FoodWorld

• The first FoodWorld store was set up in R.A Puram in

Chennai on 9th May 1996
• By November 1998, the total number of FoodWorld retail
outlets reached 19,spread over three large cities of South
India,viz ,Chennai(6),Bangalore (8) &Hyderabad (5)
• The turnover during the first year (1996-97) was Rs.210
million and this was doubled to Rs. 520 million by November
1998.
 Company Background
• FoodWorld was a division of Spencer’s ,the retailing
company under RPG Enterprises
• RPG was one of the top 5 business houses in India ,with a
sales turnover of Rs. 65 Billion in 96-97 & an asset base of
Rs. 75 billion as of 1997
• RPG’s business interests spanned several sectors including
power, automobile tyre, agri-business,
telecommunications,retailing,&financial services
• RPG’s entry into retailing was through the acquisition of
Spencer & Company in 1989
• In I989,RPG purchased Spencer’s & established it as a
separate division under the leadership of P.K. Mohapatra,a
senior RPG executive
 Contd…
• However,the RPG executives who were managing Spencer’s
felt that the potential of retail business should not be given
up easily.Therefore,it was decided to experiment with one
store to test the potential.If the experiment failed,then RPG
would close down the retail operations.
• In line with this decision,the departmental store in
Bangalore was modernized in 1991,retaining its product
profile of hardware,food,kitchen appliances,& clothing.
• When the store opened ,sales increased to four times the
previous levels & made a healthy contribution.This settled
the issue in favour of continuing the more important
activities of Spencer’s ,which included retailing,airline
general sales agency,& pharmaceutical retailing.
 RPG’s Retail Focus
• Based on the decision to focus on the retail sector, senior executives
studied various retail formats & retailers world over & discussed issues
with experts in the field.
• These insights provided 3 directions: First ,that the company should not
get into niche retailing;instead,they should focus on the mass market.
Second ,that organized retailing format was closely related to economic
development of countries.Third,that they should focus on daily
necessities of households-food, clothing,& health.
• Clothing was eliminated ,since the company had no prior experience in
the fashion industry or in textile manufacturing.
• Therefore, food was decided as the entry product line followed by health
care.
• It was decided to follow a supermarket format for the retailing business.
 Retail Market Scenario in India
• As per the 1991 population census, the total
population of India was 846 million. About
one fourth of this population lived in 3768
towns & the remaining in 627,000 villages
• The retailing system in India operated at 3
parallel levels: the formal sector, informal
sector& the fair price shops under the
government’s public distribution system
 Number of Retail Outlets
• The total number of retail outlets under the formal system in
the country in 1993 was estimated to be about 8.06 million
&,in 1998,it was about 11.1 million. It was estimated that by
the year 2001,the total number of retail outlets in the country
would be about 13.6 million. Approximately 30% of these
outlets
Numberwere located
of Outlets in urban areas
(in 000)
Area 1993 1996 1997 1998 1999 2000 2001
Urban 2693 3074 3200 3400 3500 3700 3800
Rural 5364 6633 7200 7200 8400 9000 9800
Total 8057 9707 10,400 11,100 11,900 12,700 13,600
 Urban Outlets Food/Non-Food
• About 27% of urban retail outlets dealt with food
products,& an equal proportion dealt with non-food
items. The remaining outlets carried other Fast
Moving Consumer products
Types of Products Number (‘000) Percentage (%)
Sold
Food 824 26.8
Other FMCG 1,430 46.5
Non-food 820 26.7
Total 3,074 100
 Distribution of Stores by Shop
Classification Index
• Small retail shops with a shopping area of 300-400 sq.ft
constituted about 64 % of the total number of retail
establishments in the country.
• Large & very large retail shops (area of over 800 sq.ft)
constituted only about 11 percent of the total number of retail
outlets.
• The presence of supermarkets in India was confined to larger
cities & Type
theseof retail institutions accounted
Retail Outlets for%)only about 2 %
Proportion (in
of sales of FMCG
Small 64
Medium 25
Large 8
Very Large 3
Total 100