The food sector is going to be one of the hottest in the coming days, as analysts expect investments worth $ 10 billion to come up in the next five years. Amazon is entering the food retailing space with $ 500 million, which might be topped up going ahead. There will be investments also from Grofers and Big Basket who are already present in online food retailing. Government has received investment proposals worth $695 million from three companies—Amazon, BigBasket and Grofers.
While these three are predominantly online, offline players too won't be behind. Reliance retail has already said that it plans to ramp up its presence in the online segment. It currently offers online deliveries through phone, web, and app in parts of Mumbai, Bengaluru and Pune. Tata recently entered the online grocery space by acquiring Gurgaon based GrocerMax. Spencer's retail owned by Goenkas had last year experimented with online groceries in select markets of Delhi NCR and Kolkata.
Walmart, another retail heavyweight, has not announced its plans on food retail but experts say that it might be interested. Wal-Mart is currently expanding on the cash and carry, that is wholesale retail front, and is also present in the online format in some geographies for cash and carry.
Amazon is entering the space as government allows 100 per cent FDI in food retail—a policy separate from single brand and multi-brand retail. While there is 100 per cent FDI allowed in single brand retail, only 51 per cent is allowed in multi brand retail. Under 100 per cent FDI in food retail, Amazon will be permitted to sell locally-made food products through online channels as well as brick-and-mortar stores.
"Food retail is a completely different ball game. Organised brick and mortar retail has so far struggled to build out proper supply chains and create sustainable businesses. Amazon, however, is probably the best placed to succeed in this category as it has deep pockets. Moreover, it has already tested the market with Amazon Now, " said Harminder Sahni, founder and managing director at Wazir Advisors.
