Online grocery is emerging as the next battlefield for top internet companies in India with Amazon and Alibaba throwing their weight behind the category to get a toehold in what could potentially be a huge market.
We’ve learnt from sources close to the matter that Amazon has shown interest in picking up a minority stake in the SoftBank-backed e-grocer Grofers after the internet behemoth’s talks with BigBasket failed to culminate in a deal.
Amazon’s preliminary discussions with Grofers for an equity funding come on the back of Alibaba closing in on a $200-million investment in BigBasket. Alibaba’s capital infusion through Paytm Mall will see $150 million being ploughed into BigBasket, with the rest of the $50 million going to its existing investors in a secondary transaction, people in the know said.
The heightened interest in online grocery has been fuelled by two big developments -Amazon doubling down on the sector around last year’s Diwali and the bumper IPO of supermarket chain D-Mart earlier this year.
If an investment comes through from Amazon, the size of which is yet to be decided, it would have to cross multiple hoops as two of the investors in Grofers -SoftBank and Tiger Global -are also investors in Flipkart. Having pulled in a $2.5-billion financing round led by SoftBank Vision Fund, Flipkart too is preparing for a foray into grocery and it’s been speculated that a possible merger of Grofers with the Bengaluru company is likely. An investment by Amazon in Grofers of around $100 million or so is a way of preventing Flipkart from aligning with Grofers, which is a natural ally.
An Amazon spokesperson said the company doesn’t comment on rumours and speculation, while Albinder Dhindsa, co-founder & CEO, Grofers, did not reply to TOI’s query. A person close to the matter said, “Both Alibaba and Amazon want to get a toehold in the grocery category, which is why they are not looking to acquire any of the two companies but only back them with capital.”
In India, the overall grocery and foods market is estimated at $400 billion, this includes packaged food. But only 5% of the sales is contributed by organised retailers, according to consulting firm Technopak.Still in their early days, the online grocery platforms rack up sales of about $300 million.
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