Lately, micro delivery platforms that essentially built around the premise of milk delivery have become hot for venture capitalists as well as on demand grocery and food delivery majors.
For instance, Kalaari Capital and Beenext, and other existing investors recently poured in $7 million Series A round in Milkbasket.
A few months ago, Bengaluru-based DailyNinja had raised $1.5 million from Sequoia Capital while Pune-based RainCan has been acquired by Alibaba-backed BigBasket. Two months ago, Noida-based MrNeeds had shut shop.
Meanwhile, Swiggy is in the last leg to take over Mumbai-based SuprDaily.
So, why has there been much gung-ho around milk-tech segment (micro delivery platforms primarily built around milk subscription)?
While the startups in the segment certainly solve a pain-point of residents in high rises and organised housing pockets, the inflow of large capital in BigBasket and Swiggy are driving the consolidation in the milk-tech segment.
BigBasket had raised a staggering $300 million from Alibaba and Swiggy had gobbled up $100 million from Naspers and Meituan-Dianping.
With capital inflow from Chinese investors, both companies are in rush to accelerate scale and they see the micro-delivery route as an obvious option.
Alibaba’s Ele.Me and Tencent-backed Meituan-Dianping had used food delivery as a core in China but over the years they have expanded in services ranging from grocery delivery to offering handyman services and many more.
Both BigBasket and Swiggy tend to integrate many services along the lines of their investors play in China. Integration services such as milk, grocery, and medicine delivery also seem a logical step for them as they have been building and optimising supply chain capabilities through grocery and food delivery.
Why VCs gravitated towards milk-tech?
While entry barriers in regular grocery delivery business have gone beyond the reach of new startups because of deep-pocketed players (BigBasket, Grofers, Flipkart, and Amazon), micro-delivery platforms appear a fresh model to venture capitalists.
Since building a loyal consumer-base has turned out to be difficult, matching unit economics in a pure-play grocery delivery model is tough. On contrary, micro-delivery platforms inherently have a loyalty factor through milk and other daily essentials requirement.
The loyalty factors can be used to cross-sell many product and services.
Given that SuprDaily and RainCan get settled with Swiggy and BigBasket, the micro-delivery segment aka milk-tech is left with two pure-play platforms – MilkBasket and DailyNinja. And, they would now fight deep-pocketed BigBasket and Swiggy.
Going forward, it would be interesting to see how these two companies create their own path while competing with the portfolio of Alibaba and Tencent.