Online grocery retailer Grofers has raised $200 million in fresh funding to take on its local competitors and global giants such as Amazon and Walmart. Led by Softbank’s Vision Fund, it is one of the largest investments in the online grocery retailing segment. Sequoia Capital and Tiger Global also participated in the funding round, and South Korea’s K-T-B has come on board as a new investor.
Founded in 2013 by IIT graduates Albinder Dhindsa and Saurabh Kumar, Grofers offers products across categories such as grocery, fruits and vegetables. It operates in 13 cities.
In an exclusive interview with CNBC-TV18’s Megha Vishwanath, Co-founder of Grofers Albinder Dhindsa has talked about the company’s future plans.
Excerpts from the interview:
You now have a big war chest of $440 million that you have raised to date, to compete against rivals like BigBasket. Interestingly, BigBasket too has recently raised $150 million in funding.
We are very excited to have Softbank Vision Fund on board. It is great for the team. We have put in a lot of hard work in the last three years, even going against conventional thinking. We are indeed growing really quickly in the space and that is great for us.
How are you planning to deploy this round of funding? Are you planning to explore new cities or go deeper into the current 13 cities where you have a presence?
We have kind of a double plan and strategy in cities such as Delhi and Kolkata, which are our profit centres. We are expanding around these cities, and recently have launched in Rohtak, Bhiwadi and Meerut. So we will continue to expand around our existing cities. In addition to this, we are putting a lot of focus on building supply chain in some of the southern cities. We are tripling warehouse capacities in Hyderabad, Chennai and Bangalore.
You scrapped your 90 minute delivery model a long time ago, but do you see yourself venturing back in that space? BigBasket, your biggest rival, offers fresh produce or same-day deliveries, which is a big differentiator as of today.
I don’t think that you should necessarily change your strategy altogether, just because you get slightly more money. Our strategy for the last three years has been very consistent targeting middle class India and building value for them and the strategy is going to remain the same. We are not looking to change any of that.
The move by SoftBank has once again put the talk about merging Grofers with players like Alibaba-backed BigBasket off the table? A bit of relief there for you or is a merger still on the cards?
That has not been a conversation that has been active for a very long time. We are happy that our efforts as a team to take the lead in this space are getting acknowledged. We have raised the largest primary capital round in online grocery in India and this would be great for our team to really build great scale in this business.
No merger talks, anytime in the near future?
No, I don’t think so.
The last time I caught up with you, you were counting Paytm Mall as one of your competitors. Do you still count Paytm Mall as your competitor? What have been your learnings, from their journey?
Our competitive pool keeps changing. We are fairly confident that a lot of the competitors, especially the larger companies, have been trying to venture into this space. They don’t really understand what they are actually trying to achieve here. So we will stay focused on our customers and hopefully the competition takes care of itself.
It is no news that e-commerce giants like Amazon and Flipkart have also been growing their grocery verticals aggressively. You once said that Amazon will learn its lessons when it comes to their ultra-fast two-hour delivery promise. What’s your stance on competitors today?
Our stance is pretty much the same. I think they are still trying to figure out how it is going. However, I think their livelihood does not hinge on figuring this out whereas ours does. I think that is why we will always be better at doing this job. We still wish them the best, and hope that they are also worthy competitors in the space.
So strong focus, is that the secret sauce when it comes to Grofers?
Absolutely. For my team, we often say that a lot of companies try to build search, but there is only one Google.
The last time I caught up with you, Grofers was still betting big on modern trade penetration in India and was actively partnering with small manufacturers to create private labels. Can you tell us how much of the current revenues are driven by private labels and how are you planning to take this to the next growth phase?
We have been expanding our focus there. When I talk about building more supply chain muscle, that is closer to our manufacturing partners. Currently we are working with 140 small and medium manufacturers across the country. We are going to add a lot more to that and we have been helping them scale up. A lot of these businesses had run into financial trouble in the past, so we are actually helping them with working capital with guaranteed offload. So, I think north of 40 percent is now Grofers’ own brands of products.
Can you tell me how much revenues are driven by the top five cities and which are those cities?
Our biggest city is Delhi; Delhi, Mumbai, Kolkata, Bengaluru and Hyderabad are the top five cities for us within the country. These cities jointly account for almost 80 percent of our sales. However, cities such as Kanpur, Lucknow and Jaipur have really started ramping up very quickly, especially as more of our manufacturer base is located around these cities. It has allowed us to get value-for-money products into these markets.
Are you inching towards profitability as of now, are there any city that is breaking even operationally at this point?
Delhi does break even for us. Kolkata is very close, and we are expecting that by the end of this quarter. We plan to invest a lot more in the southern cities, so we do not expect them to be profitable anytime soon. After Kolkata, our focus would be on making sure that the western cities of Mumbai, Ahmedabad and Pune also start moving towards profitability.