Chinese online grocer Dingdong raises US$300m led by US private equity firm

CHINA – Dingdong Maicai, a Chinese online grocer has raised US$300 million in a new funding round led by US private equity firm, General Atlantic and values the company at US$2 billion, reports Reuters.

With the new capital injection, the Shanghai-based Dingdong, whose earlier backers include Sequoia China and Qiming Ventures, is set to benefit from a rise in demand for fresh food delivery amid coronavirus-related restrictions

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Dingdong’s focus on delivering fresh food to consumers doorstep and puts it among the few sectors that have seen a surge in investor interest due to a pick up in demand as containment measures restrict movement of people.

Operating mainly in first-tier cities like Shanghai, Beijing, Shenzhen, and Hangzhou, Dingdong saw a 14% rise in monthly active users in January, when travel restrictions were imposed, from December levels, market researcher Analysys says.

“The outbreak has broadened the user base for online grocery companies,” said Zhao Yue, an Analysys analyst.

“Only young people ordered fresh food online before the outbreak, but now more middle-aged consumers are buying fresh groceries online,” Zhao said, but added the sharp rise in demand was flattening with China gradually opening up for business.

Dingdong Maicai, which means “Dingdong Buy Vegetables”, has said its revenue topped 1.2 billion yuan (US$169 million) in February. It processed around 300,000 orders daily during the outbreak in Shanghai, the Chinese news portal Paper reported.

This comes after the grocer faced operational setbacks last year and, according to Chinese magazine Caijing, paused expansion in some cities including Shaoxing and Wuxi.

Now Dingdong, along with startups like Tencent-backed MissFresh, is competing with e-commerce titans like Alibaba and JD.com, as well as food delivery giant Meituan Dianping in the cash-burning and crowded sector which relies on subsidies to gain new users.

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Chinese ride hailing giant Didi Chuxing has also launched a grocery delivery service in 21 cities in the country to tap in to the demand fuelled by the outbreak.

While monthly active users for the fresh grocery delivery sector fell by about 5% in March and April, Dingdong’s latest fundraising and valuation underline optimism about its outlook.

However, the fresh groceries delivery industry in China has seen less financings over the past five years, researcher qianzhan.com says. In 2019, 27 deals were made, seven less than 2018.

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