Amazon to Invest $500 Million in India’s Food Retail Market

27 Mar
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By Simran Agarwal, The Tech Portal

Witnessing the billion dollar funding of arch-rival Flipkart and weighing its future growth prospects with e-bay acquisition, Amazon India has now come up with fresh plans. The U.S. e-commerce major intends to invest about $500 million in country’s food retail space along with kicking off several brick and mortar stores in India. The company approached food processing minister Harsimrat Kaur Badal on Thursday to discuss its ideas and strategies.

Apart from detailing the plans for Amazon, Harsimrat told TOI that Germany’s Metro Cash & Carry is also interested in India’s food retail sector. The wholesaler will kick off business with 50 stores, to be opened up pan-India. Since the Indian Government allows 100% FDI in trading of food products, the international players are constantly looking for opportunities to penetrate within the said space.

Such an allowance is offered to the companies so as to efficiently utilise the farm produce and dismiss the role of middlemen exploiting the Indian farmers. If an organised channel enters the food retail sector, it will provide right prices to the farmers as well as offer freshly sourced produce to the customers. Due to the absence of access to the market, about 40% of the produce goes to waste affecting the already low income of the food producers.

With the flow of investments in the sector, farmers will invest more in quality produce and drive exports from the country. It also will bring savings to farmers by reducing the cost of transportation, market access and hence the food wastage will be saved. Apart from Amazon, home-grown grocery sellers such as Big Basket and Grofers have also submitted their FDI plans to enter the food retail segment through brick and mortar stores.

Although food is not the only segment, these companies are lured with. Consumer essentials and general merchandise like soaps and shampoos are also sought to be sold through the planned outlets. The government is yet to respond to the mentioned demand, though food retailing is already in the preferential books. A viable business can be incorporated by combining food products with essential products and hence a considerable enough shot for the companies.

Detailing the plans of domestic and International companies, the minister said,

Amazon has decided to get into e-retail of food. They are going to put up brick and mortar apart from e-retail. These retailers will have to get best prices to make more profit… Hence, the companies will have to link up with farmers and give them infrastructure, quality seed, know-how, hand-holding, which is the need today and bring in a win-win situation.