Alibaba to Take Control of Chinese Supermarket Giant Sun Art in $3.6B Deal

(Source: Alibaba)

Alibaba Group Holding Ltd. said on Monday it will invest about $3.6 billion to increase its stake in Sun Art Retail Group Ltd., one of China’s largest supermarket operators. After the transaction, Alibaba will raise its aggregate direct and indirect stake to approximately 72%.

This new investment in Sun Art will be made by acquiring 70.94% of equity interest in A-RT Retail Holdings Ltd., which holds approximately 51% of the equity interest in Sun Art.

“As the COVID-19 pandemic is accelerating the digitalization of consumer lifestyles and enterprise operations, this commitment to Sun Art serves to strengthen our New Retail vision and serve more consumers with a fully integrated experience,” Alibaba Chairman and CEO Daniel Zhang said in a statement.

Alibaba first invested in Sun Art back in 2017, spending about $2.88 billion to pick up a 36.16% share in the chain, as part of its New Retail strategy.

New Retail is an extension of Alibaba’s strategy of digital competition into the physical world, enabling seamless engagement between the online and offline world through steps such as integrating supply chains and turning physical stores into pickup points for online orders.

Over the past three years, Sun Art has undergone a digital transformation under a fast-changing market environment by leveraging resources and technology from the Alibaba ecosystem, to capitalize on the growth opportunities in China’s hypermarket and supermarket space, according to an Alibaba statement.

Alibaba added that all of Sun Art 484 physical stores in China have been integrated into Alibaba’s Taoxianda and Tmall Supermarket platforms, providing one-hour and half-day on-demand delivery through collaboration with other key businesses across the Alibaba ecosystem, including Ele.me and Cainiao.

Sun Art plans to focus on opening smaller and offline community-based shops in future, the statement said. It expects to open 30 mini stores this year, on top of 10 hypermarkets and two to three supermarkets.

Following the transaction, Alibaba will consolidate Sun Art in its financial statements. Sun Art CEO Peter Huang has also been appointed as its new chairman.

China’s offline supermarket and hypermarket industry reached 4.7 trillion yuan in retail sales in 2019, accounting for about half of overall grocery sales, according to global market research firm Euromonitor.

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Affected by the pandemic, online grocery sales expanded this year in China as a result of lockdowns and social distancing measures. From January to September, online retail sales in the country reached 806.5 billion yuan, a year-on-year increase of 9.7% and an increase of 0.2% from January to August, government statistics show.