Alibaba Group acquired rival cross-border e-commerce site Kaola, operated by game developer NetEase, for $2 billion. Alvin Liu, the general manager of Tmall Import and Exports, will replace Kaola’s current CEO, Zhang Lei. Kaola will continue to operate under its own brand but will also be integrated into Tmall, creating the world’s single largest cross-border shopping platform (Fortune).

Alibaba Group has acquired NetEase  Kaola for $2 billion, the two companies said …, and will integrate it into Tmall, creating the largest cross-border e-commerce platform in China. The announcement follows weeks of media reports about a potential deal, which was said to have stalled in the middle of August after the companies reportedly disagreed on transaction details.

Tmall Import and Export general manager Alvin Liu has been named as Kaola’s new CEO, replacing Zhang Lei, but Kaola will continue to operate independently under its own brand.

Tmall Global and Kaola are China’s largest and second-largest cross-border e-commerce platforms, respectively, holding 31.7% and 24.5% of the market, and their union means they will create a business that will far outstrip in size rivals like JD Worldwide, VIP International and Amazon China. (Earlier this year, NetEase was reportedly in talks to merge Kaola with Amazon China.)

This is a massive consolidation in China. There is something there that activated this deal: Alibaba needs a competitor out, and the competitor wants to go home because it cannot predict tomorrow. That government will allow this deal to go through is surprising.

Typically, the Chinese dynamics partly mirrors Africa; Jumia may need to look at a new game plan to drive growth: buy small pieces of ecommerce companies across nations and integrate where possible. Of course, not many have the scale that may move the needle in the Jumia world.

But we need to watch carefully – MallforAfrica, Jumia, Konga and other leaders in Nigeria may be having evening talks. With what happened in China a few days ago with the opening of Costco, it seems the love of physical store is coming back in China. If the items you buy across border is sold by a trusted chain back home, a minor disintermediation will take place. 

For the Alibaba forest, it has a really big animal in Kaola to deal with. This may not be the last especially if the Chinese economy continues to cool, and the global economy shows more signs of fatigue.

There is no data to draw any direct correlation that the recent consolidation in Chinese ecommerce is attributable to the slower growth in the economy. But if that hypothesis happens to be true, it may be a really bad trajectory: yes, slower growth means lesser ecommerce platforms because possibly people are focusing on physical stores. The challenge there is that investors may see ecommerce as not integral to living but a kind of “luxury” lifestyle in emerging economies which is not sustainable during downtime economic cyclical phase. No ecommerce player will like that scenario!

I like visiting factories in Nigeria because until we begin to process some of the raw materials we have in Nigeria, we will remain downstream players. So, it was a beauty when Symrise noted it was opening a factory in Nigeria to hire our young people and run an application lab. That is a win for Team Nigeria. 

Symrise supplies fragrances, flavourings, cosmetic active ingredients, and raw materials to manufacturers of perfumes, cosmetics, food and beverages, the pharmaceutical industry and producers of nutritional supplements.

Another element of this company that got me excited was the promise to source “production inputs locally”. This can open opportunities for our chemists, microbiologists and other domain experts to see how our abundant natural resources can be used in perfumes, cosmetics, pharmaceutical and beverages. I will recommend “ugbaju”, a local herb in eastern part of Nigeria that blows our malaria! (please  see a doctor, forget my prescription).

Welcome to Nigeria, Symrise – we want more factories in Nigeria. Yes, industrialization  was a key part of my piece in Harvard Business Review last week here. I will be making a visit to Symrise Lab this month when I make it to Lagos.

Read Press Release Below

Global flavours, fragrance, and cosmetic ingredients manufacturer Symrise has launched its new application laboratories in Lagos with an exclusive tour of the facility on September 4, 2019. The lab exists to deepen the company’s presence in West Africa and to service Nigeria’s consumer demands by sourcing production inputs locally.

According to Rudy McLean Managing Director Symrise Nigeria, the principal challenge being tackled by the new Symrise facility is to help Nigerian manufacturers create affordable consumer brands like beverages, toothpaste, cereals, detergents, washing up liquid, beauty products, and personal hygiene products. Making such items affordable is central to the company’s strategy because of the unique economic situation in the Nigerian market.

Speaking on what informed the decision to do business and build application labs in Nigeria, Thomas Dressler, President EAME Fragrances and Oral care said,

“Nigeria has a very large economy and we service the everyday needs of people. Even though we have a large sales department here, the products for the Nigerian market were developed outside the country. To serve Nigerians better, we need to be close enough to the Nigerian people and products to understand them and give better-suited products to the Nigerian consumer. That informed our decision”.

Alexander Lichter, Vice President Flavour Sales EAME, added that doing business in Nigeria comes with its own challenges, he said,

“Challenges are not exclusive to Nigeria. We see all the challenges in all other countries where we have a presence and we are used to it. However, the prevailing factor for us is that we recognize the opportunities in West Africa and Nigeria and we tap into it regardless”.

Symrise has a unique value proposition in the Nigerian market space because most of its clients in the country lack proper application labs to carry out ingredient analysis and testing. With this new facility, not only will clients be able to satisfy their customers at their price-dominated point of need, but they will also be able to develop higher quality products without breaking the bank.

The new facility will provide labs for beverage, sweet and culinary applications, as well as labs for fragrance and cosmetic ingredients applications. It represents a key part of the company’s EAME expansion strategy.

Highlighting the next steps for Symrise after the launch of the Labs facility, Thomas Dressler, President EAME Fragrances and Oral care said,

“We will be providing a few job opportunities but our first step is to educate people in the art of perfumery. This is exciting because we offer young people a very special opportunity you can’t get in a public school or University. Symrise has a Perfumery school in Germany. We have people come from Brazil, Thailand, and China. We hope to have Nigerians come in and learn this art very soon. However, they need to have some basic knowledge and in the application Labs, young technicians will be exposed to the development of consumer products; one side cosmetic, the other side, food products”.

Notable guests present at the opening of the new facility included, Dr. Alexander Lichter – Vice President Flavour Sales EAME, Sofiane Berrahmoune Sub Regional Flavour Director Africa Middle East, Dr Eberhard Suessle – Vice President Creation & Application Category Culinary EAME, Rudy McLean – Managing Director Symrise Nigeria, Pieter Gildenhuys – Head of HR & Finance Symrise South Africa, Thelumusa Mkhonza – Technical Manager Sub Saharan Africa, Amit Mudholkar – Sales Director Sub Saharan Africa Fragrances, Miguel Pereira – Sales Director Sub Saharan Africa Flavours, Dr, Rene Hemeier Vice President AMET Fragrances, Thomas Dressler – President EAME Fragrances & Oral Care, Daniel Ibarra – Vice President EAME Cosmetic Ingredients, among others.

Symrise is a global supplier of fragrances, flavourings, cosmetic active ingredients, and raw materials as well as functional ingredients. Its clients include manufacturers of perfumes, cosmetics, food and beverages, the pharmaceutical industry and producers of nutritional supplements.

To find out more about Symrise, visit www.symrise.com