China grocery players Dingdong, Miss Fresh file for US IPOs
Competing Chinese online grocery delivery platforms Dingdong Macai and Miss Fresh, recipients of more than $3 billion in aggregate private funding, have both filed to list in the US.
In keeping with the surge in growth-stage technology funding in China, Dingdong closed its Series D round less than a month ago. SoftBank Vision Fund led a $330 million extension, taking the entire round past the $1 billion mark, following commitments to the first tranche from DST Global and Coatue Management, among others.
Miss Fresh secured $800 million in funding in the second half of 2020, comprising $495 million in July – said to be the largest private round ever seen in the country's fresh produce industry, a distinction later passed to Dingdong – and RMB2 billion ($305 million) in December. The investments were led by CICC Capital and a string of government-related funds, respectively.
China's overall fresh produce market has experienced explosive growth in the past year as COVID-19 prompted lockdowns and social distancing. Various community group-buying platforms are now active in the space as well as all the country's major internet companies Alibaba Group, Meituan, JD.com, and Pinduoduo.
What Dingdong and Miss Fresh have in common is a front-warehouse model, operating small warehouses in city centers instead of large suburban facilities. This speeds up fulfillment. They use digital management systems and algorithm-based sales forecasting in warehouse location selection, product selection, and procurement, claiming this minimizes the slow-moving inventory loss rate.
There is also an emphasis on sourcing directly from farmers. On one hand, this is a means of quality control and ensuring timely delivery. On the other, it brings standardization and efficiency to a highly fragmented upstream agricultural supply chain, removing redundant intermediaries.
Dingdong had more than 950 frontline fulfillment stations in 29 cities, supported by 40 regional processing centers as of March. In the first quarter of 2021, it served 6.9 million average monthly users. Most located within the frontline fulfillment grid receive their goods within 30 minutes of ordering. The company launched in Shanghai and the bulk of its network is in the Yangtze River Delta.
Gross merchandise value (GMV) reached RMB13 billion ($1.9 billion) in 2020, up from RMB4.7 billion the previous year, while revenue increased from RMB3.9 billion to RMB11.3 billion. Over the same period, net losses widened to RMB3.2 billion from RMB1.8 billion, the prospectus states.
Miss Fresh claims to have invented the “distributed mini-warehouse” (DMW) model in China and operated 631 of these facilities across 16 cities as of March. It had 7.9 million transacting users in 2020 and average delivery time was 39 minutes in the first three months of 2021. It also sells software to offline retailers and has signed contracts to operate 54 fresh markets in 14 cities.
GMV was RMB7.6 billion in 2020, representing a slight increase on 2019. Revenue rose from RMB6 billion in 2019 to RMB6.1 billion in 2020, while the net loss narrowed from RMB2.9 billion to RMB1.6 billion, according to its prospectus.
Dingdong, which was established in 2017, counts Tiger Global Management as its largest external shareholder with 5.7%. General Atlantic and Vision Fund 2 each own 5.6%, while CMC Group has 5.3%, and Capital Today China Group and DST each hold 5.1%. The company has also received funding from Sequoia Capital China, Gaorong Capital, BAI, and Starquest Capital.
Tiger Global is also a significant backer of Miss Fresh with 12.4%. Tencent Holdings and Genesis Capital own 8.1% and 7.2%, respectively. The company, founded in 2014, is backed by Abu Dhabi Capital Group, Goldman Sachs, Jeneration Capital, Davis Selected Advisers, GX Capital, Lenovo Capital, and Zheshang Venture Capital, in addition to CICC Capital and others.
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