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In-depth analysis and replenishment of supply chain activities in retail grocery industry.
Submitted by: Nishant 10bsp0030
A Report on
In-depth analysis and replenishment of supply chain activities in retail grocery industry.
“The Report is submitted as a partial fulfilment of the requirement of PGPM program of IBS AHMEDABAD”
Prof: Dhwanika Ahya (Faculty Guide) ICFAI Business School, Ahmedabad
If words are considered to be signs of gratitude then let these words convey the very same. I shall remain grateful to her hope her best wishes will guide me to come out with flying colours on the path of honesty and harmony. Dhwanika Ahya for encouraging with her kind words of knowledge & wisdom and also co-operating with me.Acknowledgment These works being the imprints of many persons whose valuable assistance and insightful suggestions have made this project a success. Prof. 3 . I take this opportunity to thank our faculty guide.
1. Introduction 1.Retail Models in India:Current and Emerging 2.1.2. Recommendations: 4.Table of Contents Cover Title Page Acknowledgment 1.3.1. Conclusion 12-28 12-17 17-27 27 28-29 29 4 .2.2. Retail In India 1. SWOT Analysis 1 2 3 5-17 5 5-6 6-9 9-11 2. Analysis of Food Retail Sector 2. Main Text 2.1. Present Scenario 1.1. Major developments and investments 1. Challenges and Constraints 3.
6 per cent through 2015). It further stated that the Indian luxury market stood at a value of US$ 4. luxury brand retailers have announced their expansion plans in Indian markets. Where on one hand the luxury electronics and car segments registered a growth of over 35 per cent. India has surpassed the US to become the third largest men's luxury jewellery market in the world in 2011. The greater availability of personal credit. A report by CII-AT Kearney revealed that Luxury brands market in India grew at a healthy 20 per cent during 2010 reaching a size of US$ 5. more and more companies are willing to invest in India due to significant growth forecasts on gross domestic product (GDP) (BMI predicts average annual GDP growth of 7. Similarly. Also. A report by Boston Consulting Group (BCG) has revealed that the country's organised retail is estimated at US$ 28 billion with around 7 per cent penetration. stated the researcher Euromonitor International. The researcher's study projected Indian men's jewellery market at Rs 954 crore (US$ 183.76 billion in 2009 and is anticipated to be worth US$ 14.Introduction: Retail in India: Brief Overview Indian retail business values at around US$ 550 billion as of now and about four per cent of it accounts for the organised sector. Apparel and accessories. between 24-30 per cent. watches and personal care witnessed a substantial growth rate. It is projected to become a US$ 260 billion business over the next decade with around 21 per cent penetration. Luxury Retail Soars High Without wasting any time to react on the Indian Government's decision of allowing 100 per cent foreign direct investment (FDI) in single-brand retail. among others. Brands like Vertu. while brands like Van Laack and Diesel Black Gold will commence their operations by January 2012 itself.76 million) in terms of sales and made an anticipation for it to grow 36. are all small. fine dining grew by almost 40 per cent in 2010.4 per cent in 2012 5 . improved mobility. Armani Junior.7 billion by 2015.8 billion. Christian Loubotin. will open their exclusive stores at DLF Emporio in early 2012. but significant contributors to the growth of Indian retail industry. Another report by Business Monitor International (BMI) suggests that enhancing middle and upper class consumer base has set vast opportunities in India's tier-II & tier-III cities. better tourism et al.
Cumulative FDI inflows in single-brand retail trading during April 2000 to September 2011 stood at US$ 44. India has more than 100 million internet users.35 billion) by 2015. The lab would be tasked to drive the US$ 422-billion company's next generation innovations that impact shopping behavior among the customers. French retail chain. the Indian online retail industry would register annual growth rate of 35 per cent to increase from current size of Rs 2.52 million) to establish a greenfield facility at an upcoming industrial estate in Sanand which is being developed by state-run Gujarat Industrial Development Corporation (GIDC). according to a leading industry body. FMCG firm GSK Consumer Healthcare (GSKCH) has made a debut into Indian breakfast cereal market by launching oats cereal under its flagship brand ‘Horlicks'. out of which around half of them are up for online purchases and the statistics is growing every year. Oral and dental hygiene products manufacturer Colgate Palmolive has decided to invest Rs 200 crore (US$ 38.Retail: Major Developments and Investments After the US. intends to tap Indian packaged food industry and achieve sales of US$ 85 million in the first year of operations in the country. one of the prominent German retail chains. The breakfast cereal market in India is currently dominated by PepsiCo and Kellogg's. Retailing over Internet Indian retailers and consumer durables companies are joining the web bandwagon with India's online shopping industry registering phenomenal growth of almost 100 per cent annually. Metro AG. US fast moving consumer good (FMCG) giant McCormick.000 stores globally. The world's largest retailer Wal-Mart will open an innovation lab in Bengaluru by the end of 2011.000 crore (US$ 1. Germany has also come up in full support of FDI in retail in India. has shown intentions to venture in Indian markets along with US' Wal-Mart and France's Carrefour. 000 crore (US$ 385 million) to Rs 7. according to the Department of Industrial Policy and Promotion (DIPP). Furthermore.45 million. 6 . Claire's is a specialty retailer which targets young girls through over 3. Certain developments and investments that took place on the Indian retail canvas recently are discussed below Real estate major DLF's subsidiary DLF Brands has struck a deal with Chicagobased Claire's Stores Inc to bring the latter to India and open its 75 stores over 2011-16. Carrefour is on an expansion spree in India wherein it is about to finalize lease deals across 10 to 12 sites in the country to open cashand-carry (wholesale) outlets. that has recently formed a joint venture (JV) with Indian basmati rice brand Kohinoor Foods. says Google.
Since then. fashion clothing. It was brought under the automatic route in 2006. 57 proposals were approved. jewellery. FDI inflows of US $ 1. 2000 to March. to the extent of 100%. Women's apparel retail brand Biba and tyre brand Bridgestone have become available online recently. Single brand retail outlets with FDI generally pertain to high-end products and cater to the needs of a brand conscious segment of the population. under the Government approval route. in 1997. 2010. Of this. 2010. 2006 and March. Investors are also betting high in the industry.The US$ 10 billion Indian e-commerce market is expanding exponentially (it grew 47 per cent in 2011 to reach the present size) as rising internet penetration is making customers buy more and more stuff online. they poured around US$ 200 million into Indian e-commerce start-ups in last couple of years. to the extent of 51%. An FDI inflow of US $ 194. permitted in 2006.64 crore) was received between April. The proposals received and approved related to retail trading of sportswear. however. FDI in cash and carry wholesale trading was first permitted.21% of the total FDI inflows during the period. Between April. comprising 0. under the category of single brand retailing. hand bags. Though the data on volume of turnover by retail is not separately maintained. FDI in Single-Brand Retailing was. 7799 crore) were received in the sector.54 % of the total FDI inflows received during the period.69 million (Rs. apparel.. Internet and Mobile Association of India (IAMAI) expects online advertising to increase by 30-40 per cent in 2011-12 on back of increased internet usage by retailers PRESENT SCENARIO FDI in Multi-Brand retailing is prohibited in India. This segment of customers is distinctly different from one that is catered by the small retailers/ kirana shops. mainly attracting a brand loyal clientele. commodity composition of private consumption expenditure provides reasonable estimates of the size of the retail sector 7 . life-style products etc. 2010.779 billion (Rs. luxury goods. covering high-end items. 901. which often has a pre-set positive disposition towards the specific brand. This comprised 1. a total of 94 proposals have been received till May. Retail brands are expected to bring a great transformation in online space.
070.954 434.778 259.944 95.458 105. Fuel and Power Furniture and Appliances Medical Care Transport and Communication 2004-05 763.195 2006-07 947. FDI can be a powerful catalyst to spur competition in industries characterized by low competition and poor productivity. Industry restructuring enables global growth as companies reduce production costs and create new markets.797 356. high competitive intensity caused by informal players forced all modern retailers to rapidly increase productivity. capital. Increasingly.871 ‘FDI IN RETAIL.633 277.986 64.608 250.363 73. Examples include the cases of consumer electronics in Brazil and India.244 418. The biggest beneficiaries from this transition are consumers .344 415.348 204.856 188. Education and 65. in crore) item Food and Beverages Clothing & Footwear Rent.794 202. foreign direct investment is integrating developing countries into the global economy.536 127.560 378.915 93. India. However. For the large developing countries.962 336.562 2007-08 1. food retail in Mexico.345 127.310 76. Competition is also key to diffusing FDI-introduced innovation across an industry.Table A: Private Final Consumption Expenditure.858 97.197 111.211 213.564 2008-09 1.265 Recreation. creating large economic benefits to both the global economy and to the developing countries themselves.401 115.900 477.Commodity Composition (Rs.048 110. iii. and global capabilities which allow MNCs to close existing large productivity gaps more aggressively.182. and Brazil. and auto in China. ii.both global consumers that 8 v. iv. 2005 i.584 608. PREPARED BY FICCI AND ICICI PROPERTY SERVICES IN FEBRUARY. increasing competition from imports induced foreign players themselves to increase their productivity. FDI's potential for impact can be greater because of the combination of scale. .648 521. in Mexican and Brazilian auto cases. In Brazilian food retail.217 2005-06 852.A POLICY PERSPECTIVE’.984 140.276 311. integrating into the global economy through foreign direct investments improves standards of living by improving productivity and creating output growth. Competition within the host country sector is a critical driver of improvements in sector performance as a result of FDI.798 150.521 82.327 Culture Miscellaneous Services Goods and 180.436 121.
It can bring about: Supply Chain Improvement Investment in Technology Manpower and Skill development Tourism Development Greater Sourcing From India Up gradation in Agriculture Efficient Small and Medium Scale Industries Growth in market size Greater Productivity Benefits to government: through greater GDP. vi.reap the benefits from global industry restructuring.14 billion by 2015 while automotive sales would swell by almost 44. The report highlights strong underlying economic growth. population expansion.6 million units in 2011 to 5. tax income and employment generation vii The report inter alia made the following recommendations: Permit FDI in retail Remove Bottlenecks in the supply chain Relax SSI Reservation Remove distribution constraints Organize market for real estate Increase land supply Road Ahead The BMI India Retail Report for the first quarter of 2012 released forecasts that the total retail sales will grow from US$ 422.8 per cent from 3.21 million units in 2015. The report further predicts that sales through mass grocery retail (MGR) outlets will increase by 219 per cent to reach US$ 28. increasing disposable income and rapid emergence of organised retail infrastructure as major factors behind the forecast growth. due to the current scenario of low competition and poor productivity. and consumers in the host countries that see their purchasing power and standards of living improve. FDI can be a powerful catalyst to spur competition in the retail industry.09 billion in 2011 to US$ 825. Consumer electronic 9 .46 billion by 2015.
global consultancy firm PricewaterhouseCoopers expects Indian retail sector to be worth US$ 900 by 2014 in its report ‘Strong and Steady 2011. The 'retail boom' of which 85 percent has so far been concentrated in the metros. It is seen that actual conversions of footfall into sales for a mall outlet is approximately 20-25 percent.sales are estimated at US$ 29. 3) The Indian middle class is already 30 crore &is projected to grow to over 60 crore by 2010. with over-the-counter (OTC) pharmaceutical sales at US$ 3. the conversion ratio has been very low in the retail outlets in a mall as compared to the standalone counter parts. the focus has now been shifted towards the tier-II cities. While the metros have already been exploited. a stand-alone store has a ROI (return on investment) of 25-30 percent. SWOT ANALYSIS Strength: 1) Retailing is a “technology-intensive" industry.03 billion. in contrast the retail majors are experiencing a ROI of 8-10 percent. 2) Customer Loyalty: Retail chains are yet to settle down with the proper merchandise mix for the mall outlets. Since the stand-alone outlets were established long time back. On the other hand. reduce inventory holding and ultimately save cost. is beginning to percolate down to 10 . They introduced two innovative logistics techniques – cross-docking and EDI (electronic data interchange). Weakness: 1) Less Conversion level: Despite high footfalls. 2) On an average a super market stocks up to5000 SKU's (Stock keeping Units) against a few hundreds stocked with an average unorganized-retailer. As a result.44 billion in 2011. Opportunity: 1) Percolating down: In India it has been found out that the top 6 cities contribute 66 percent of the total organised retailing. Example: Wal-Mart pioneered the concept of building competitive advantage through distribution & information systems in the retailing industry. making India one of the largest consumer markets of the world. sot hey have stabilized in terms of footfalls &merchandise mix and thus have a higher customer loyalty base. shorten lead times. The IMAGES-KSA projections indicate that by 2015 India will have over 55 crore people under the age of 20– reflecting the enormous opportunities possible in the kids and teens retailing segment. Successful organised retailers today work closely with their vendors to predict consumer demand. On the similar lines. a high street store of retail chain has an average conversion of about 50-60percent. It is technology that will help the organised retailers to score over the unorganized retailers.
Even now malls are just a place to hang around. pastes Threats: 1) If the unorganised retailers are put together. The Godrej group has launched the concept of 'agri-stores' named "Aadhaar" which offers agricultural products such as fertilizers & animal feed along with the required knowledge for effective use of the same to the farmers. 2) Rural Retailing: India's huge rural population has caught the eye of the retailers looking for new areas of growth. 2) Strategic implications of supply chain activities that contribute and enable sustained firm performance. budget reports. The contribution of these tier-II cities to total organised retailing sales is expected to grow to 20-25 percent. Methodology: The data for the research project would be mainly secondary data. a high degree of flexibility in merchandise. and government sites will be used for the successful fulfillment of the project. display. 2) Shopping Culture has not developed in India as yet. Due time limitation and being a large are. started by DCM Sriram group. Various sources of secondary data like. prices and turnover. Objective: 1) Tactical level inventory control decisions of the retail grocer seeking to improve the replenishment process and reduce total inventory cost. magazines. the scope will be limited to Ahmedabad city only. provides farm-related inputs & services. "Hariyali Bazar". 11 . internet. they are parallel to a large supermarket with little or no over-heads. attempting to provide farmers a one-stop destination for all their needs. newspapers. largely confined to window-shopping. Pepsi on the other hand is experimenting with the farmers of Punjab for growing the right quality of tomato for its tomato purees. ITC launched India's first rural mall "Chaupal Saga" offering a diverse range of products from FMCG to electronic goods to automobiles.these smaller cities and towns.
But they do know their business– these lowest cost retailers can be found wherever more than 10 Indians collect – a rural post office. The home delivery (Fabmart) While the focus of this note is on modern organized retail trade. Trinethra) 4. measure and analyze. Margin Free) 2. Small to medium food retail outlets. 2. therefore. Apna Bazaar. these retailers have succeeded beyond all doubt. semi and unorganized retailers.Scope: The scope of the project will be limited mainly to Ahmedabad city. Hawkers – ‘mobile supermarkets’ The unorganized sector is characterized by the cart vendors (also known as “mobile supermarket”) seen in every Indian town and city is. The experience shop (Foodworld. They have neither village nor city-wide ambitions or plans – their aim is simply a 12 . One the reason for limiting the research to Ahmedabad is because the city itself is big market for the secondary data. difficult to track. Open format more organized outlets b. within which: a. The road side hawkers and the mobile (pushcart variety) retailers. Modern trade – the organized retailers Within modern trade. The discounter (Subhiksha. The kirana stores (the Indian equivalent of the mom-and-pop stores of the US). The other reason for the area confinement is due to the lack of time. These are: 1. The value-for-money store (Nilgiris) 3. we hereunder present insights into the smaller. we have: 1. a dusty roadside bus stop or a village square As far as location is concerned. Retail Models in India: Current & Emerging The Indian food retail market is characterized by several co-existing types and formats.
These retailers are not organized in the manner that they could challenge the power of the sellers. convenience stores and fast-food chains. but is certainly replicable all over India. The model is very antithesis of modern retail in terms of the buyer (retailer) .long walk down the end of the next lane. These stores have presented Indian companies with the challenge of servicing them. giving rise to distribution and cash flow cycles as never seen elsewhere in Asia. especially in the urban areas. Evolution of organized retailing Retailing. have tried to redefine themselves. These are highly organized in their own way. It is not unknown for MNC leaders to link the supply of one line of products to another slower moving line of products. prices and turnover. is going through a transition phase in India. one of the largest sectors in the global economy. cooked food and FMCG products is a very interesting model of retailing. For a long time. which really have not hit any company permanently. Much has been written about these roadside “malls” – from social security issues to their nuisance value. display. This mode of “mobile retailers” is neither scalable nor viable over the longer term. Most retailing of fresh foods in India occurs in Mandis and roadside hawker parks. most protests have been in the form of boycotts. these hawkers sure have a system that works. by introducing self-service formats as well as valueadded services such as credit and home delivery. Hawking of food products. the corner grocery store was the only choice available to the consumer. However if you put these hawkers together. they are akin to a large supermarket with little or no overheads and high degree of flexibility in merchandise.seller (FMCG) equations. Economies of scale are not yet realized in this format. The traditional grocers. While shopping ambience and the trust factor maybe missing. grocers and provision stores are characterized by the more systematic buying – from the mandis or the farmers and selling – from fixed structures. The traditional food and grocery segment has seen the emergence of supermarkets/grocery chains. but the front end is already visible changing with the times. which are usually illegal and entrenched. 13 . This is slowly giving way to international formats of retailing. Kirana/Mom-and-Pop Stores Semi-organized retailers like kirana (mom-and-pop stores).
However. the economists put a figure to it: Rs. Margin Free and others have made their foray into this sector albeit at regional levels. Hyderabad and Bangalore markets. India's per capita retailing space is thus the lowest in the world. This means that India per capita retailing space is about 2 square feet (compared to 16 square feet in the United States). the modern retailer is yet to feel the saturation' effect in the urban market and has. 800. There are two primary reasons for this. In fact. therefore. Retailing in India is unorganized with poor supply chain management perspective. In 2000. Hence. The experiment has reaped rich dividends and the group is now foraying into other territories as well. The trend in grocery retailing. Second. According to a recent survey by some of the retail consulting bodies. Impact of Organized Retail Organized retailing is spreading and making its presence felt in different parts of the country. the boom in retailing has been confined primarily to the urban markets in the country. which was expected to develop to around Rs. 400. several new models such as Trinethra. despite its costeffectiveness. preliminarily. an overwhelming proportion of the Rs. large chunks are yet to feel the impact of organized retailing. 20. the retail revolution happened with the RPG group starting the Foodworld chain of food retail outlets in South India with focus on Chennai. Retail stores necessarily have to identify with different lifestyles. Even there. As much as 96 per cent of the 5 millionplus outlets are smaller than 500 square feet area. Though there were traditional family owned retail chains in South India such as Nilgiri’s as early as 1905. The attractiveness of the other stores actually appeals to the existing affluent class as well as those who aspire to be part of this class. Today the food retail sector in India is about Rupees Ten Lakh Crores (USD 200 billions) of which the organised food retail segment is about 1 per cent and increasing at a pace of over 20% year-to-years. Subhiksha. has come to be identified with lifestyles.000 crore. Owing to the success of Foodworld model of RPG group. First. This trend is already visible with the new stores with an essentially `value for money' image. only a Rs.000 crore segment of the market is organized. one can assume that the retailing revolution is emerging along the lines of the economic evolution of society. 14 .000 crore retail markets is unorganized. the modern retailing trend. however. has been slightly different with a growth concentration in the South. probably not looked at the other markets as seriously.000 crore by the year 2005 – an annual increase of 20 per cent. 400.
Almost all food retail players have been region-specific as far as geographical presence is concerned in the country. Industry topography in India is such that spreading presence across cities is a tough call. Nilgiris. Though with excellent potential. Giant. though not value. the gestation periods are long. The trend and mindset of the present retailer chains in India can be best understood by studying Food World as an example. The chain has no plans to venture beyond the Southern region just yet. the RPG Group's Food World. As pointed out by many experts. But that could be two-three years away. while Adani is Ahmedabad-centric. In the organized retail industry. The other major factor is that of convenience shopping which the supermarket has the edge over the traditional kinara stores. In order to appeal to all classes of the society. Varkey's and Subhiksha. The demography’s of a region vary quite distinctly from others. while Chennai has about five organized food and grocery retail chains. organized food and grocery retailing chains going national requires significant investments Retailing within this sector is not just about the front end. On an average a supermarket stocks up to 5000 SKU’s against few hundred stocked at an average kirana stores. all of which are more or less spread in the Southern region. other big cities such as Delhi. As of now.To be successful in food retailing in India essentially means to draw away shoppers from. the roadside hawkers and kirana stores to supermarkets. For example. India poses a complex situation for a retailer. Sabka Bazaar has a presence only in and around Delhi. Margin Free. This transition can be achieved to some extent through pricing. the nextdoor grocery shopkeeper is smart and delivers good customer service. so the success of a food retailer depends on how best he understands and squeezes his supply chain. and Mumbai average only two-three such chains. Hence we may find more of regional players and it would take enormously long time before nationwide successful retail chains emerge. This is the main reason as to why the successful retail chains in the country today operate at regional segments only and are not aiming at nationwide presence. But the belief among top retailer chains in the country is that the industry will see large investments coming once the current ban on foreign direct investment is lifted. Bangalore. but involves complex supply chain and logistics issues as well. as this is a Country where each State is a mini Country by itself. Current plans 15 . and consumers not dissatisfied with existing shops where they buy. To illustrate with examples. Food and grocery retailing is a tough business in India with margins being very low. retail stores would have to Identify with different lifestyles. names such as Haiko and Radhakrishna Foodland are Mumbai-centric. and there is none or little Government support. which came in first in the food and grocery retailing sector. institutional funding is difficult. at least for the time being.
but not the only one. if a model is in place where the upfront store revenues scale very rapidly. Meanwhile. Therefore. Given the federal nature of the country. that players are in no tearing hurry to spread out. Chennai has some five supermarket chains. ‘Discount chains’ are also substantial in number and are growing at a fast pace through the country. should stabilize at around 2. and each of these are doing well for themselves. a Chennai based discount chain. comes at fourth place. too wants to be the principal store of purchase for at least 40 per cent of all consumers living within 500750 meters of the store. This shows the high potential the sector presents. it will have to be in the hypermarket format with its attendant investment numbers and risk profile. beside the corner shop/grocery store ’mom and pop’ store . Chennai. However. in the southern 16 . it can be seen that there is so much potential to extract from individual regions. This makes the point very clear that the strategy among most existing retail chains of various formats is to completely saturate the markets where they are already established players and then move on to virtually untouched areas where the challenge of sourcing resources and extending their supply chain model to best suit the size and expanse of the market would be a challenging task. if one is to attempt a pan-Indian grocery foray. The intention is that by 2005. the weak infrastructure and the major variances in eating habits in different parts of the country.5 per cent to 3 per cent of sales. To elaborate on the hurdles of going pan-Indian. So there is enough scope to expand even in one single city in India. “the Mecca of retailing”. in the six major metros. predominantly. Hypermarkets have very recently come into being and are negligible in number though most retail chains do intend to expand their presence through this format as well very soon. Delhi has the highest per capita consumption of food and grocery. fundamentally. If a close look is taken at the nature of the Indian Retail Markets. the way a basic grocery retailing model works is that the high set-up costs in terms of setting up buying/ distribution infrastructure is gradually amortized over a large number of stores. they could look at the other regions. that is. It can be observed that the most popular retail format in India is the ‘supermarket’. within walking distance. among supermarkets. It can be explained that the obstacles of looking at a pan-India model for grocery are several. or what in retail jargon is called retail administration costs. The back-end costs without distribution centre costs. the RPG group plans to take its new formats such as Giant Hypermarkets national over the next three years. Subhiksha. Based on a recent study by a renowned government institution in India. Grocery is a large component of this format. one will have to replicate the retail administration costs for at least each region and therefore the gestation period of the project becomes huge.are to focus on the Southern markets and achieve saturation. then it is possible.
Heinz..region. Tropicana. Various demand and supply side factors have contributed towards this growth. Entry barriers on multinationals were largely removed after which Food Industry majors like Kellogg’s. Given that organized retail has been registering growth rates of approximately 40 per cent over the last three years. it is expected to grow to about Rs 35. Evolution of super markets and fast food chains is a recent phenomenon in India. Analysis of food retail sector Retailing is a sunrise industry in India with many challenges like exclusion of small farms. Demand The increase in the income levels of middle & higher income groups in the 1990s coupled with the reduction in poverty levels was major factor in contributing to the increase in demand for 17 . but at least the winds are blowing in the direction of growth. once established.000 crore in 2005. which. Replicating the success stories of the big names of the Western nations may still be a distant dream for Indian food and grocery retailers. in turn. If projections were to be made considering the current trends in food retailing in India. some years down the line. etc.000 crore in 2010. management of processing and distribution chains. Most chains have already started developing their own unique supply chains that would suit their needs precisely. in-store label brands will become a real threat to the industry as manufacturers will have to compete with the store label brands that are generally very price-competitive. This gave rise to tremendous development of sophisticated supply chain and logistics which eventually and gradually has led to the growth in the food processing & packaging industry. As for the spread geographically. strong chances stand that the major chains would spread to the next grade of cities in the country over the next 5 years or so and then progressively start covering every corner of the country. will be forced to offer special discounts and trade terms for them to get the shelf space in such stores. Also. entered the Indian food industry. and close to Rs 70. Supply Side The liberalization of the economy in the 1990s led to a boom in the “Consumer Goods” Industry with reductions in custom duties and shift from quota to tariff based system. food and grocery stores will become dominating trade partners for the food industry.
just for the record. or organized retail. Modern.6 per cent of the total retail sales in the country. .000 crore in 2001. Another major factor that has accelerated the growth of the Indian Food Retailing Sector has been the advent of cable television and the increasing Instances of overseas travel by Indians for various reasons. Changing consumer lifestyles with the steep increase in time value.03. estimated at Rs 18.There is no uniform tax structure . requirements for shops to Close once a week .81. for the first time in five years.19. India’s retail sales now account for 44 per cent of its GDP. the shares remained stable. Retailing is subject to a plethora of laws and regulations at central.Restrictive zoning legislation limits availability of land for retail/ commercial purposes . to Rs 7.Urban land ceiling regulations. even though in terms of absolute value. to Rs 4.Restrictive Labor laws .400 crore in 1996. accounts for just about 1. wide spread change in the Indian family structure from vast Joint Hindu families to more manageable nuclear families and increasing level of quality awareness has also helped the cause of the Food Retailing industry considerably. food retail sales have grown from Rs 3. the food and grocery sector now accounts for 14 % of total organized retail. In absolute terms. Food & Grocery from big and better portion of organized retailing these days. non-food retail sales have grown from Rs 2. 18 .900 crore in 2001. after clothing and textiles (36 %) and watches and jeweler (17 %). state and Municipal/local levels.multiple layers of taxes. restrictions on shop opening timings.000 crore in 1996. And. some of which have been listed below: . Besides. The study further analyses that last year. Food retail sales make up for close to 63 per cent of total retail sales. retail shares of grocery dropped.000 crore.Restrictions on intense movement of food grains deprive farmers from getting remunerative Prices.high quality food retailing services.22.
and close to Rs 70. Giant. Food and grocery and hypermarkets are likely to generate the best returns in 5 years. Arvind Singhal. The chain has no Plans to venture beyond the Southern region just yet. other big cities such as Delhi. . FoodWorld. though not value. Director of the Chennai-based discount retail chain. once established. And as an industry analyst elaborates. For example.000 crore in 2005. Sabka Bazaar has a presence only in and around Delhi.R Subramanian.According to Mr. in turn. Given that organised retail has been registering growth rates of approximately 40 per cent over the last three years. Private labels have yielded higher margins for most large players. all announcements of expansions by leading players are in this format. Subhiksha: "Food and grocery retailing is a tough business. Although apparel stores have higher margins. which came in first in the food and grocery retailing sector. hypermarkets are expected to be the most successful format. food and grocery stores earn higher returns once the stores stabilise. will be forced to offer special discounts and trade terms for them to get the shelf space in such stores. Also. Food World has a current sales figure of Rs 350 crore. the next door grocery shopkeeper is smart and delivers good customer service. coincidentally. Subhiksha too is gung-ho about the future of the discount chain. in-store label brands will become a real threat to the industry as manufactures will have to compete with the store label brands which are generally very price-competitive. while Adani is Ahmedabad-centric. and consumers are not dissatisfied with existing shops where they buy. but involves complex supply chain and logistics issues as well. RPG Group's FoodWorld." As of now. "Organised food and grocery retailing chains going national requires significant investments. Margin Free. while Chennai has some five organized food and grocery retail chains. Bangalore and Mumbai average only two-three such chains. "Some years down the line. all of which are more or less spread in the Southern region." Says Mr.000 crore in 2010. Chairman KSA Technopak. food and grocery format scores over the apparel one. Varkey's and Subhiksha. this is driven by lower fixed costs and significantly higher stock turnover ratios. which. Margins are low." In the retail format. Also. Most of the growth will come from hypermarkets and. Nilgiris. In terms of returns. it is expected to grow to about Rs 35. Retailing within this sector is not just about the front-end. names such as Haiko and Radhakrishna Foodland are Mumbai-centric. The comprehensive list of Food & Grocery retail in India are : 19 .. most food retail players have been region-specific as far as geographical presence is concerned. food and grocery stores will become dominating trade partners for the food industry.
Dairy farm International Supplyco(KSCSCO) RPG Group AB Group AB Group Sankalp retail value stores(AHMBD) Hiranandani Group Trent Ltd Shoprite Hypermarket Cooperative (Kerala) Ahmed (Bangalore) Margin Free Markets Godrej Wadhawan group Piramyd holdings Zakaria Shahid Group Apna Bazaar(Cooperative Retail chain) Adani group Radhakrishna Group Varkey's(Kerala) Food Bazaar FieldFresh RPG FoodWorld Nilgiris Subhiksha Reliance Fresh Giant Maveli stores Spencer’s Fab Mall Trinetra Sankalp Haiko Star India Bazaar Shoprite Triveni Stores(Kerala) M K M K Retail(Bangalore) Margin Free Stores(Kerala) Nature's Basket Spinach Trumart Sabka Bazaar Apna Bazaar Adani Radhakrishna Foodland Varkey 20 .PARENT GROUP RETAIL STORE NAME Heritage foods Fresh Big Bazaar Bharti Enterprises Group Nilgiris+Actis Viswapriya Reliance Industries Ltd.
with the logo written in yellow on bold red. Additional space of approximately 400 sq ft for back office and standby generator is used.Primarily it is a shopping destination for people staying within one-and-a-half kilometer radius of 21 . Site strategy is residential high street with minimum 6000 households in two to three km radius and the Core customer target between one-and-a-half and two kilometers of the store . Big Bazaar is designed as an agglomeration of bazaars or Indian markets with clusters offering a wide range of merchandise including fashion and apparels. Vegetables. Bakery etc . Self service oriented merchandising strategy is followed. Store format There are 93 outlets today across Southern and Western India. The average ticket size ranges around Rs280-300. food products. general merchandise. fast food and leisure and entertainment sections.Big Bazaar stores consider ground floor properties only. Big Bazaar display format follows functional racking with no fancy accessories. It offers a complete range of fresh foods. including Fruits. Positing A “self service neighborhood Grocery" store catering largely to the "monthly" consumables requirement of households in the immediate vicinity.Example: Big Bazaar Organization overview Big Bazaar is a chain of hypermarket in India. Typical store carries about 5000 items. electronics. furniture. The stores have a very dominant corporate fascia/signage. books.between 3000 to 3500 sq ft with minimum 40 ft frontage. Currently there are 210 stores across 80 cities and towns in India.
Big Bazaar works on the hub-and-spoke model. health & beauty. Hosekote.the store. Distribution Strategy It follows a strategy of minimum suppliers to take advantage of economies of scale (in purchasing and supply logistics).28 per cent of Big Bazaar's foods and groceries are private labels -launched more than 150 items under Big Bazaar Brand Big Bazaar Brands are backed by a 100% No Questions Asked Replacement Guarantee. It provides customers with a wide range of quality products reasonable prices under one roof.000 sq ft in area and serves about 30-40 stores in a radius of 30 km .The remaining 10% (mostly perishable items like fruits and vegetables. Further divided into 49 categories. Merchandising and display strategy geared toward increasing the size of the bill value and purchase basket for each customer. and easier vendor development. In-store shopping ambience built using bright and prominent displays like posters. Direct mailers and in-store shopping guides main communicators for the customers for the strategy. such as destination. Marketing Strategy Big Bazaar marketing strategy’s focus is to maximize traffic in the store. Product Mix It consists of seven major groups. strategic (routine). processed foods. reduced overheads and control requirements. beverages. perishables and hardware and home appliances. staples. bright and functional ambience. in a clean. in a convenient location.Creation of Regional Hubs facilitates over 90% central distribution . non-food.000-60. It consolidates the harvests from Ooty. Venkatagirikota. convenience and specialty (occasional) depending upon the importance in the customers’ purchase basket and frequency of purchase. bakery etc) supplied direct to store. Kodaikanal. A hub is typically of 50. large shelf talkers and bulk merchandising or floor displays. namely. Bangalore and Hyderabad.a first of its kind in the market. It participates in early morning auctions at 22 .
pack and label the fresh products in time for early morning dispatch to the stores. 250 tones of fruits and vegetables a month are supplied from here to all Big Bazaar stores. Revenue as of year 2005 was Rs 382 crore.. clean. Ltd. which include organizations such as McDonalds and Radhakrishna Hospitality Services Pvt. handling and distribution solutions to various clients. Big Bazaar has close to 8.000 SKUs at any given point in time in the stores. in terms of turnover has been at 30% over the years.the major wholesale markets. The services are tailor made to suit each client’s requirements. It has a set of suppliers who grade. CAGR. such as storage. (RKHS) Platter of Services Logistics-Temperature Control Customer Order Fulfillment Warehouse Management Inventory Planning and Replenishment Management Supply Chain activities Third Party Logistics Key Features: Dedicated to movement ‘cold chain’ 23 . On an average. Customized Distribution and Logistics Supply Chain Big Bazaar provides Customized Distribution & Logistics services encompassing the entire supply chain.
Fresh Rush Aimed at movement of small volumes of perishable items. such as Frozen(below –18ºC) and Chilled (1ºC to 4ºC) can be transported.A minimum of 500 kgs to maximum of 5000 kgs can be transported 24 . Companies loose out revenue due to non catering few markets due to the inexperience in movement of perishable items.000 km Perishable tonnage handled per month – 6. The only logistics solution provider with expertise in handling agri – produce Total kilometer run per month is – 6. Fresh Rush is a temperature controlled transportation service addressing the needs of small volume cargo. Features: Multi temperature products.000tons Robust quality systems & processes First in the country to use multi temperature vehicles Use of innovative methods to ensure temperature integrity during transit Experienced staff – The BEST in the industry.00. Flexibility of load movement .
Over 65 % temperature controlled Stores as far as 500 – 1000 kms 25 . Products . shelf life extension and cost reduction of agri-produce from hinterlands and upcountry sources supplying to the country’s main markets Freedom from managing the day-to-day affairs of supply chain management Major cost saving. In transit temperature tracking Fixed schedule of pickup and delivery Well trained and experienced manpower Adherence to strict hygiene standards Consignment can be tracked through GPS system Advantage Big Bazaar Big Bazaar’s domain expertise and experience helps customers derive optimum efficiency and profitability Waste reduction. coupled with timely management of schedules and deliveries Dependable and trustworthy services matching global standards of companies like McDonalds McDonalds: Full Supply Chain responsibility Multi Temp.
Products Fruits & Vegetables Staples Bakery Items Non Veg 26 . under the ‘Big Bazaar’ brand. Drops per month – Over 700 Movement mainly by road Regular movement of perishables by air Routing Challenges No margin for error – Operations critical client No Stock Outs at store On time delivery record – above 97 % Clean delivery record – above 99 % Unfailing inbound supply chain Private Labels Big Bazaar offers its own private labels.
Unorganized sector is getting organized -Bombay Bazaar and E-food mart have also been formed which are aggregations of Kirana’s. Challenges in the area of infrastructure. 27 . Back end administration. No investments made in areas like IT. and local legislation still lie ahead. where returns are not immediate. supply chain. Delicatessen (premium ready-to-eat veg. chicken and pork products) Features: Sourcing from reliable vendors who follow stringent Quality Assurance and Food Safety standards Distribution Centers equipped with multi-temperature zones to store and process different types of products depending upon their specific requirements. and customer relationship management. warehousing. Extensive training imparted to food-handlers and others involved in the whole chain to ensure superior output Hygienic Packaging Delivery vehicles capable of carrying products across temperature dispositions Strict Quality Assurance and Food Safety programs to ensure product integrity Challenges and Constraints It faces competition from emerging value-based formats and from independent modern stores providing a better value proposition.
ketchups. racking etc) -IT led demand forecasting Intervention Areas Skill Up gradation Regulations & Policies -Govt help through subsidies to develop model warehouses & training schools -Manpower Skill development -Training on transportation Training on loading. with an estimated 225 Stores in the major cities in these states. Expand own label categories in products like jams. good real estate space and strong brand recall in areas of presence. -Sharing of Infrastructure – Transport. Recommendations: Infrastructure Development -State of art warehouses -Material handling equipments -Labeling. detergents and make product basket bigger. stacking mechanisms Technology Influx -IT led security -Warehouse management systems -Material handling technologies (fork lifts. IT etc pallets . Karnataka & Andhra Pradesh and Maharashtra. unloading Product handling -Integrated facilities that can be used as common infrastructure The above 4 mentioned intervention areas are a key to overcome supply chain challenges in 28 . It intends to be a dominant retailer of Food products in the states of Tamil Nadu.The Road Ahead: Big Bazaar has good retail penetration.
The cold storage will be used by many farmers who can store their seasonal vegetables in them. However. BANGALORE. Even if this is done & processes designed optimally the rapidly changing market dynamics soon make them ineffective. The key to success will be to use these methods in a holistic approach. INDIA . Hence there is a need to continuously review & revive the standard operating practices (SOPs) that are used to document & audit process implementation. IASMS. This type of initiative will help the retail industry in India to shine n future. keeping the fresh and available on request at all times.C Nielsen report Future Group employees National Seminar on Logistics &Supply Chain Management.retail industry.com A. Conclusion: Ideally retail supply chains need to be designed to be lean & defect free prior to implementation of the processes. A very good example can be of the Future group’s “Mega Food Park concept”. References: 1) 2) 3) 4) Indiaretailing. The company has started to build a cold storage in Tumkur. Karnataka. this is rarely possible in real life given the pace at which the industry is expanding. The government has allotted Future Group with 40% of the amount required to build the infrastructure. The rent would be paid by the farmers. A well designed lean six sigma initiative helps in continuous process redesign in order to ensure efficiency & accuracy despite changing operating conditions.
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