China’s Dingdong Maicai has raised $300 million in a new funding round that values it at $2 billion, two people familiar with the matter said, as the online grocer benefits from a rise in demand for fresh food delivery amid coronavirus-related restrictions.
The fundraising was led by U.S. private equity firm General Atlantic, the people said on condition of anonymity as the information is not public. The deal was finalised about half a month ago, one of them added.
Shanghai-based Dingdong, whose earlier backers include Sequoia China and Qiming Ventures, did not respond to an emailed request for comment. General Atlantic’s Hong Kong office did not comment over phone while an email sent to its U.S. office was not answered outside business hours.
Dingdong’s focus on delivering fresh food to users’ doorstep puts it among the few sectors, such as healthcare and online learning, that have seen a surge in investor interest due to a pick up in demand as curbs confine people to their homes.
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 ($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.
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.
Mainland China has reported 82,918 coronavirus cases and 4,633 deaths, but new infections since April have been fewer versus the thousands confirmed daily in February, allowing authorities to restart businesses.
Monthly active users for the fresh grocery delivery sector fell by about 5% in March and April, Analysys’ Zhao says.
However, Dingdong’s latest fundraising and valuation underline optimism about its outlook.
Its financing and the $1 billion raised recently by Chinese online education platform Yuanfudao also mark a rare bright spot of activity in the deal-making world, which has largely dried up amid virus-related uncertainty.
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.