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Now, Mother Dairy looks to ride the e-commerce bandwagon
NEW DELHI: Mother Dairy is looking to ride the e-commerce wave by tying up with grocery app companies.
NEW DELHI: Mother Dairy is looking to ride the e-commerce wave by tying up with grocery app companies.
Grocery apps, ever since they took off in 2012, have cornered just 0.1% of the $320-billion domestic grocery market. The opportunity, however, is huge. Mother Dairy’s arch rival Amul already generates
Rs 230 crore, about 1% of its business through e-commerce sales.
In a meeting held during last August in Noida, the company’s management, led by managing director S Nagarajan and business head (dairy products, fruit and vegetables) Subhashis Basu decided to explore the e-commerce route further. “The impact of e-commerce on our business was nothing till last year. However, we knew that down the line, we might start feeling the pinch,” Basu said.
A day later, the company asked its sales team to dial BigBasket, one of the country’s most popular grocery apps. A deal was worked out. “While we were hunting for other e-grocery platforms, we started noticing the immediate increase in our sales at BigBasket — in the last 10 months, our volume and value of sales have shot up by at least five times.”
The company started scouting for more partners to sell its products online, and tied up with nine grocery apps, including Grofers, AskMe Grocery, Sangam Direct, SRS Grocery, Just Buy Live, Innerchef, Grocermax and Orange E-Tokri. The latest tie-up was last week, with online wallet firm Paytm, which would allow consumers to pay through the app on retail outlets. Cash backs and other offers are likely to follow soon. “We are hunting for more tie-ups in mobile wallet category and negotiations are on,” Nagarajan said.
The company’s online sales are growing 10%, month-on-month. “However, it merely contributes 0.5% to our total revenue. Our target is to generate at least 1% of our turnover (around ` 80 crore) from online sales in a year or two,” Nagarajan said.
In the current fiscal, Mother Dairy expects close to Rs 8,000-crore revenue.
However, selling perishable products, including milk and dairy products, through e-commerce, is still an issue, the company said. “Around 80% of our revenue comes from the sale of milk and dairy products. However, we have figured out that value-added products, such as, cheese, butter milk, flavoured milk and ice creams do well on grocery apps.”
The revenue- split model between Mother Dairy and these apps remain similar to the profit-sharing models with retail chains, including Big Bazaar and Spencer’s. “We negotiate harder for getting better visibility on the app or running promotions. Otherwise, the margins are similar at all trade channels,” Basu said.
Amul, which forayed into e-commerce two years back, has already doubled its revenue coming through the channel. “Underestimating the power of e-commerce would harm the future prospects of any company. At Amul, e-commerce today comprises 1% of total revenue (Rs 23,000 crore),” said MD RS Sodhi.
