hang Xu — who is also LemonBox’s “Chief Nutrition Scientist” — has spent 10 years in the field of nutrition science. Xu holds a Ph.D. from Texas A&M University, is a U.S.-registered dietitian and has published over 10 research papers. The startup’s third co-founder, Eddy Meng (CMO), is a graduate of Chinese app store startup Wandoujia which sold to Alibaba two years ago.

Right now, LemonBox has offices in the U.S. and China and it is squarely focused on e-commerce but Weng said the company is looking to introduce other kinds of health services. That could include consultations with dietary experts and specific offerings for patients leaving a hospital or in other long-term care situations, as well as potentially own-label products.

“We look at Stitch Fix for inspiration,” Weng said. “Right now, it leverages data to develop its own in-house private label products that improve on margin and the accuracy of recommendations. This kind of data and further services will be the next stage for us.”

LemonBox raised a seed round in March, which included participation from Y Combinator, and as part of Y Combinator’s current program, it’ll present to prospective investors at the program’s demo day. Already, though, Weng said there’s been interest from investors which the company is thinking over.

Interestingly, it was forth time lucky entering YC for Weng, who had before applied with previous startups unsuccessfully. This time it was entirely circumstantial. He applied to be in the audience for Y Combinator’s ‘Startup School’ event that took place in Beijing in May.

Unbeknownst to him, YC picked out a handful of attendees whose companies were of interest, and, after an interview that Weng didn’t realize was an audition, LemonBox was selected and fast-tracked into the organization’s latest program. In addition, YC joined the startup’s seed funding round which had initially closed in March.

That anecdotal evidence says much of YC’s effort to grab a larger slice of China’s startup ecosystem.

The organization has aggressively recruited companies from under-represented regions such as India, Southeast Asia and Africa, but China remains a tough spot. According to YC’s own data, fewer than 10 Chinese companies have passed through its corridors. That’s low considering that the organization counts over 1,400 graduates.

With events like the one in May, which helped snare LemonBox, and a new China-centric role for partner Eric Migicovsky, who founded Pebble, YC is trying harder than ever.

India may become next restricted market for U.S. cloud providers

Data sovereignty is on the rise across the world. Laws and regulations increasingly require that citizen data be stored in local data centers, and often restricts movement of that data outside of a country’s borders. The European Union’s GDPR policy is one example, although it’s relatively porous. China’s relatively new cloud computing law is much more strict, and forced Apple to turn over its Chinese-citizen iCloud data to local providers and Amazon to sell off data center assets in the country.

Now, it appears that India will join this policy movement. According to Aditya Kalra in Reuters, an influential cloud policy panel has recommended that India mandate data localization in the country, for investigative and national security reasons, in a draft report set to be released later this year. That panel is headed by well-known local entrepreneur Kris Gopalakrishnan, who founded Infosys, the IT giant.

That report would match other policy statements from the Indian political establishment in recent months. The government’s draft National Digital Communications Policy this year said that data sovereignty is a top mission for the country. The report called for the government by 2022 to “Establish a comprehensive data protection regime for digital communications that safeguards the privacy, autonomy and choice of individuals and facilitates India’s effective participation in the global digital economy.”

It’s that last line that is increasingly the objective of governments around the world. While privacy and security are certainly top priorities, governments now recognize that the economics of data are going to be crucial for future innovation and growth. Maintaining local control of data — through whatever means necessary — ensures that cloud providers and other services have to spend locally, even in a global digital economy.

India is both a crucial and an ironic manifestation of this pattern. It is crucial because of the size of its economy: public cloud revenues in the country are expected to hit $2.5 billion this year, according to Gartner’s estimates, an annual growth rate of 37.5%. It is ironic because much of the historical success of India’s IT industry has been its ability to offer offshoring and data IT services across borders.

Indian Prime Minister Narendra Modi has made development and rapid economic growth a top priority of his government. (Krisztian Bocsi/Bloomberg via Getty Images)

India is certainly no stranger to localization demands. In areas as diverse as education and ecommerce, the country maintains strict rules around local ownership and investment. While those rules have been opening up slowly since the 1990s, the explosion of interest in cloud computing has made the gap in regulations around cloud much more apparent.

If the draft report and its various recommendations become law in India, it would have significant effects on public cloud providers like Microsoft, Google, Amazon, and Alibaba, all of whom have cloud operations in the country. In order to comply with the regulations, they would almost certainly have to expend significant resources to build additional data centers locally, and also enforce data governance mechanisms to ensure that data didn’t flow from a domestic to a foreign data center accidentally or programmatically.

I’ve written before that these data sovereignty regulations ultimately benefit the largest service providers, since they’re the only ones with the scale to be able to competently handle the thicket of constantly changing regulations that govern this space.

In the India case though, the expense may well be warranted. Given the phenomenal growth of the Indian cloud IT sector, it’s highly likely that the major cloud providers are already planning a massive expansion to handle the increasing storage and computing loads required by local customers. Depending on how simple the regulations are written, there may well be limited cost to the rules.

One question will involve what level of foreign ownership will be allowed for public cloud providers. Given that several foreign companies already exist in the marketplace, it might be hard to completely eliminate them entirely in favor of local competitors. Yet, the large providers will have their work cut out for them to ensure the market stays open to all.

The real costs though would be borne by other companies, such as startups who rely on customer datasets to power artificial intelligence. Can Indian datasets be used to train an AI model that is used globally? Will the economics be required to stay local, or will the regulations be robust enough to handle global startup innovation? It would be a shame if the very law designed to encourage growth in the IT sector was the one that put a dampener on it.

India’s chief objective is to ensure that Indian data benefits Indian citizens. That’s a laudable goal on the surface, but deeply complicated when it comes time to write these sorts of regulations. Ultimately, consumers should have the right to park their data wherever they want — with a local provider or a foreign one. Data portability should be key to data sovereignty, since it is consumers who will drive innovation through their demand for best-in-class services.