TATA capitalizes on US$115bn Indian online food & grocery market with acquisition of BigBasket, says GlobalData

The Indian online food & grocery market has seen multiple developments since the breakout of the COVID-19 pandemic. In India, the online penetration of food & grocery market accounted for only 3.5% growth in 2019. However, COVID-19 has transformed the buying dynamics of the consumers’ leading to a 43.4% growth in the online food & grocery sales in 2020. To capitalize on this trend, TATA digital acquired 64.3% stakes in BigBasket, an Indian online grocery delivery company, sensing the future growth opportunities in the Indian online food & grocery market which is expected to be valued at US$115bn by 2025, according to GlobalData, a leading data and analytics company.

While the financial details of the deal remain undisclosed (as of May 28, 2021), the duo has the potential to stand strong in the Indian online grocery market. The acquisition deal was approved by the Competition Commission of India (CCI) in the last week of April 2021 and may see the exit of majority shareholders like China’s Alibaba Group and Actis LLP.

Ankita Roy, Retail Analyst at GlobalData, comments: “Valued at US$46.1bn in 2020, online sales accounted for 4.9% of total Indian food & grocery market and the penetration is expected to increase to 7.8% by 2025. Given the highly competitive food & grocery market, TATA’s blockbuster BigBasket acquisition will place it in direct competition with other online market leaders such as Amazon, Flipkart and Reliance Jio Mart.

“While TATA has a robust financial position, BigBasket had a remarkable run in 2020 with its presence in more than 25 cities having an assortment of over 50,000 SKUs and complemented by a well-established supply chain network. This indicates both the companies will be in a win-win situation by being able to leverage each other’s capabilities. The acquisition will give TATA access to BigBasket’s huge consumer base, which it can use to cross-sell its other products. The deal also brings TATA a step closer to launching its much-pronounced ‘Super App’.”

According to the GlobalData Q1 survey, 49%* of consumers in India are buying grocery products online and 89%* of consumers are concerned about visiting shops/stores because of the COVID-19 risk. Although the survey results may be skewed due to the impact of COVID-19, the online food & grocery market in India is projected to grow by 150% during 2020-2025, reflecting a permanent change in the buying behaviour.

Ms Roy concludes: “Backed by TATA Group, if BigBasket is able to match delivery times, slots, selection of products and the price range offered by its competitors such as Amazon and Flipkart, the company will reach great heights and steal market share from these leading players. The company must also expand its footprints to smaller cities to serve a larger audience and establish a stronger foothold.”

*Data taken from GlobalData’s Q1 survey of 500 nationally representative Indian consumers, aged 16+ conducted in February 2021.

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