The rise of players in the rapid delivery of grocery products should benefit the major players in the FMCG sector and promote consolidation and formalization.

Delivery of orders within 10 to 30 minutes forces these players to store inventory nearby, which does not allow these players to have large warehouses with a wide selection of products.

According to analysts at ICICI Securities, due to the lack of storage space in the Kirana store and the mini-warehouses in the neighborhood, these players can only stock the best brands in each category. Thus, most of the large listed FMCG players are the beneficiaries because they are market leaders.

“The HerfindahlHirschman Index (HHI), a commonly accepted measure of market concentration, shows that the HHI for 13 out of 20 categories is above 2,500, which is considered a very concentrated market. In addition, each category has a clear market leader with over 40 percent market share. This makes us believe that the scales are in favor of the big staple companies – a fast grocery delivery retailer / player can’t really sell toothpaste without stocking Colgate or premium detergent without Surf, ” Manoj Menon, Aniket Sethi and Karan Bhuwania, analysts at ICICI Securities said in a note to investors.

They added that quick service players are the most likely to stock the best brands (with high market shares) to increase inventory turns, as margins are low for retail groceries and delivery times are longer. short. Analysts expect this trend to stimulate consolidation and lead to higher market concentration.

Fast trade space

According to RedSeer’s July report titled “Rapid Trade: A $ 5 Billion Market by 2025,” estimated the rapid trade market penetration at $ 0.3 billion in 2021 and is expected to grow by 10-15. times over the next 5 years, or $ 5 billion by 2025..

Earlier this month, players like Tata’s BigBasket and Ola walked into the 15-minute grocery delivery space. While existing players such as Dunzo and Swiggy Instamart have doubled their investment to reduce delivery times. Swiggy is investing $ 700 million in its fast grocery delivery subsidiary Instamart and plans to start delivery in 15 minutes from January. On the other hand, Dunzo adds more than 300 micro-execution centers in 700 localities.