
Deal focus: Investors back Benlai’s cold chain solution
Chinese online grocery supplier Benlai.com raises $100 million in Series C funding to support expansion of its cold chain logistics network
To Huafeng Yu, founder and CEO of Chinese fresh food e-commerce site Benlai.com, keeping products fresh is more challenging than sourcing or selling them.
Yu co-founded Weitepai in 2011 to provide third-party delivery services to e-commerce players like Yihaodian. The following year he came up with an online grocery store idea and launched Benlai, which means "back to the original life." From the outset, cold chain delivery services have been a priority.
Banyan Capital and CDH Investments together around $40 million in Series A funding in February 2014. This was followed by a Series B round from an undisclosed Chinese agriculture and consumer-focused VC firm.
"The fresh grocery market is worth several trillion renminbi in China but internet penetration is still very low," says Zhen Zhang, co-founder of Banyan Capital. "Benlai has built its own cold chain logistics and warehouses, which is a key differentiator from its industry counterparts."
However, developing a self-owned logistics network requires plenty of cash. A few days ago, Benlai raised more than $100 million in Series C funding, with Shenzhen-listed home appliance maker Joyoung committed $30 million for a 3.82% stake in the start-up. Several undisclosed strategic investors and PE firms also participated, including CDH. Banyan did not, given its early-stage focus.
Benlai gained prominence in its early days thanks to Shijian Chu, a local entrepreneur. Previously director of state-owned Hongta Tobacco Group Chu was arrested on corruption charges. Released from prison in his 70s, he became an orange farmer. Yu turned Chu's life story into a marketing campaign for Benlai's "Chu Orange" line.
He didn't stop there. The Chu Orange was followed by the "Pan Apple," named for property tycoon Shiyi Pan, co-founder of Soho China, and the "Liu Peach," which got its moniker Chuanzhi Liu, chairman of Legend Holdings.
"Yu has strong marketing and advertising skills. That's why a lot of Chinese agribusiness wholesalers want to work with Benlai, supplying fruit, vegetable, seafood and other fresh products on the platform," Zhang says.
Benlai focuses on providing quality goods - nutrition and food safety are priorities. This resonated with Joyoung, which wants to sell its kitchen appliances to consumer groups that have similar sensibilities.
The new funding will allow Benlai to continue expanding its supply chain and delivery services. The company has warehouses in Beijing, Shanghai and Guangzhou, and offers cold chain logistics services in 22 cities. Sales have grown 300-400% every year since inception and reached RMB268 million ($41 million) in 2014, although Benlai still posted a loss RMB208 million.
Person-to-business (P2B) is another area in which the company sees growth potential. "By sourcing food directly from individual farmers, Benlai can maximize the sales to convenience stores and supermarkets," Zhang adds.
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