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Why Alibaba and McDonald’s Are Strengthening Ties

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Jun. 3 2019, Updated 10:48 a.m. ET

Alibaba and McDonald’s team up on loyalty program

McDonald’s (MCD) has linked its loyalty program with Ele.me, Alibaba’s (BABA) on-demand delivery service. As a result, McDonald’s customers in China can now earn points when they order products from the restaurant chain using the Ele.me app. McDonald’s and Ele.me customers participating in this loyalty program can receive vouchers worth up to $12.8, Alibaba news service Alizila reported.

Last year, McDonald’s selected Ele.me alongside Tencent-backed (TCEHY) Meituan to deliver coffee for its customers across China. Ele.me also delivers coffee for Starbucks (SBUX) customers in China.

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Alibaba seeking business from Luckin Coffee

Alibaba is seeking more business in China’s booming coffee market. According to a report from TechNode, Alibaba is pursuing a coffee delivery contract for its Ele.me service from Luckin Coffee (LK), a rival of Starbucks and McDonald’s in China’s coffee market. Luckin Coffee went public in the United States last month (May), raising $560 million in cash through an initial public offering that valued it at over $4.0 billion. In its IPO documents, Luckin Coffee disclosed that one of its major risks is that it relies on a single provider for its delivery needs, indicating that the coffee retailer wants to diversify its delivery service.

Alibaba’s commerce revenue jumped 45%

Ele.me falls under Alibaba’s local consumer services business in the core commerce division. Revenue from the local consumer services business reached $785 million in the March quarter, thereby contributing to 45% year-over-year growth of Alibaba’s core commerce revenue to $8.7 billion in the quarter.

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