FOOD RETAILING

Anuranjan

YMT COLLEGE OF MANAGEMENT

 WHAT IS RETAILING?

• Retailing – a set of business

activities that adds value to the
products and services 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 retail

sector

• Rapid Evolution of New-age Young Indian

Consumers

• Rapidly increasing middle class

• Rising Incomes levels

• Increased Awareness Level among Consumers

• Exposure 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 Billion USD (55%)

• Organized Retail – 6.2 Billion USD (3%)

• Retailing – 35% of GDP

• Outlet Estimates – Over 12 Million

• Format – Only 4% larger than 500 sq.ft.

• Second Largest Employer after Agriculture

 
THE RETAIL LIFE CYCLE

Maturity
SALES

Decline

Growth Profit

Innovation

TIME
CLASSIFICATION OF RETAIL
STORES
Classification of Retail Stores

Store Based Non-Store

Retailing Retailing

Form of Ownership Merchandise offered Direct selling

Independent retailer Convenience stores Mail order
Chain retailer Supermarkets Tele marketing
Franchise Hypermarkets Automated
Leased departments Speciality stores Vending
Consumer co- Departmental stores
operatives Off price retailers
Factory outlets
Catalogue showrooms
 RETAILING FORMATS IN
INDIA
• Malls

• Specialty Stores

• Discount Stores

• Department Stores

• Hypermarts/Supermarkets

• Convenience Stores

• MBO’s
 ORGANIZED RETAIL

• The Indian organized retail industry is valued at

about $300 billion and is expected to grow to $427
billion in 2010 and $637 billion in 2015.
• Retail Market India today is the second fastest
growing economy of the world after China.
• In organised retail the front liners like shop floor
executives, sales executives etc are in great
demand.
• Organised trade in India is highly under-developed
as compared with other emerging markets in Asia,
Latin America and Eastern Europe and developed
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
shops & 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 activity, 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 the economy.
• At US$ 175 billion today the food industry is likely to
grow to US$ 400 billion by 2025.
• Modern state of the food retailing is not a demand
led but the supply led one.
• Food has the largest consumption in the Indian
economy and will remain the single largest category.
• There are 10 million street vendors in India, of which
6 million only sell food.
• Indian consumers are happy with store goods than
branded goods.
 FACTORS PAVING THE WAY TO
REVOLUTIONIZING FOOD RETAILING
IN INDIA
• Changing life styles and tastes
• Growing need for convenience
• Increasing disposable income
• Increasing numbers of working women
• Change in consumption patterns
• Higher aspirations among youth
• Impact of western lifestyle
• Plastic Revolution – Increased 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 distance 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 Free in Kerala and Subhiksha.
• Supermarkets:
This format caters to the consumers' need for
choice and variety. These stores cater to the
consumers in a catchment area with a radius of 3 to
4 km. Examples of supermarkets already in India are
Food World, Trinetra and Nilgiris.
 UP-AND-COMING FOOD
RETAIL FORMATS
• Hypermarkets: Hypermarkets are essentially
destination stores catering to the consumers' 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 retailers and institutions. The key added
value is a wide range of products under one 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 different value that it
offers to the consumer along three
key dimensions – Choice, Service and
Price.
 THREE MODERN FOOD RETAIL
FORMATS
• Hypermarkets:
- Self service stores, mix of food & non food.
- Essentially low price
- 40,000– 75,000 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. Specialty 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 household

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 ageing
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
• More 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 retail division.
• The company already has in excess of 560
reliance fresh outlets across the country.
• Reliance Fresh store is approximately 3000-4000
square. feet and caters to a catchment area of 1-
2 km.
 VISION

To create a blend of a typical Indian Bazaar

andInternational Supermarket atmosphere with
theobjective of giving the customer, all the
advantages ofQuality, Range and Price associated
with large format stores and also the comfort of
being able to touch andfeel the products.
SUBHIKSHA
• Subhiksha is an Indian retail chain
with more than 1400 outlets
• selling groceries, fruits, vegetables,
medicines and mobile phones.
• It was started and is managed 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 country by 2009
 FOOD BAZAAR
• Food Bazaar, the supermarket
variant of
future group.
• Has adopted the 'negotiated and
predetermined' model to source
vegetables and fruit from farmers
across states.
• The company will use the model to
procure potatoes from farmers in
Uttar Pradesh where the quantity and
quality of the produce is
predetermined. The company
• 35+ stores; pan Indian format
Bhubaneshwar, Nagpur, Nashik,
Durgapur….Sangli
• Simple, Indian model
• Minimum habit change for the
customers
• Use small entrepreneurs to 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 locations with layouts
that allow ease of navigation. The
product display is well organised 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
discount mass merchandisers,has
increased substantially in the
pastdecade.
• Traditional supermarkets are facing
seriouscompetition from these retail
outlets because
nontraditionalretailers with low-
operating margins areable to provide
low-price appeal 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
groceries, 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 of 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 retail

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 class
of India.

• A business model from India is

superior to a business model imported
from the West.

• We genuinely believe that through

 RELIANCE FRESH
• Reliance Fresh is the convenience store
format which forms part of the retail business
of Reliance industries of india.

• Mukesh Ambani Reliance plans to invest in

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
opportunities 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
locations with layouts that allow ease of
navigation.

• MORE is the answer to the shopping

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, premium and select ranges.

• The Rs 9,000-crore pan-Indian plan

would have neighbourhood
supermarkets catering to daily and
weekly household shopping needs of
customers.
• Food Bazaar supermarket variant of
Pantaloon Retail Ltd, has adopted the
predetermined' model to source
vegetables and fruit from farmers.

• Almost 20% of the cost is saved if the

produce is procured directly from the
farmers.
• Kishore Biyani-run retail major,
Pantaloon, is awaiting amendments in
the Agriculture Produce Marketing
Committee (APMC) Act in different
states to source its produce 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 products
• Time-consuming and inefficient way
of shopping for food
• Changing lifestyle
• ‘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
metropolitan areas
• In the last few years, various factors
have led to increased availability 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 government has launched
value added tax (VAT) nationwide
April 2005

• Aim was to: boost state revenues,

reduce inter-state barriers to trade
and make accounting more
transparent

• 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 well-

established brands of the leading
FMCG companies

• Trent (A Tata Group Company) has

now launched a hypermarket 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 basket

• Retailers are offering a package of

convenience and freshness

• Food retailers are also offering 'live

kitchen' formats

• Examples: Grinding coffee fresh at

 KEY CHALLENGES IN FOOD
RETAILING
Penchant for fresh/home-made and
value consciousness
• Dietary patterns, poor electricity
supply, low penetration of refrigerators
and a family structure

• Value conscious

• A TSMG study indicates that packaged

food players need to drive down prices
by almost 35-40% to be comparable on
cost with home made food
 Diversity of tastes and
preferences
• Multiple cultures, languages and
religions

• Preferences 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 availability
 EMERGING TRENDS IN FOOD
Big becoming bigger
• Size drives profitability, not just
through economies of scale 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 preferences
are undergoing a shift
• Factors like increased disposable
incomes, changes in lifestyle
patterns, shift in age structure,
increased number of working women
and multi cultural exposure
• Increasing health consciousness in
the future
• Organic foods and wellness products
 Increasing focus on private
labels
• Competition in the organized retail
market

• Discounts and promotions are

expected to play a critical part in
generating footfalls

• 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 systems, e-SCM

systems, e-Procurement systems and
warehouse management systems

• Use of cutting edge analytics

THANK YOU..