(Bloomberg Opinion) -- Starbucks Corp. and Alibaba Group Holding Ltd. areĀ pitching theirĀ delivery deal as a win-winĀ for both sides. And it is.
But it's Alibaba's Ele.me food delivery business that needs the immediate caffeine hit. Starbucks would be looking for a nice, slow caramel macchiato.
Both companies are under the gun in China. Ele.me is facing stiff competition from Meituan Dianping, which isĀ backed by Tencent Holdings Ltd. Starbucks has to contend with the rapid rise of local competitors, including a newly crowned unicorn,Ā Luckin Coffee.
Starbucks reported a same-store sales drop of 2 percent in China in the three months throughĀ July 1, admitting thatĀ results there wereĀ ādisappointing.āĀ Delivery is a key plank of its China growth strategy, in addition to ramping up the pace of store openings, and it needs a local partner to do that. Ele.me is as good a choice as any.
But it's Ele.me that has to put some space between itself and Meituan Dianping, especially as that firm āĀ which gets 60 percent of its revenue from food-delivery commissions āĀ could soon raise as much as $6 billion in a Hong Kong IPO.Ā We've already seen how investors are willing and able to throw silly money around to chase all manner of online-to-offline businesses āĀ deliveries, ride share, bike rental āĀ and Meituan isn't even profitable.
Getting outside helpĀ from an iconic global nameĀ is exactly the kind of leg up Ele.me needs. It won't be enough to finish the competition, but a shot of caffeine willĀ help it keep up the pace.
To contact the editor responsible for this story: Paul Sillitoe at psillitoe@bloomberg.net
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tim Culpan is a Bloomberg Opinion columnist covering technology. He previously covered technology for Bloomberg News.
Ā©2018 Bloomberg L.P.
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