BackTata-BigBasket deal comes as online grocery sales pick pace
Deal comes at an opportune time when grocery sales online have seen a significant jump in the past three quarters
PremiumNEW DELHI: News of Tata group picking up a stake in online grocery retailer BigBasket comes at an opportune time when grocery sales online have seen a significant jump in the past three quarters as numbers reported by large fast-moving consumer goods (FMCG) companies in their quarterly earnings indicate.
On Tuesday, ET Now reported that Tata group will buy 68% stake in BigBasket. The deal ties in with Tata group’s plans to launch a super-app housing all its consumer facing businesses.
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India’s grocery market has remained an attractive proposition for several large global as well as homegrown retailers for years. It's easy to see why. The bulk of the market is still unorganized with small mom-and-pop stores controlling more than 88% of the trade.
New and emerging business models such as JioMart and hyper-local delivery services are now bound to shape the future of grocery and FMCG sales in India, especially as the covidpandemic has pushed consumers to buy more goods online.
Companies such as Hindustan Unilever, Nestle India, Marico, Dabur India reported strong growth in sales via e-commerce in their December quarter earnings.
Sales via e-commerce already contribute 7.5% to revenues of FMCG companies in the large cities. Overall, the share of e-commerce to FMCG sales rests at 2.8%, market researcher Nielsen IQ said in a recent report.
Action is already heating up. Earlier this month, Amazon India said it is integrating its 'Pantry' and 'Fresh' services in cities, including Delhi, Bengaluru, Ahmedabad and Mysore, to offer a simplified grocery shopping experience. It promises a wide selection of daily grocery offerings across perishables, staples, and household products available for delivery in two hours.
FMCG companies are ready to capitalize on this shift.
In its third quarter earnings call, FMCG company Dabur India’s top management said that e-commerce is structurally set to become a bigger channel. “The behaviour is currently skewed towards urban and millennial consumers," said Mohit Malhotra, chief executive, Dabur India. Malhotra said e-commerce will also compliment modern trade and have a rub-off effect on large stores as retailers such as DMart and Reliance Retail enhance their delivery services and online capabilities.
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