Milk delivery startups make a splash in groceries market

Bengaluru resident Mahipat Kulkarni places about 20 orders for fresh milk and groceries on an app every month, rarely setting foot inside a supermarket or a local shop. His preferred supplier of morning items is not a big brand online store, but a relatively new entrant.

"I have been using the DailyNinja app for five months now, and I get my delivery by 7 am. It’s a convenient option for working professionals. The best part is I can place an order as late as 11 pm and still expect things on my doorstep early next day," Kulkarni said.

DailyNinja, Milkbasket, and Doodhwala are among the new stars in the growing hyperlocal delivery space, changing the way dairy reaches homes. They are cracking aggregation and micro-delivery, competing, in some ways, with well-funded firms like Bigbasket and Grofers.

The three startups operate on a subscription model, but also accommodate standalone orders. Though milk deliveries form a huge chunk of their sales, around 70%, they are also seeing good numbers in groceries. Milkbasket, in fact, earns more from nonmilk products.

"The most ordered product on our platform may be milk, but it contributes less than 25% of the revenue. Bread, tea, fruits, vegetables, and other products make most of the money," Anant Goel, co-founder of the Gurugram-based company, told STOI.

Sagar Yarnalkar, CEO of DailyNinja, said each user on his platform ordered household essentials up to 22 times a month. Roping in existing milkmen helped the Sequoiabacked startup build its customer base. "We have partnered with 2,200 milkmen in Mumbai, Pune, Bengaluru, and Hyderabad. We cater to up to 85,000 households daily," he said.

Milkbasket, on the other hand, steers clear of the existing network of local suppliers. "We have our own supply chain and network of delivery partners. One of the pain points we wanted to resolve was the inconsistency of neighbourhood milkmen, so partnering with them didn’t make sense," Goel said.

Bengaluru-based Doodhwala has its own delivery personnel, though it has tie-ups with existing milk vendors. "We are operationally profitable now and are looking to expand to tier 2 cities," said co-founder Ebrahim Akbari. Doodhwala has operations in Bengaluru, Hyderabad, and Pune, registering 1.3 million to 1.5 million transactions a month

"The delivery costs just 5% of the total sale volume. We get over 20 orders a month, with each customer spending anywhere between Rs 2,400 to Rs 4,000," Akbari said.

Growing consumer interest in organic milk and A2 varieties has also worked in the favour of hyperlocal delivery startups. "One has to make a trip to a department store to purchase MoooFarm organic milk because the local distribution system is not robust enough for daily delivery of such varieties. Apps not only list them among products, but also promise delivery by 7 am," Pune resident Samir Kulkarni.

According to Akbari, premium milk varieties account for 25% of Doodhwala’s total sales. "We have over 70 varieties, including ones sold by mass milk and premium organic brands," he said.

The startups say they are witnessing a growth of 20% every month, retaining 85% of customers for six months on average. The strong numbers have caught the attention of venture capital firms such as Kalaari, Blume Ventures, Matrix Partners, and Sequoia. According to data from Tracxn, $28 million was invested in this space last year, a huge jump from the funding pledged in 2017.

Arpit Agarwal, principal, Blume Ventures, said the startups remove a major irritant for families in tier 1 cities. "Many urban customers are ready to pay a premium to get fresh milk and groceries delivered to their homes every day. The startups provide a good customer experience, which gives them room to scale up and grow at a good pace. They also have the pricing power," he said.

In 2014-15, many hyperlocal delivery startups tasted success and failure in a short span. One of them, Pepper-Tap, later shut down. Milk-Basket and DailyNinja, which were founded in 2015, survived and are now leaders in the space. They received funding in 2018. "There was little interest in the initial three years, but we kept growing. After investors took note in 2018, we were able to raise money 3 times that year," said Milkbasket’s Goel said.

Sagar of DailyNinja said the company had witnessed exponential growth in the past year. "From 17,000 orders a day 12 months ago, we have grown 4x to touch 70,000 orders a day," he said.

Players like Bigbasket and Swiggy are keenly following the space. Bigbasket has entered the market by acquiring two startups, RainCan and Morning Cart, whereas Swiggy has bought SuprDaily. Swiggy has also opened stores in Gurugram.

But other micro-delivery startups are not looking for a buyer. "If our business was one-tenth of its current scale, it would have made sense to be acquired. However, we want to make it on our own," said Doodhwala co-founder Akbari.

Yarnalkar of DailyNinja said his company’s business model was different from that of other delivery startups. "We are not look at launching private labels in near future and wish to focus on delivery and customer acquisition," he said.

Source:-https://retail.economictimes.indiatimes.com/news/food-entertainment/grocery/milk-delivery-startups-make-a-splash-in-groceries-market/69407661