Good morning [%first_name |Dear Reader%],

I hope you read my colleague Aayush’s sharp piece on Zomato last week. India’s foodtech majors haven’t exactly had a ‘happy, happy’ relationship with their restaurant partners for a while now. But at least, when it came to banishing reviews pointing out health-code violations, Zomato was on the restaurants’ side—before a social media furore kicked off and it suddenly wasn’t. 

Anyway, the fickle side of foodtech aside, for today’s edition, I thought I’d touch upon a story Aayush and I wrote earlier in June—Metro Cash & Carry and the never-ending search for B2B-grocery riches.

A deal to buy the German wholesaler’s India business has been in the works for a while now. But while Zomato rival Swiggy, Thai conglomerate CP Group, and private-equity firm Samara Capital were all said to be among the suitors, it’s Reliance Retail which is now set to buy it for Rs 4,060 crore (US$500 million).

That’s only a third of the likely cost of acquisition reported back in May. What’s more, it’s almost 40% less than Metro’s revenue in the year ended March 2021. 

Even if the eventual price Reliance pays is not this low, there is unlikely to be a big premium for Metro’s 31 outlets in India. Because there’s little Reliance stands to gain from Metro’s business or brand. 

Except, of course, for one thing.

Why location trumps business in the Reliance-Metro Cash & Carry deal

As we wrote in our June story, if you need to understand how painful selling groceries to small neighbourhood stores, restaurants, and office canteens is, you need only look at the progress Metro has made in the two decades since it set foot in India.

While Metro took a long time to turn Ebitda-positive (it only did that in the year ended March 2018), it still makes net losses.