Bottom line: The closure of online grocer Tablelife and a major overhaul at paid advice service Fenda show investors are growing more impatient with Chinese Internet companies without clear road maps to profitability.
Online grocer Tablelife shuts down
Two news items on downsizing websites reflect not only intense competition on China’s Internet, but also a growing impatience among financial backers for money-losing sites without a clear road map to profitability. It wasn’t long ago that anyone with a dot-com name could easily find hundreds of thousands or even millions of dollars in funding, as both domestic and foreign investors threw money at anything with even the slightest hint of growth potential.
Fast forward to the present, when investors are becoming far more selective and avoiding companies that can’t show a clear paths to profits due to stiff competition and notoriously stingy Chinese web surfers. That reality has apparently spelled the end of the line for online gourmet grocer Tablelife, and a major scale-back for paid advice service Fenda following a 47-day disappearance from the Internet. Read Full Post…
Bottom line: Yum China’s new stock will post moderate gains of 3-6 percent when trading begins on November 1, while Merchants Securities’ IPO shares will price in the middle of their range and debut flat to up slightly.
Merchants Securities makes HK listing
IPOs are heating up as we head into the fourth quarter of 2016 and companies race to complete offerings before the traditionally slow period between Christmas and Chinese New Year. The last week alone has seen progress on what could be the world’s 2 biggest offerings this year, being made by Postal Savings Bank of China and P2P lender Lufax. (previous post) Now 2 more mega listings are in the headlines, as brokerage Merchants Securities prepares for an IPO in Hong Kong and KFC parent Yum (NYSE: YUM) gets set to spin off and separately list its China unit in New York. Read Full Post…
Bottom line: Yum and McDonald’s are likely to complete spin-offs of their China units by year end, offering a new business template for multinationals that should be encouraged with incentives from Beijing.
Yum names board for China unit
Separate plans by fast food giants KFC and McDonald’s (NYSE: MCD) to spin off their China businesses into separate companies were in the headlines last week, in a new trend that could see other big multinationals take similar steps to address the market’s huge size and unique qualities. Each company is using a slightly different strategy, with KFC parent Yum Brands (NYSE: YUM) choosing a key strategic partner and separate listing for its China unit. By comparison, McDonald’s is simply selling its China stores to a strategic partner in a franchise-style arrangement, while maintaining control of its bigger China operations. Read Full Post…
Bottom line: Rumors that Baidu may be planning to merge its take-out dining and group buying units with Meituan-Dianping are consistent with recent market trends, but are less likely to be true due to Baidu’s strong denial.
Baidu denies merger plan for group buying, dining units
I normally try to avoid writing about rumors that lack strong foundation, but the latest gossip about a potential new mega tie-up between 2 non-core units of online search leader Baidu(Nasdaq: BIDU) and group buying giant Meituan-Dianping look too spicy to ignore. Baidu came out with a statement late on Tuesday denying any talks were taking place to combine its take-out dining and Nuomi group buying services with Meituan-Dianping. But that said, any veteran China watcher will know that companies frequently deny such rumors even when they’re true. Read Full Post…
Bottom line: JD’s driverless vehicle delivery program will face problems due to chaos they create on city streets, while its naming of an Yihaodian CEO augers a prolonged new round of price wars with Alibaba for online grocery shoppers.
JD pilots driverless vehicles, names Yihaodian CEO
E-commerce giant JD.com(Nasdaq: JD) is making a couple of major new moves as the summer ends, led by an interesting program using ground-based driverless vehicles to deliver its goods. At the same time, the company has just installed one of its own top executives as CEO for Yihaodian, the online grocery specialist it recently acquired from US retailing giant Walmart (NYSE: WMT). This kind of corporate shuffle is quite common after such acquisitions, and we can probably expect to see some aggressive moves by new Yihaodian CEO Yu Rui as he takes over at the helm of the struggling company. Read Full Post…
Bottom line: Yum’s selection of Primavera and Ant Financial to anchor its China unit spin-off look like reasonable choices, as it tries to put the business back on solid footing before a New York IPO that should enjoy modest success.
Yum China sells stake to Primavera, Ant
After months of talks and speculation, fast food giant Yum Brands (NYSE: YUM) has announced that two firms with distinctly financial backgrounds will anchor its plan to spin off its China business. The larger of the investors, private equity firm Primavera, doesn’t look extremely exciting strategically, as it’s mostly a private equity investor with little experience in the tough retail sector. The second investor, Alibaba’s (NYSE: BABA) Ant Financial affiliate, looks a little more interesting since its core Alipay electronic payments service could help to propel Yum’s aging KFC and Pizza Hut brands into the modern era. Read Full Post…
Bottom line: New Teavana-branded drinks at Chinese Starbucks will get a relatively strong reception, prompting the opening of experimental stand-alone Teavana stores in Beijing or Shanghai within a year.
Starbucks launches Teavana drinks in China
Not content with its phenomenal success in China already, trendy coffee chain Starbucks (NYSE: SBUX) is hoping to extend its winning streak in the market with the roll-out of new tea beverages from its sister Teavana chain. This particular move was actually announced back in March, but the two new Teavana-branded drinks just hit Starbucks stores this week, in line with the previously announced schedule for a September launch. Read Full Post…
Bottom line: McDonald’s is likely to choose a buyer for its China stores in the next 2 months, while China Foods’ decision to sell its stakes in several Coca-Cola bottling plants is probably a simple business decision that reflects changing priorities.
McDonald’s near a sale of China stores
Two western consumer giants are in the headlines of China’s rapidly shifting corporate landscape, led by word that the list of bidders vying to buy McDonald’s (NYSE: MCD) 1,650 China restaurants has been narrowed to 2. The other headline has one of Coca-Cola’s (NYSE: KO) top China business partners, China Foods (HKEx: 506), announcing its intent to dump its stake in several local bottling joint ventures.
Each of these stories illustrates the vital role that local partners play in the operations of foreign companies doing business in China. McDonald’s has largely owned and operated its thousands of China stores independently since entering the market in the early 1990s. But it wants to find one or more local partners to take over those operations as it moves to a more franchise-style model. Coca-Cola also uses a franchise model for the companies that bottle its trademark drinks that include Coke, as well as Sprite and many others. Read Full Post…
Bottom line: Lufax’s reiteration of plans for an IPO by year-end indicate China’s regulator may increase new listing approvals as the market stabilizes, while progress in Yunda’s backdoor listing also may reflect a relaxing attitude by the regulator.
Lufax sticks to plan for IPO by year-end
After an anemic flow of domestic IPOs so far this year, building pressure and a stabilizing stock market may finally be prompting the regulator to step up the pace as we head into fall. That appears to be the thinking at Lufax, China’s leading P2P lender, which says it is still targeting an IPO by the end of this year, after previously indicating China would be its first choice for such a listing. Meantime, an easing of the IPO climate won’t come soon enough for parcel delivery firm Yunda, which has joined many of its peers in moving ahead with a backdoor listing plan in Shenzhen. Read Full Post…
Bottom line: Yihaodian could regain momentum in China’s online grocery market under an aggressive 1 billion yuan promotion by new owner JD.com and strong support from former owner Walmart.
Yihaodian launches 1 bln yuan promotion
One major obstacle for foreign companies in China is their reluctance to engage in the kind of cut-throat price wars that are all too common in many of the nation’s huge but extremely competitive emerging markets. Such reluctance was a big factor behind the disappointing progress for Walmart’s (NYSE: WMT) local e-commerce venture Yihaodian, and prompted the US retailer to sell the company in June in exchange for shares of local e-commerce powerhouse JD.com (Nasdaq: JD). Now we’re getting word that JD is preparing to position Yihaodian as its flagship online grocery store, and is getting set to launch a massive price war in its bid to achieve that target. Read Full Post…
Bottom line: A blossoming price war between Alibaba and JD.com in the online grocery space could stretch out for the next year, costing each hundreds of millions of dollars on promotions as they battle for market share.
Alibaba to spend billions on Tmall Supermarket
Just days after e-commerce partners JD.com (Nasdaq: JD) and Walmart (NYSE: WMT) revealed a major promotion for their online grocery business, sector leader Alibaba (NYSE: BABA) is firing back that it will outspend its smaller rivals in the hotly contested space. This sudden price war in online groceries space looks remarkably similar to another battle that broke out nearly a year ago, when Alibaba launched another major promotion against online grocer Yihaodian, Walmart’s main China e-commerce site at the time. Walmart appeared to later concede defeat in that battle just two months ago when it sold Yihaodian in exchange for shares in JD.com, Alibaba’s chief rival. Read Full Post…
