Alibaba Rival JD.com Invests in FruitDay and Produce Delivery

NEW YORK (The Street) -- New investments from online retailer JD.com (JD) show the company is flexing some muscles to improve the delivery of produce in China.

JD.com Saturday announced that it is taking a stake in FruitDay, an online seller of fruit and produce in China.

JD was the lead investor in a $70 million Series C round along with Susquehanna International Group and ClearVue, who both participated in previous rounds though it is the first for JD.

FruitDay, which offers imported produce from countries such as the U.S., Australia, New Zealand, and Chile, is already the largest seller of fresh produce on JD's marketplace.

"With our shared commitment to providing consumers with the best online shopping experience, FruitDay and JD.com are natural partners as Chinese consumers increasingly shift to purchasing fresh produce online," JD Mall CEO Haoyu Shen said in a statement.

JD.com declined to share how much it invested in FruitDay or what percent stake it now owns in the company.

FruitDay is the only fresh food company in China that has earned the National Sanitation Foundation certification, which provides public health standards. It also provides a full fleshed supply system, from procurement to storage to logistics. The company delivers to customers twice a day and uses temperature-controlled equipment to ensure the produce is fresh.

"We identified fresh produce as a key target area this year as part of our strategy to dominate key growth verticals in the Chinese e-commerce space," said JD senior director of international communications Josh Gartner. "Our investments in travel, car sales, and produce reflect that strategy. FruitDay is the clear market leader in China, and has outstanding expertise in the difficult area of transporting fruit globally and getting it to consumers in excellent condition."

At the Harvard China Forum last month, JD CEO Richard Liu spoke about the company's ambitions in China and focused specifically on produce delivery. This category has been top of mind for JD for the past two years, but is a particular priority in 2015, according to Gartner. This is one area in which JD could theoretically take on its rival Alibaba (BABA).

"It dovetails very well in terms of our target audience who are looking for high quality products, imported and domestic," Gartner said.

"In China the food supply chain is a real concern for consumers and they want to buy from a website they can trust. We are building out our supply of produce, from the best domestic and international sources, as another way to strengthen our position in China as the one-stop destination for safe, trusted products," he added.

While the company doesn't store any produce inventory itself, it partners with third-party sellers and helps them deliver produce in a timely manner to ensure the goods stay fresh. Some of the produce is delivered same-day, though it depends on the particular merchant.

JD has also recently begun testing a more instant delivery service, similar to Amazon (AMZNPrime Now and Google (GOOG) Express, which deliver products to consumers in select zip codes within hours. In Beijing, consumers can order from local sellers through JD and receive products within hours (the company didn't clarify how many hours exactly.) JD CFO Sidney Huang mentioned the pilot in its first-quarter earnings call, comparing it to the delivery model of Uber.

Both the on-demand delivery pilot and the investment in FruitDay signal a heavy commitment to improving the way Chinese consumers receive produce. According to both JD and FruitDay there is a strong demand in China for fresh produce, so they are hopping on the opportunity.

"Based on our market research, freshness and produce quality is most important to consumers in China," FruitDay founder and CEO Wei Wang said.

"And we are also seeing a trend toward customers trying new fruits. For example, the volume of American cherries sold in China rose 2.8 fold in 2014, while imports of avocados has increased 128 fold since 2011. More consumers are taking care of themselves, and this means greater consumption of fresh fruit, particularly among white collar workers," he added.

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