Will Tata capture the online grocery opportunity?

6th May 2021

Online grocery is expected to reach a market size of $18 Bn by 2024 and constitute 2.3% of India's overall food and grocery market. 

Moreover, among the three players in the food and grocery market — traditional retail (brick and mortar stores), modern retail, and online grocery — it is the online grocery segment that is growing at the fastest pace and will lead the growth for the sector, along with traditional retail. 

The Tata Group is in the final stages of acquiring a majority stake of 68% in Supermarket Grocery Supplies, which runs and operates online grocery brand BigBasket, for about Rs 9,300-9,500 crore, said a source close to the development. 

The deal — biggest in the online grocery space so far—values BigBasket at Rs 13,500 crore (around $1.85 billion) and will give exit to investors Alibaba, Abraaj, and IFC. It is one of the largest M&A deals in the start-up ecosystem. The top management to continue on board. 

The Bigbasket transaction will make Tata Group the largest online grocer in the country even though it has a limited play in the space through StarQuik and Tata Nutrikorner. Bigbasket has the lion’s share in the grocery market, crossing $1 billion of annualized gross sales last year. 

BigBasket has created a significant presence in the online space that has got certified further in the past 12 months. For Tatas to make a transition from a physical to a digital space, an inorganic route makes more sense. This transaction would allow the conglomerate access to a large customer base. 

All the big names including Tatas, Amazon, Reliance, Walmart-owned Flipkart, and Udaan are making their presence in the e-grocery segment thus making it an emerging business opportunity. According to Industry experts, BigBasket will need serious money to remain a leader in the game. Hence, a deal with the Tatas coming in as a strategic partner makes perfect sense.