FOOD RETAILING

Anuranjan
YMT COLLEGE OF MANAGEMENT
WHAT IS RETAILING?
• Retailing – a set of business activities that adds value to the products and servi
ces sold to consumers for their personal or family use. • A retailer is a business
that sells products and/or services to consumers for personal or family use.
RETAILING IN INDIA
• Emergence of modern retail formats • Increased pressure on opening up FDI in retai
l sector • Rapid Evolution of New-age Young Indian Consumers • Rapidly increasing mi
ddle class • Rising Incomes levels • Increased Awareness Level among Consumers • Expos
ure to International Brands • Retail Space is no more a constraint for growth
INDIAN RETAIL SCENARIO
• Total Private Consumption Expenditure in India – 375 Billion USD • Retail Sale – 205 B
illion USD (55%) • Organized Retail – 6.2 Billion USD (3%) • Retailing – 35% of GDP • Outl
et Estimates – Over 12 Million • Format – Only 4% larger than 500 sq.ft. • Second Larges
t Employer after Agriculture
€
THE RETAIL LIFE CYCLE
SALES
Maturity Decline
Growth Innovation
Profit
TIME
CLASSIFICATION OF RETAIL STORES
Classification of Retail Stores
Store Based Retailing
Non-Store Retailing
Form of Ownership
Independent retailer Chain retailer Franchise Leased departments Consumer cooper
atives
Merchandise offered
Convenience stores Supermarkets Hypermarkets Speciality stores Departmental stor
es Off price retailers Factory outlets Catalogue showrooms
Direct selling Mail order Tele marketing Automated Vending
• Malls
RETAILING FORMATS IN INDIA
• Specialty Stores • Discount Stores • Department Stores • Hypermarts/Supermarkets • Conve
nience Stores • MBO’s
ORGANIZED RETAIL
• The Indian organized retail industry is valued at about $300 billion and is expe
cted to grow to $427 billion in 2010 and $637 billion in 2015. • Retail Market Ind
ia today is the second fastest growing economy of the world after China. • In orga
nised retail the front liners like shop floor executives, sales executives etc a
re in great demand. • Organised trade in India is highly under-developed as compar
ed with other emerging markets in Asia, Latin America and Eastern Europe and dev
eloped markets like the US.
ORGANISED RETAIL MARKET IN INDIA (Rs. Cr.)
FOOD RETAILING
• Food retailing has come of age – Food items were sold in small road side grocer sh
ops & mandis, now being sold through supermarket stores. • Shopping for groceries
is no longer a strenuous and uncomfortable affair. • Food & beverages is the major
segment, in organized Retail of India, worth Rs 8,97,000 crore. • Food retail has
surpassed the dominating apparel and accessories sector. • From simple trading ac
tivity, food retailing is now heading to the status of an industry.
SOME FACTS ABOUT FOOD RETAILING IN INDIA
• Food Retailing is growing at 30% rate which makes it a major driving force of th
e economy. • At US$ 175 billion today the food industry is likely to grow to US$ 4
00 billion by 2025. • Modern state of the food retailing is not a demand led but t
he supply led one. • Food has the largest consumption in the Indian economy and wi
ll remain the single largest category. • There are 10 million street vendors in In
dia, of which 6 million only sell food. • Indian consumers are happy with store go
ods than branded goods.
FACTORS PAVING THE WAY TO REVOLUTIONIZING FOOD RETAILING IN INDIA
• • • • • • • • Changing life styles and tastes Growing need for convenience Increasing dis
le income Increasing numbers of working women Change in consumption patterns Hig
her aspirations among youth Impact of western lifestyle Plastic Revolution – Incre
ased use of credit cards and debit cards
ORGANIZED FOOD RETAIL CHAIN
UP-AND-COMING FOOD RETAIL FORMATS
• Neighbourhood Stores In India about 90% of food purchases are made within a dist
ance of 1.5 km from the customer s home. The outlets closest to a neighbourhood
store in India are Safal outlets operated by Mother Dairy in Delhi, Margin Fre
e in Kerala and Subhiksha. • Supermarkets: This format caters to the consumers ne
ed for choice and variety. These stores cater to the consumers in a catchment ar
ea with a radius of 3 to 4 km. Examples of supermarkets already in India are Foo
d World, Trinetra and Nilgiris.
UP-AND-COMING FOOD RETAIL FORMATS
• Hypermarkets: Hypermarkets are essentially destination stores catering to the co
nsumers bulk shopping needs in both food and non-food categories. Spencer’s (RPG)
, Big Bazaar (Pantaloons), Star India Bazaar. • Cash & Carry (C & C) Stores: These
stores sell their products to their members only. The members are typically ret
ailers and institutions. The key added value is a wide range of products under o
ne roof, available at wholesale prices. Metro has started the first C & C store
in India in Bangalore. The typical area of a C & C store is 70,000 to 100,000 sq
. ft.
FOOD RETAIL FORMATS
“Food Retail Format” as a retail offering that can be segmented based on the differe
nt value that it offers to the consumer along three key dimensions – Choice, Servi
ce and Price.
THREE MODERN FOOD RETAIL FORMATS
• Hypermarkets:
- Self service stores, mix of food & non food. - Essentially low price - 40,000– 7
5,000 Size (sq.ft)
• Supermarkets:
- Food, laundry and household maintenance products. - Self service - low cost
• Convenience stores:
- Mix of products - 500-1,000 (sq.ft)
OPPORTUNITIES FOR NEW FOOD
1. Limited-Range Discount Stores 2. Mini-Marts 3. Compact Hypermarkets 4. Specia
lty Food Stores 5. Convenience Plus
LIMITED-RANGE DISCOUNT STORES
• Small • Easy-to-shop • Easy-to-access configurations • Low-priced
MINI-MARTS
• low-priced neighborhood stores • Limited range of fresh food • Dry groceries and hou
sehold products
COMPACT HYPERMARKETS
• Small in size than hypermarkets • Reduced range and assortment • Brings together the
strengths of both hypermarkets and supermarkets
SPECIALTY FOOD STORES
• Large produce sections • Area between 200 and 500 square metres
CONVENIENCE PLUS
• Neighborhood shops • Stand to do well in markets with busier lifestyles and an age
ing population
THE BUSINESS ENVIRONMENT AND ITS INFLUENCE ON FORMATS
1. The cost and availability of real estate
2. Regulatory environment
3. Development of distribution in infrastructure
4..State of technology
KEY PLAYERS IN INDIAN FOOD RETAIL SECTOR • • • • Reliance fresh Subhiksha Food bazaar Mo
re retail
International player
Wall mart- Super center
RELIANCE FRESH
• Reliance Fresh is the convenience store format • Headed by MUKESH AMBANI. • Reliance
plans to invest in excess of Rs 25000 crores in the next 4 years in their retai
l division. • The company already has in excess of 560 reliance fresh outlets acro
ss the country. • Reliance Fresh store is approximately 3000-4000 square. feet and
caters to a catchment area of 12 km.
VISION
To create a blend of a typical Indian Bazaar andInternational Supermarket atmosp
here with theobjective of giving the customer, all the advantages ofQuality, Ran
ge and Price associated with large format stores and also the comfort of being a
ble to touch andfeel the products.
SUBHIKSHA
• Subhiksha is an Indian retail chain with more than 1400 outlets • selling grocerie
s, fruits, vegetables, medicines and mobile phones. • It was started and is manage
d by R. Subramanian • Subhiksha plans to open 1000 outlets by December 2008. • plans
to invest Rs.500 crore to increase the number of outlets to 2000 across the cou
ntry by 2009
FOOD BAZAAR
• Food Bazaar, the supermarket variant of future group. • Has adopted the negotiate
d and predetermined model to source vegetables and fruit from farmers across st
ates. • The company will use the model to procure potatoes from farmers in Uttar P
radesh where the quantity and quality of the produce is predetermined. The compa
ny
• 35+ stores; pan Indian format Bhubaneshwar, Nagpur, Nashik, Durgapur….Sangli • Simpl
e, Indian model • Minimum habit change for the customers • Use small entrepreneurs t
o the hilt, for category management • Largest Food Retailer – But just a small spec
in the market • Shooting for Rs 1000 Cr this year; Rs
MORE RETAIL STORE
• The more. chain of supermarkets, are bright and clean stores, at convenient loca
tions with layouts that allow ease of navigation. The product display is well or
ganised and facilitates ease of choice. The stores have been designed by Fitch,
the leading international retail design firm.
WAL-MART SUPERCENTER
• The number of non-traditional retail outlets,such as warehouse clubs and discoun
t mass merchandisers,has increased substantially in the pastdecade. • Traditional
supermarkets are facing seriouscompetition from these retail outlets because non
traditionalretailers with lowoperating margins areable to provide low-price appe
al to consumers. • supercenters,ranging in size from 100,000-200,000 square feet.
COMPETITIVE ANALYSIS (FOOD RETAIL)
SUBHIKSHA
• Subhiksha is an Indian retail chain with more than 1400 outlets selling grocerie
s, fruits, vegetables, medicines and mobile phones. • Subhiksha plans to open 1000
outlets by December 2008. • Plans to invest Rs.500 crore to increase the number o
f outlets to 2000 across the country by 2009.
• Subhiksha has seen a considerable growth by offering goods at cheaper rates and
there by increasing its customer base. • It is also dubbed as India s largest reta
il chain.vision to deliver consistently better value to Indian consumers.
• Subhiksha now has the pan Indian presence with stores across Delhi, UP, Punjab,
Hariyana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recently commenced
operation in Kerala also.
• Thinking:• Bringing in a model that is Indian, capable of supporting the middle cl
ass of India. • A business model from India is superior to a business model import
ed from the West. • We genuinely believe that through
RELIANCE FRESH
• Reliance Fresh is the convenience store format which forms part of the retail bu
siness of Reliance industries of india. • Mukesh Ambani Reliance plans to invest i
n excess of Rs 25000 crores in the next 4 years in their retail division. • Stores
would provide direct employment to 5 lakh young Indians and indirect job opport
unities to a million people, according to the company.
• The company also has plans to train students and housewives in customer care and
quality services for part-time jobs. • Company-owned stores currently totals just
$8 billion in India.
MORE 4 YOU
• The MORE chain of supermarkets, are bright and clean stores, at convenient locat
ions with layouts that allow ease of navigation. • MORE is the answer to the shopp
ing needs of the Indian housewife who wants a modern and convenient option
• MORE also has a range of products from its own stable available across value, pr
emium and select ranges. • The Rs 9,000-crore pan-Indian plan would have neighbour
hood supermarkets catering to daily and weekly household shopping needs of custo
mers.
• Food Bazaar supermarket variant of Pantaloon Retail Ltd, has adopted the predete
rmined model to source vegetables and fruit from farmers. • Almost 20% of the cos
t is saved if the produce is procured directly from the farmers.
• Kishore Biyani-run retail major, Pantaloon, is awaiting amendments in the Agricu
lture Produce Marketing Committee (APMC) Act in different states to source its p
roduce directly from the farmers. • The floor area for the stores will range from
5,000 sqft to 20,000 sqft.
• Of the 8,000 stock keeping units available across the stores, 10% constitute the
farm fresh segment, while the international standard is around 12%. The company
wants to push the former to 15% in the next three years.
KEY SUCCESS FACTORS FOR
• • • • Increasing need for convenience Eight to ten outlets to purchase various food pr
oducts Time-consuming and inefficient way of shopping for food Changing lifestyl
e ‘Value for time and ‘Value for money
•
•
•
•
Availability of quality retail space In late 1990s cost of real estate was high
and hence food retail business models were not financially viable in metropolita
n areas In the last few years, various factors have led to increased availabilit
y of real estate for organized retail formats 300 malls are at various stages of
construction across metros and mini metros in the country The average size of a
mall is about 100000 sq ft
Taxation: Implementation of VAT helping organised retailers • The Indian governmen
t has launched value added tax (VAT) nationwide April 2005 • Aim was to: boost sta
te revenues, reduce inter-state barriers to trade and make accounting more trans
parent • This was in favour of organized
Increasing share of private labels • Share of private labels in the basket of key
food retailers is increasing • Fierce competition with the wellestablished brands
of the leading FMCG companies • Trent (A Tata Group Company) has now launched a hy
permarket with focus on Star India Bazaar and aim to achieve a significant share
of sale through private labels.
Retailers eye on the unbranded food space • Modern food formats like Food Bazaar
and Spencer s have their eye on the unbranded part of the consumer s shopping ba
sket • Retailers are offering a package of convenience and freshness • Food retailer
s are also offering live kitchen formats • Examples: Grinding coffee fresh at
value consciousness • Dietary patterns, poor electricity supply, low penetration o
f refrigerators and a family structure • Value conscious
KEY CHALLENGES IN FOOD RETAILING Penchant for fresh/home-made and
• A TSMG study indicates that packaged food players need to drive down prices by a
lmost 35-40% to be comparable on cost with home made food
Diversity of tastes and preferences • Multiple cultures, languages and religions • P
references of the Indian consumer. • A challenge for players aspiring to develop a
pan Indian presence.
Willingness to travel Sourcing base and efficiency Real estate availability and
cost • Rentals account for 7-7.5% • Real estate availability and costs • Factors like
adequate parking, ambience and proximity the key drivers of footfalls Manpower a
vailability
EMERGING TRENDS IN FOOD
Big becoming bigger • Size drives profitability, not just through economies of sca
le in operations but also through higher bargaining power • The growth stage will
be characterized by rapid expansion and consolidation among these players.
• •
• •
Rise of organic foods and health and wellness segment Consumer attitudes and pre
ferences are undergoing a shift Factors like increased disposable incomes, chang
es in lifestyle patterns, shift in age structure, increased number of working wo
men and multi cultural exposure Increasing health consciousness in the future Or
ganic foods and wellness products
Increasing focus on private labels • Competition in the organized retail market • Di
scounts and promotions are expected to play a critical part in generating footfa
lls • More attractive to promote private labels or store brands given their
FUTURE OF FOOD RETAILING
Innovation on Retail format • by targeting specific customer segments and serving
their needs better e.g. working women, single office goers, etc • by changing the
product mix e.g. entirely private label stores, exclusively fresh produce stores
• by offering new forms of convenience and wider range to the customer e.g.
Technological Innovations • Self-scan checkouts • Using RFID tags • Web-enabled POS sy
stems, e-SCM systems, e-Procurement systems and warehouse management systems • Use
of cutting edge analytics
THANK YOU..