Online grocery firm Grofers is bullish on private labels and aims to clock a turnover of Rs 50 bn by FY20, with 60 per cent of it coming in from its such house brands.
The online marketer with marquee names like SoftBank, Sequoia Capital, and Tiger Global among others as investors, closed FY18 with Rs 9.5 bn sales and is targeting a stronger growth this fiscal year with a revenue of Rs 25 bn of which half will contribution from private labels, which is 25 per cent at present.
"We are targeting a revenue of Rs 50 bn by FY20 of which Rs 30 bn from private labels, that would be 60 per cent of our total top line," its founder Saurabh Kumar told PTI.
Private label allow us to provide customers with the best quality products at the lowest prices by shortening the supply chain. The products go through a stringent quality check that compete with the best available brands in their respective categories.
"Our competition, with these launches, is not just other grocery retailers but also FMCG brands. To optimise on marketing cost, we will continue to build our parent brand and not our individual range of brands," Kumar said.
Grofers is investing $30 million on private labels this financial year which will go up to $100 million over the next three years.
It recently made a foray into the FMCG space and expects it to contribute around 40 per cent of its private label sales this financial year.
"Today we have over 700 products within the Grofers brand of products of which over 250 products are in the FMCG space. This will increase to over 1,500 by FY19, wherein we will add another 500 items in the FMCG portfolio spread across various categories," Kumar said.
Staple food products form a significant part of its portfolio, he noted, while adding that growth in this segment is now being driven by popular processed food products like tea, ketchup, jam, breakfast cereals.
Grofers' range of private labels is priced 5 to 50 per cent lower than the market for popular brands in these categories, he claimed.
The domestic online grocery segment is pegged at $650 million and Grofers claims to have 40 per cent of this pie.
"The online grocery space will continue to grow at a rapid pace with growth doubling up over the next three years.
"From the initial hype around convenience, the segment is now being driven by consumers who have become more familiar with the offerings and are now looking at differentiated solutions around savings, quality, convenience and other product offerings," Kumar said.
Its average daily order volumes were over 35,000 per day in June 2018.
The company is present in 13 cities, including the eight large metros and Gurgaon, Noida, Jaipur, Lucknow and Kanpur and Kumar, said they do not have any immediate expansion plans but continue to evaluate new geographies and categories for expansion.
The company has managed to break even in key markets and is aiming to break even in all its markets by 2019.
It has so far raised $226.5 million from investors which include SoftBank, Sequoia Capital , Tiger Global and Apolette Asia and on further fund raising plans, Kumar said, "We are well capitalised to drive our current growth plans but we will continue to raise funds to scale up supply chain capabilities.
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