Zomato To Give Booster Shot To Grofers Now: Eyes On A Big Chunk Of Grocery Delivery Market

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After the historic performance with IPO, Zomato is now gearing up for another milestone – to grab a sizeable share of the online grocery market in India. According to media reports, India’s first public listed startup unicorn Zomato is considering investing more funds in Grofers to help it strengthen the market presence.

In a recent interview, InfoEdge’s founder and vice chairman said that Zomato won’t mind dipping its toes in the grocery market again. InfoEdge has the largest percentage of shares in Zomato.

These developments are not surprising considering the fact that Zomato has declared its interest in re-entering the grocery delivery market.

Zomato and the Grocery Market: Big Picture

  • Zomato is expected to lead a $470 million investment round in Grofers.
  • Just last month Zomato invested $100 million in Grofers, for a stake of 9.3%, setting the latter’s value at more than $1 billion.
  • SoftBank is the largest investor in Grofers with a controlling stake of 51.9%
  • The eGrocery market in India has great potential, especially since the outbreak of the Covid-19 pandemic, as there has been a shift in consumer behavior since the same. 
  • Earlier people used to buy groceries from brick and mortar shops, now instead of being susceptible to the virus by going out in the shops, they prefer buying it online. Hence online grocery adoption has seen an uptick due to the pandemic. 
  • The online grocery delivery market in India has been largely driven by utility as 80% of those who ordered during the covid induced lockdown did so because of convenience.
  • This might be a reason why this market has grown by 60% in the year 2020 and is expected to grow 41-49% in the first half of 2021 alone. The investors are ready to cash in on this phenomenon. According to an expert, most of the marketplace investments will be made in grocery in the next 5 years.
  • India’s online grocery delivery business is estimated to be whopping $18.2 billion market by 2024.
  • Zomato once was in the eGrocery market itself. It then quit to focus on its core market, food delivery. It was beneficial as it became the first Indian unicorn to  open an IPO.
  • Zomato did not completely exit the grocery delivery market. It still provides fresh and high-quality groceries, fruits, vegetables, and spices to restaurants. This initiative is called HyperPure.
  • Because it never completely exited the market, the speculations had always been high for Zomato to re-enter eGrocery. Now the food delivery unicorn has announced the same.
  • Zomato probably wants to strengthen its network in the grocery delivery business through fresh round of strategic investment in Grofers, which is another Indian unicorn.
  • Grofers too will benefit from Zomato’s investment as many private equity investors will be attracted to it because of the latter. Grofers itself has impressive investors, with SoftBank holding 51% and Tiger Global holding 19.2% in it.

Food For Thought

Just investing in the eGrocery market does not ensure success for the Zomato-Grofers duo. It will have to face many competitors in this market now, considering Amazon and Flipkart, the eCommerce giants, are also leaving no stone unturned to grab a sizeable share of India’s online grocery delivery market, currently dominated by TATA-owned BigBasket.

On the other hand, Zomato’s competitor in the food delivery market, Swiggy, is already in e-grocery market. JioMart app is set to launch across 200 cities, while BigBasket delivers more than 300,000 orders in a day.

Looks like online grocery delivery is the next battlefield for all the delivery unicorns of India.


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