Source: Business Standard, July 27, 2017
New Delhi: Home-grown e-grocer Grofers is the latest online player to receive permission from the government to open fully-owned brick-and-mortar stores for selling food products. American major Amazon was the first e-commerce company to get an approval for setting up food retail stores in the country earlier this month.
Bigbasket, which had put in a similar request with the Department of Industrial Policy and Promotion (DIPP) around the same time last year, is also expected to receive an approval under the food retail policy soon, a senior government official said.
In its January application to DIPP, Amazon had proposed to invest $515 million in food retail over the next five years. Taking into account the investment figures of the other two players, a total of $695 million is expected to enter the market.“Food and food products account for 70 per cent of Grofers sales. This approval would ensure elimination of multiple layers between the farmer and the end customer, ensuring better quality and fresher products at cheaper prices,” Albinder Dhindsa, founder of the company, said.
The firm intends to push in an additional capital of $40 million within the next few weeks into the business.
In June last year, the government had allowed 100 per cent FDI in multi-brand food retail. However, food products have to be produced, processed or manufactured in the country. The move till now had drawn little interest from international retail players who have complained that just having “food-only” stores was not a viable option.
While 51 per cent FDI was allowed in multi-brand retail under the UPA rule, the current NDA government is opposed to it though the rules have not been altered.
The Grofers case becomes the second FDI case to get an in-principle clearance after the Foreign Investment Promotion Board (FIPB) was shut down.
“From an approvals perspective, Grofers is now in a much better position in comparison to horizontal e-commerce players and international retailers, who are only permitted to undertake marketplace/B2B wholesale trade businesses in India,” a Grofers executive said.
Many companies have already selected space for stores and worked out the number of employees they would need. “The blueprint for our offline plan is ready; our back-end is in place,” a senior executive at an online company planning to open physical stores said.