Chinese internet giant Alibaba Group is set to offload its grocery business Freshippo and Taiwanese hypermarket chain RT-Mart, sources claim, as it looks to concentrate on its core e-commerce business.

The sale plan comes as Alibaba, under chairman Joe Tsai and newly appointed chief executive Eddie Wu, continues to shift focus back to its core profitable e-commerce business model while divesting non-core, loss-making units, said one of the sources.

Alibaba has reportedly been in talks with strategic and financial investors about these assets, which also include shopping mall operator Intime. Discussions are at an early stage and Alibaba may decide not to proceed, the sources said.

A spokesperson for Freshippo denied that Alibaba was planning to sell the company and declined to comment further.

 

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The divestment efforts also come amid Alibaba’s broad restructuring and China’s tightened scrutiny over initial public offerings in already challenging capital markets that have hampered startups’ ability to raise funds.

Wu, who took office after predecessor Daniel Zhang stepped down in September, set out the company’s future strategy two months later, saying that each of its businesses would face the market more independently and that it would conduct a strategic review to distinguish between “core” and “non-core” businesses.

“With the change of Alibaba management, they are more focused on their core business, which is obviously domestic e-commerce, and they want to invest in more AI, cloud computing, and also overseas expansion,” said Jason Yu, greater China managing director of market research firm Kantar Worldpanel.

“These offline businesses do require a huge amount of effort and resources and it’s proven quite difficult to actually integrate with their core business, which is the online commerce business,” he said.

Alibaba announced a plan in March to split into six units and explore fundraisings or listings for most of them. It has since filed a Hong Kong listing application for the logistics arm Cainiao in September.

 

Freshippo Listing Postponed

Freshippo, or Hema in Chinese, is a supermarket chain in China which also offers services such as dine-in and 30-minute home delivery. Launched in 2015, it has more than 300 stores in 28 cities, according to its website.

It was looking to list in Hong Kong last year but the plan was put on hold to better evaluate market conditions, Alibaba said in November.

In 2022, the grocery chain set out to raise funds at a valuation of about $6 billion, much lower than a hoped-for $10 billion. Freshippo has not announced the completion of the fundraising to date.

Alibaba invested $3.6 billion in 2020 to acquire a controlling stake in hypermarket operator Sun Art Retail Group Ltd, which runs RT-Mart, after buying a 21% stake in the company three years earlier.

The group expanded in China’s brick and mortar retail sector, as growth in e-commerce slowed, but that strategy has not translated into profits, one of the sources and analysts said.

 

  • Reuters with additional editing by Sean O’Meara

 

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Sean O’Meara

Sean O’Meara is an Editor at Asia Financial. He has been a newspaper man for more than 30 years, working at local, regional and national titles in the UK as a writer, sub-editor, page designer and print editor. A football, cricket and rugby fan, he has a particular interest in sports finance.


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