The premium grocery business has burned retailers. This ex-Metro chief knows why.

Mediratta is launching Fresh Terra this week, with an 8,000-square-foot store at The Hilton in Gurugram, with plans to tap demand among urban Indians with rising incomes who are seeking healthier options.

This cohort is “bored of shopping online", and does not trust the quality and claims made by most packaged consumer goods brands, Mediratta, who previously headed the India operations of German retail giant Metro A.G., told Mint.

“Our model is very different…Our focus is on the centre of the plate, unlike stores like Nature’s Basket or Food Stories [gourmet food retail brand launched by Foodhall founders Avni and Ashni Biyani]," he said. "We are focused on the Indian consumer’s staple needs – atta, dal, chawal, oil, spices, fruit and vegetables, dairy, meat, and everyday baked goods.”

Fresh Terra, which launches this Saturday, will feature live stations where foods are processed and packed in real time. It also has an app that delivers orders to homes in Gurugram within 30-45 minutes from the main store, rather than via network of dark stores. The store will also house a cafe.

Mediratta plans to launch five stores and five to six smaller, standalone cafes going ahead.

To be sure, Fresh Terra’s parent firm Elixiir Foods raised seed funding of $9 million from Incubate Fund and 3one4 Capital in February this year at a valuation of $47.9 million.

He is focusing on private-label brands and has excluded several popular consumer brands, such as ITC, Britannia, and Parle Products, for failing the company’s internal quality checks for biscuits and cookies.

“We have very high quality criteria for shortlisting a product,” he said. “We are looking at our own standard for brands. We have 900 SKUs (stock keeping unit) of our own private labels, including our own brand of cookies and lentils.”

Mediratta expects more than half of the company’s revenues to come from its private labels, boosting margins, as he aims for over 20% gross margins to begin with and store-level profitability in the first year of operations.

“We have kept our costs very low, and I have personally negotiated many contracts and leveraged existing relationships,” Mediratta said. “My team and I have been in the wholesale and retail business for decades, and we are leveraging past relationships with brands, suppliers, farmers' organisations, and real estate developers.”

Premium problems

India's grocery market is projected to grow to $992 billion by FY30 from $658 billion now, but more than 90% of it is still with mass brands in kirana stores, according to consulting firm Redseer. The firm found consumers are willing to pay a 10-15% premium for healthier, "clean label" products.

"While online retail in India has grown to ~21% year-on-year in FY26, the split in India’s grocery market lands at two different models (and two different Indias)," Redseer partner Kushal Bhatnagar said in a note in June this year.

"Quick commerce serves the metro market with a 10-minute delivery and dark stores around the cities. This is India 1, where the upper-middle-income families live. India 2, better known as ‘Bharat’, works on a different consumer model entirely. With no digital player to clock into this opportunity (because they are not built for this type of buyer), kiranas still remain the default grocery purchase hub. This is a large gap."

That said, premium, grocery-focused supermarket chains have rarely done well in India. A prominent example is Nature’s Basket, set up by the Godrej Group in 2005 as a gourmet, “world food” focused store, and later sold to Sanjiv Goenka-owned Spencer’s Retail in 2019 in an all-cash deal worth ₹300 crore.

For the last three years, sales of gourmet supermarket Nature’s Basket have declined to ₹272 crore in FY26 from ₹296 crore in FY24 and a similar number in FY25.

“It's not that people are going and shopping online for this kind of a category,” Anuj Singh, CEO and MD, Spencer’s Retail told analysts in an earnings call in May this year.

“This is a premium gourmet grocery retailer. So, one of the reasons, obviously, the headwinds or the challenges are largely internal. And the internal challenge is if you don't have the right assortment at the right time, consumers will come in and then they will walk out empty handed and they will not come back. So clearly, for us, it's about fixing that. And it's quite evident.”

Meanwhile, Avni and Ashni Biyani, daughters of the Future Group founder Kishore Biyani, launched a gourmet grocery store Foodstories in Hyderabad last year and raised $5.2 million from Zerodha co-founder Nikhil Kamath in July this year. The Biyanis previously ran Foodhall.