Indian e-grocery market to touch $24 billion by 2025

10 March 2021 Consultancy.in 3 min. read
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According to RedSeer Consulting, e-groceries could account for 3% of India’s grocery market by 2025 – amounting to $24 billion in market value.

In their new report, consultants from RedSeer has traced how India’s grocery market fared during the Covid-19 crisis, and how it will perform over the next half a decade. Low consumer spending as a result of the ongoing economic slowdown caused India’s overall grocery market to dip from over $600 billion last year to just over $570 billion this year.

That said, a rebound is very much on the cards. A RedSeer report from late last year pegged India’s grocery market size at $790 billion by 2024. A new report puts this figure at more than $850 billion in 2025 – tracing a compound annual growth rate (CAGR) of 8% in the build up.

India Grocery Market Size & Growth

Several factors are at play here. Easy-to-cook products, healthy foods, and exotic global delicacies are all making waves among Indian consumers, who are increasingly willing to pay a premium for a better experience. Rising income levels are doing their bit in the backdrop.

While the segment as a whole is soaring, the feature story here is e-groceries – a segment that has benefitted from all that occurred in 2020. Tech savvy Indian consumers were already upping their online grocery consumption before the crisis – marked by a staggering 60% CAGR for e-groceries between 2016 and 2019.

Yet, the nearly $2 billion segment was limited in its penetration, accounting for less than 0.5% of the total grocery market. Local kirana stores remain the staple source for most Indian consumers. That was before the crisis, and Covid-19 has introduced a marked shift in this outlook.

Covid-19 a launchpad for e-groceries in India

It began with total lockdown in March through May, when the online route became a necessity of sorts for infection-weary consumers. The e-grocery market traced a steep upward trajectory in these months – spurred on by a growing consumer base and a ballooning set of new players on the supply side.

The telltale sign is that e-groceries continued their growth in the aftermath of lockdown, as consumers formed a level of familiarity with apps and online platforms. Whatever marginal dip in value followed was offset by the festive season at the end of the year – when online commerce in general went through an unprecedented boom.

Growth and segmentation

What results is a set of strong fundamentals – familiar customers, multiple competing players, better online infrastructure, etc – poised to take the e-grocery market to new highs in the near future. In the lead up to 2025, RedSeer expects the segment to grow at a CAGR of over 50% – faster than other grocery segments by a long yard.

E-grocery projected market size and penetrationThe resultant $24 billion e-grocery segment will account for 3% of the total grocery market. As the market matures, RedSeer Engagement Manager Kushal Bhatnagar explained how it will also grow more niched.

“Accounting for almost 2/3rd of the 130 Mn e-grocery addressable households, value-first households account for a large opportunity in the grocery space, but are quite different in the way they go about purchasing groceries.”

“Recently, as a result of Covid-19, hygiene has become a second consideration driver after affordability for these households – such differentiated purchase behaviour, would require e-grocery platforms to serve this opportunity through specific tailored offerings.”