Alibaba enters liquor market with $288m investment
Alibaba Group Holding Ltd announced on Friday investment of 2 billion yuan ($288 million) in Chinese liquor e-commerce retailer 1919 Wines & Spirits Platform, in a move aimed at tapping the lucrative yet unsaturated online-to-offline business of alcoholic drinks.
Chengdu-based 1919 Wine & Spirits will issue over 39.2 million new shares to a unit of Alibaba at a price of 50.9 yuan, according to the liquor merchant in a statement. The proceeds raised in this round of financing will be used for expenditures, supplementary liquidity and repayment of bank loans.
Upon the transaction, Alibaba will hold 29 percent in the leading player of China's alcohol scene, becoming its second-largest shareholder.
The capital injection can strengthen Alibaba's presence in the vast alcoholic drinks market in China, which is estimated by consultancy GlobalData to hit $450 billion by 2021.
Under the new tie-up, Alibaba promised to deliver alcohols purchased through its online sites in as fast as 19 minutes. This is thanks to 1919 Wines & Spirits's widespread presence with 1,200 offline stores.
Through investment and acquisitions, Alibaba is working to tighten grip on as many sectors as possible by merging online and offline resources through its so-called "New Retail" initiative. It estimated that only 5 percent of alcoholic needs are met through e-commerce, leaving huge potential for growth.