Alibaba-backed BigBasket, a leading online grocer in the fiercely competitive USD 600 million Indian grocery market, is looking to pick up equity in early-stage consumer brands that sell on its platform, local media Economic Times reported.
Through its ‘BB Accelerate’ program, it is looking at ‘nurturing’ private labels that are into staples and household products, and compared to traditional fast moving consumer goods (FMCG) brands are less pricey. In the last one year, since the set up of its in-house acceleration program, it has worked with 20-25 private labels such as Delight Foods, Kapiva, and Vahdam Teas, among others.
Taking this route, it hopes to capture the mass market through a cost-efficient supply chain than just focusing on premium customers.
“We are considering to step up this (BB Accelerate) and take some equity and essentially pump that money back to help them (startups) grow. That’s the next stage of it,” Hari Menon, co-founder and CEO at BigBasket, told ET.
The nurturing exercise includes monthly meetings with company executives, consumer data analysis, and express delivery. Later in their life-cycle these labels would be upgraded to compete with top-notch Indian consumer brands like Hindustan Lever and Marico. According to the report, over 35% of BigBasket’s total sales are from private labels like Fresho and Royal.
“Grocery will now extend beyond the high socio-economic classes towards the mid-section, and the market will expand. These new set of customers, they have all transacted online on Amazon or Flipkart, and this group will move to online grocery ordering,” the news report quoted Menon. He wants to scale up the share of private labels contributing to BigBasket’s revenues, to about 45% but will not go on a total private-brands-only approach.
It is to be noted that its Gurugram-based competitor, Grofers, is also aggressively getting into private-labels since a few years now, and said 40% of its current revenue comes from private labels, which it wants to take it to 60% in the coming years.
In a move to outdo competition from SoftBank-backed Grofers, Amazon India, and Walmart-owned Flipkart that has also gotten into grocery business, BigBasket recently merged two of its core businesses, the on-demand 90-minute delivery—which offered a lesser variety of products, and planned next-day delivery—that has a larger product range to choose from. The merged entity will deliver products in four hours.
Core online grocery companies like BigBasket and Grofers will have to stand against more competitors such as food delivery unicorn Swiggy, and hyper local delivery platform Dunzo, which recently added grocery to their portfolio of services. Swiggy and Dunzo are keen to leverage their bandwidth for instant delivery of small orders from offline stores.
As of March 2019, BigBasket’s turnover totalled USD 458 million, according to the ET report.
According to a 2018 study by market research agency Euromonitor, 95% of India’s overall grocery market is controlled by mom-and-pop stores or kiranas, as supermarkets, and online grocers contribute just 5% to the country’s grocery sales.