Technology giant Tencent is teaming up with Chinese start-up Luckin Coffee to take on China's growing coffee-drinking market, the South China Morning Post reported.
China's local market for coffee products is worth about 100 billion yuan ($14.62 billion), with instant coffee accounting for 72 percent and freshly brewed coffee making up 18 percent, according to the news site.
The partnership will create a "new lifestyle of 'smart retail' through tie-up on user traffic, technology exploration, application scenarios and management abilities," said Lei Maofeng, deputy general manager of Tencent's payment platform WeChat Pay, the SCMP reported.
Tencent did not respond to CNBC's multiple requests for comment.
The announcement comes just a month after rivals Alibaba confirmed that its food delivery arm, Ele.me, has teamed up with Starbucks to deliver coffee and snacks to Chinese consumers starting in fall in Beijing and Shanghai. Before the end of the calendar year, the partnership will broaden delivery to 2,000 stores in 30 cities, according to Starbucks President and CEO Kevin Johnson.
The backing from Tencent could potentially bolster Luckin's ability to compete with the American beverage giant in China. Luckin, which began its operations earlier this year, sells on-demand coffee through its app that is delivered to customers under 30 minutes. The company has hundreds of outlets in 13 Chinese cities, compared to Starbucks' more than 3,300 stores.
WATCH: China's Luckin Coffee takes on Starbucks
