The new entity will focus on food retail of products manufactured and produced in India through offline and online distribution and sup infrastructure throughout the nation.
In a regulatory filing earlier this week, Flipkart revealed that it has authorized to invest US$258 million (Rs 1,845 crore) in the new venture, which Kalyan Krishnamurthy, Flipkart Group CEO said it has secured approvals from the board to enter the food retail business.
The new entity was incorporated on October 4 and is structured as “limited by shares”. This unit will only sell locally produced and packaged food products.
While the company already working with small farmers for the business, Krishnamurthy said that the extended business represents “an important part of our efforts to boost Indian agriculture as well as food processing industry in the country.”
“We’re looking forward to invest more deeply in local agri-ecosystem, supply chain and working with lakhs of small farmers, Farmer Producers Organisations (FPOs), food processing industry in India, helping multiply farmers’ income and bring affordable, quality food for millions of customers across the country,” he added.
The investment comes at a time when Flipkart major rival, Amazon has committed to invest US$500 million over the next five years to sell third-party and its own private-label food products.
Amazon also plans to sell the products both online and through brick-and-mortar stores and which like Flipkart, will be sourced and packaged locally. Amazon also recently launched its two-hour delivery service for fresh fruits and vegetables.
The Indian government sidestepped the intense opposition to foreign investment in multi-brand retail in 2016 to create a food retailing segment that it said was aimed at creating jobs and helping farmers.
However, the government has asked ecommerce firms to keep its food-only retailing venture at arm’s length from their flagship marketplace business by maintaining separate boards, staff, bank accounts, and inventories.
Currently, food products are the only items that the government has permitted e-commerce companies to sell directly to consumers. Other categories of items, e-commerce businesses work with third-party sellers.