What started as an online platform to deliver groceries to Internet savvy customers, Grofers is slowly and steadily transforming itself into a consumer products company with a focus on profitability. This is part of its strategy to take on archrival BigBasket and other biggies such as Amazon and Flipkart that are lately focussing on the food and grocery segment.

For the last 15 months, the Tiger Global-backed consumer-tech company has been focussing on creating private brands across the FMCG (fast moving consumer goods) categories such as food and personal care.

Product range

Of the total 2,500 stock keeping units (SKUs) that Grofers sells on its platform, about 750 SKUs come from seven of its own brands. Chakki Fresh atta (wheat flour) is its largest selling product on the platform. The company is looking to add about 100-150 SKUs every year mostly under processed food.

Saurabh Kumar, Co-Founder of Grofers told BusinessLine , “We are seeing ourselves as an FMCG company. We discovered that there is a huge potential in this segment as it helps create difference price points across all the categories for all kind of consumers.”

About 40 per cent of the company’s total revenues at present comes from private brands, which also results in higher margins of 25-30 per cent compared to 15-20 per cent margins for branded products such as Hindustan Unilever, Procter & Gamble, Nestle among others.

Growth phase

Kumar said that higher margins also lead to higher chances of getting onto the profitability track. “We have already operationally broken even in most of the cities we are present. However, we are on a growth phase right now and will continue to invest on the private brands and hence there is some time before we turn profitable at the company level,” Kumar said.

Grofers gross sales for FY 18 stood at ₹1,000 crore with a current run rate of half a billion dollar and looking to hit a billion dollar by end of this fiscal. However its

Besides, private labels, the company’s subscription model is also pushing the revenue growth for Grofers with about 70 per cent sales coming from this channel.

Indicating that the push to do private labels is being driven by its investors, Kumar said that food and grocery is an interesting space for the online players at the moment even as grocery retailers are not impacted by the current FDI regulation for ecommerce companies.

‘Good prospects’

“No one is looking to exit the food and grocery segment at the moment. We will see more investments in this space,” Kumar added.

As per Nielsen, online grocery space is likely to gain traction as e-commerce picks up.

Ajay Macaden, Executive Director at Nielsen, said at the India Food Forum that, the market is expected to touch $5 billion by 2020 from $1 billion in 2017.