Amazon Vendor Cloudtail To Make Room For Amazon Food Vertical

One of Amazon’s largest sellers, Cloudtail India is reportedly planning to exit food retail as the ecommerce giant’s food retail arm has committed to scale selling of local food outputs.

Earlier this week, Amazon has invested INR 240 Cr (approximately $35 Mn) into its food ecommerce arm Amazon Retail India (ARIPL), which encompasses the Amazon’s Pantry, and Now categories of the US-based company. ARIPL is responsible for the sale of groceries, household and other food products in India.

According to an ET report which cited sources, “Cloudtail will no more buy locally produced food and that will be entirely done by ARIPL.”

Cloudtail is now reportedly onboarding independent sellers to trade imported food products that ARIPL is prohibited from selling. Government norms only permit the selling of local and packed food items on both offline and online retail channels.

“ARIPL continues to scale up its infrastructure and selection for made-in-India food items. It is on track with its plans to partner with the Indian agricultural community toward creating a modern farm-to-fork food supply chain of processing, warehousing and distribution hubs to connect with the end-consumer across India,” an Amazon spokesperson said in a media statement.

Cloudtail is a joint venture of Amazon Asia and Infosys founder Narayana Murthy’s personal investment vehicle Catamaran Ventures. The vendor has been facing several issues since the announcement of strict foreign direct investment (FDI) norms by the Department of Industrial Policy and Promotion (DIPP) in March 2016.

Amazon’s Food Retail Plans

Amazon grocery services had been a major plan for Amazon’s food retail plans for India, for which it has committed $500 Mn, of its $5 Bn commitment to its market in India.

Amit Agarwal, Amazon India head, had earlier said that Amazon expects groceries and household products to account for over half of its business in the country in the next five years, as it moves to broaden offerings in the segment and foray into areas such as fresh produce.

Earlier in May 2018, a Citi research report said that Amazon India is expected to reach $70 Bn in gross merchandise volume (GMV) and $11 Bn in net sales by 2027.

Earlier in January, reports surfaced that Amazon will stop selling food products in India to comply with the country’s new FDI ecommerce guidelines which came into effect on February 1, 2019. The new guidelines prohibit online marketplaces from making more than 25% of purchases of a vendor.

However, the government had later clarified that companies with foreign direct investment (FDI) in food retail will be out of the purview of FDI ecommerce guidelines and can continue selling through ecommerce. Following which the Amazon’s grocery services resumed operations after witnessing brief pause.