 Government

 Consumers
 Unorganised trade participants
 Producers/Farmers
 Contributions to flow to exchequer due to
increased transparency
 Some issues:
 Service tax on immovable properties is a major
burden for retailers who are operating on thin
margins.
 Excise tax poses a challenge to retailers.
• Collecting revenue from the unorganized retail sector
is a challenge for authorities.
• • Kirana stores and the kiosks are located across
geographical distances, in urban and rural areas.
• • Street vendors and rural outlets do not have a postal
address.
• • Most people who own and operate these stores or
kiosks do not have basic education.
• Availability of exemption or composition schemes
enabling small retailers to effectively not pay VAT of
any significance leads to a large number of retailers
not contributing much to the exchequer.
• Organised retailers, on the other hand, are both tax
compliant and large tax payers.
• Given their significantly larger turnover, there is
typically no means by which they would be in a position
to avail of tax exemptions/concessions.
• In addition to this stellar role, the organized retail
sector also facilitates the generation of significant tax
revenues through the building up of a robust and
sophisticated supply chain which impacts the logistic,
transportation, warehousing, freight forwarding and
other similar service sectors, all of which contribute to
the exchequer through payment of indirect taxes,
primarily the service tax.
 Out of the total unorganized retail sector, 60
percent are unregistered dealers whose
revenues are below the threshold limits for
registration under VAT and consequently such
dealers are will not pay any VAT.
 • 30 percent are small dealers paying VAT
under composition scheme at a rate of 1
percent
 • The balance 10 percent pay VAT at full rate
i.e. at the rate of 10 percent as above.
 VAT revenues are expected to grow by
INR34205 crores (USD8.6 billion)
 Growth attributable to increase in size of
retail sector (INR10265 crores or USD2.6
billion)
 • Growth attributable to shift from
unorganized to organized (INR23940 crores or
USD6.0 billion, taking into account a 10
percent increase in VAT collections where the
shift is from unregistered dealers to
registered dealers
 The retail sector in India employs nearly 21
million, which is 7% of the total national
workforce, Second only to agriculture
 Organised trade employs nearly 5,00,000 and in
future will require many more.
 Global retailers like Carrefour have already
invested significantly in the local economies they
are present in by have improving living standards
of consumers, suppliers, farmers and employees
and generating greater quantity and quality of
employment
 Modern trade also brings added value to the
workforce in a country.
 Carrefour has created over 7,200 jobs in Thailand
and provides skill and knowhow training at more
than 50 training modules in the retail business.
 Indirect employment generation will be triggered as
a chain reaction in the value chain i.e. at the
manufacturer/producer level, as well as other
support activities such as grading, sorting,
packaging, transportation, storage, various other
service providers, such as security, training, IT,
architects, store designers, facility management etc.
•Given the shortage and availability of skilled
labour, proactive training is a key imperative for
Indian retailers.
 Grooming the salesforce
 Lifestyle, part of the Dubai-based Landmark
Group, partnered with the National Institute
of Fashion Technology, Hyderabad to groom
its sales force. The three month course in
Fashion Retail Management Studies will be
fully sponsored by Lifestyle. Trainees will
later be employed by Lifestyle stores.
Lifestyle has also entered into similar
initiatives in other major cities.
 Working with the hearing impaired
 Café Coffee Day (CCD) provides employment
opportunities to hearing impaired individuals
as part of its Silent Brewmaster program.
This initiative leverages the skills of the
hearing impaired.
 Upskilling staff
 One major quick service restaurant (QSR)
player prefers to take non-graduates so that
they can be trained and upskilled to assume
challenging front-office roles. This QSR
player has also partnered with an
educational institution to impart training.
The QSR player can hire a crew member who
is a 10th to 12th standard pass and they can
be trained to become a management trainee
and then a store manager.
 ITC’s
Innovative Experiments to Involve Small
Vendors
 ITC will negotiate with gated communities to permit ITC-
branded pushcarts into a locality.
 ITC plans to provide logistics support for unbranded
pushcart vendors. ITC is passing on live information to
vendors such as being at high traffic zones at different
times of the day and different days in a week, etc.
 Vendors can walk into Choupal Fresh Wholesale outlets
anytime of the day to refill their carts, unlike just once
at the traditional mandi.
 ITC is also working with microfinance institutions to lend
money to headload vending women to buy/lease a
pushcart, obtain working capital to purchase a load of
produce, etc.
 To unlock operational efficiencies, facilitate
growth, reduce costs and improve the time it
takes for food to move from point of
manufacture to point of consumption, robust
and scalable supply chains need to be built.
 supply chain costs form over 50 percent of
total operating costs.
 avoidable supply chain costs (wastage,
excess inventory and excess transportation
costs) in Indian Food and grocery sales to be
about INR1 trillion (USD 24 billion).
 Benefits to farmers and Agriculture would include:
 Encouraging direct dealings with farmers via dis-
intermediation.
 Educating farmers in methods to improve yield and
crop selection to meet the end consumer’s
requirements.
 Aggregating demand at the village level and removing
farmers’ dependence on village level agents to
market smaller lots.
 Carrying out the grading/packing activity with
appropriate infrastructure to ensure global standards
of hygiene and quality.
 Designing and establishing the distribution system to
handle large volumes.
 Minimising wastage at each stage of the supply chain
through improvements in handling, packing,
transportation and storage.
 Establishing freely accessible information platforms
for a transparent brokerage of prices and qualities of
agricultural products
 Ensuring prices to the farmers / producers
commensurate with their value add and risk
undertaken.
 Retailer becomes a wholesaler
 In this model, the retailer works with
farmers to develop an expertise in the
farming and harvesting of a range of
produce.
 Considering volume and scale parameters, it
would make the most sense, in this model, to
interact and deal with a large number of
farmers to cultivate the produce.
 Once the produce has been harvested, the
retailer can become a wholesale farmer
(since they have aggregated volumes) to —
 Supply this produce to the retailer’s food and
grocery stores
 Act a sourcing agent and supplier to other
modern trade formats and unorganised trade
participants
 Export surplus produce overseas
 Contract farming models bring together
farmers and retailers
 Farmers do not have access to finance,
equipment, seeds, fertilisers and machinery;
under contract farming, companies provide
access to funds and materials to farmers.
 Contract farming is likely to also improve
food safety since large corporate companies
will be partnering with farmers to teach
them best practices in crop management and
food safety.
 Cooperative models
 Farmers, retailers and agri-universities can
explore partnership models. Through
collaboration, stakeholders can share best
practices in harvesting, crop management,
soil conservation and protecting the
environment.
 Global retailers source a lot of merchandise from local
countries thus creating huge opportunities for growth as
well.
 Their expertise of retail operation, manufacturing and
back end operations maybe leveraged as well.
 Wal-Mart is keen on sourcing food and dairy products from
India. To this effect, Wal-Mart is ready to bring in high-end
technology, invest in cold chains and address issues such as
contract farming.
 Wal-Mart, Gap, J C Penny, Ikea and Tesco are some of the
leading global retailers currently sourcing from India.
Buying volumes for many of these players are already in
the range of Rs 10 billion – Rs 20 billion (US$ 0.2 billion - $
0.4 billion) per year, with reported plans for further
increases of up to Rs 100 billion – Rs 150 billion (US$ 2
billion - $3 billion) within the next 3-4 years.
 Leading Indian modern trade players already
source significantly from local Small Scale
Industries (SSI) for their private label
programme. Private label constitutes anywhere
between 20% to 100% of modern trade sales.
About 10% -50% of total merchandise is sourced
through SSIs. Some benefits would accrue from:
 Supermarkets source on an average of 50% of
their supplies from the SSI sector
 Department stores source around 30% of their
supplies from SSIs
 DIY stores source upto 40% of their supplies from
SSIs
 Sourcing large volumes from SSIs
 Overcoming marketing weaknesses of SSIs
 Developing branding skill in SSIs through
partnering
 Demanding product development skills from SSIs
for private label exclusivity
 Enforcing quality production standards on SSIs,
thus enabling them for exports.
 RPG Retail in among the top five players in India’s
emerging modern trade business. RPG Retail
clocked a turnover of about US$ 120 million, with
about 0.6 million square feet of space across its
various retail formats, which are Supermarket
(FoodWorld), Health & Beauty (Health & Glow),
Specialty music retail (Music World) and
Hypermarket (Spencer).
 Carrot farmers typically used to cordon a ditch and
wash the carrots in ditch water, by stamping on them.
This obviously affects the quality of produce. FoodWorld
introduced the practice of using washing trays to wash
carrots, thereby reducing wastage and improving shelf-
life and quality.
 A typical cauliflower farmer used to plant 12,000
cauliflowers per acre, resulting in 30% wastage of
produce and poor quality as well. FoodWorld insisted
that their suppliers plant 9,000 cauliflowers per acre,
thereby reducing wastage and improving quality. The
increased size of the cauliflowers and reduced wastage
actually increased the net yield for the farmers.
 FoodWorld has contracted millers for grains and spices.
By adopting updated machinery, the millers have been
able to save at least 15% on cost of spices.
 FoodWorld markets tamarind paste in its stores. The best
tamarind in India is grown in the Tumkur region of
Karnataka. FoodWorld has been successful in branding the
paste as “Tumkur” tamarind.
 About 40% of FoodWorld’s merchandise is sourced from
about 500 local small-scale industries.
 Ready-to-cook idly batter manufacturer– A former employee
of RPG who wanted to turn entrepreneur was assisted by
RPG to set up a business supplying idly batter to FoodWorld.
His annual turnover today is about Rs 9 million.
 Jam manufacturer – a small local vendor started supplying
jam to FoodWorld, which was made in his aunt’s kitchen.
Today he has a factory that employs about 60 people and
has now diversified into making mango pulp. His annual
turnover today is Rs 25 million
 The Metro Group, the 2004 sales turnover of which was over
56 billion, is the third largest trading and retailing group in
Europe and the fifth largest in the world. It runs 2,447
stores in 30 countries covering about 12 million square
metres of retail space and employs around 2,50,000 people
worldwide.
 Over 95% of Metro’s merchandise for its Indian operations is
sourced locally, both from large and small scale industries
 Metro has joined hands with various government agencies in
India and the German Development Finance Institution, to
invest about Rs 27 million in the training of more than
33,000 sheep and 800 fish farmers. By adopting the best
practices and new methodologies introduced to them, the
farmers would be able to increase their yield levels, reduce
wastage and improve the quality levels of their produce.
 Metro has identified and worked with an Agra based
unbranded footwear supplier for a basic range of
footwear, meant for blue-collared employees in
small businesses. Metro assisted the vendor in
designing shoes, keeping in mind the unique toe
shape of the target user segment. Today 10,000
pairs of these shoes are sold every month by Metro
in Bangalore, at an extremely competitive price of
Rs 199 (US$ 4). The turnover of the small scale
vendor has risen from Rs 45 million (US$ 1 million)
to Rs 60 million (US$ 1.3 million), an increase of 33%
with Rs 11 million (US$ 0.25 million) coming from
just Metro.
 Metro sources high quality pork from local
piggeries. The quality of the produce is of
international standards, thanks to the rigorous
training and investments made by Metro in
upgrading feed, hygiene / veterinary care,
slaughter, preservation, transport and storage
methods used by the vendors.
 The e-Choupal assists the farmer in the following
ways:
 Provides farmers with real-time information and
customized knowledge, enabling them to improve
productivity, quality of produce and price
realization.
 Allows for aggregation of demand for farm inputs
from individual farmers, thus giving them access
to high quality inputs from reputed
manufacturers at competitive prices.
 Eliminates middle-men, multiple handling,
multiple transportation and wastages, thereby
significantly reducing transaction costs.
 Startingwith just 6 choupals in June 2000, this
model has become rural India’s largest internet
based initiative and as on May 2007 e-choupal
services reach more than 4 million farmers in
about 40,000 villages through more than 6500
choupals in Uttar Pradesh, Madhya Pradesh,
Rajasthan, Maharastra, Karnataka, Andhra
Pradesh and Kerala . ITC’s objective over the
next decade is to create a low cost IT based
interactive transaction and fulfillment channel to
cover 1,00,000 villages.
 ITC’s Choupal Fresh fruits and vegetables format
utilizes best practices transfer in farming and
sales volume projection that results in higher
income generation for farmers.
 Each Choupal Fresh outlet is linked to between
15 to 40 farmers, who are given a calendar of
which items to produce and harvest. ITC
provides infrastructure in terms of tools and
knowledge transfer (nursery management,
farming management etc.) A truck collects
produce from farmers and transfers this directly
to stores, which can then be bought fresh by
consumers.
 McDonald’s unique cold chain, on which the
quick service restaurant (QSR) major has
spent more than six years setting up in India,
has benefited both farmers and customers;
customers receive high quality fresh food
products at competitive prices.
 Each McDonald’s burger requires six different
ingredients which are sourced from 35 suppliers
across the country:
 • Sesame seeds come from Ghaziabad, Uttar
Pradesh
 • Bun is sourced from Noida and Khopoli,
Maharashtra
 • Vegetable sauce comes from Phillaur, Punjab
 • Cheddar cheese from Baramati, Maharashtra
 • Vegetarian and non-vegetarian patty from
Taloja, Maharashtra
 • Lettuce from Talegaon (Maharashtra), Ooty
(Tamil Nadu) and Nainital (Uttaranchal)
 Trikaya Agriculture is a major supplier of iceberg
lettuce to McDonald’s India. Through its association
with McDonald’s, Trikaya was exposed to more robust
agricultural management practices and sharing and
transfer of advanced agricultural technology.
 Initially lettuce could only be grown during the winter
months but with McDonald’s knowledge and assistance
in agriculture, the McDonald’s supplier can grow this
crop all the year round.
 McDonald’s also assisted with the selection of seeds
and exposed Trikaya to advanced drip-irrigation
technology. McDonald’s also facilitated the
development of a refrigerated transportation system
that enabled this small agri-business to provide fresh,
high-quality lettuce to McDonald’s urban restaurants,
located thousands of kilometers away.
 Trikaya also plans to export this high value
product to other international markets,
especially to McDonald’s Middle East and Asia
Pacific operations. McDonald’s expertise in
packaging, handling and long-distance
transportation enabled Trikaya to produce trial
shipments to the Gulf successfully.
 In addition to exports, McDonald’s assistance
enabled Trikaya Agriculture to supply this crop to
several of star-rated hotels, clubs, flight kitchens
and offshore catering companies in India.
 Therefore, in collaboration with McDonald’s,
Trikaya was able to increase its customer base,
grow its revenues and develop refined knowledge
in the area of farming produce.
 Vista Processed Foods Pvt. Ltd. are McDonald’s suppliers
for the chicken and vegetable range of products. Technical
and financial support extended by US-based OSI Industries
Inc. and McDonald’s India Private Limited enabled Vista to
establish world-class infrastructure and support services.
This includes hi-tech refrigeration plants for manufacture
of frozen food at temperatures as low as - 35°C.
 With continued assistance from its international partners,
Vista installed hi-tech equipment for both the chicken and
vegetable processing lines, which reflect the latest food
processing technology
 These products, besides being supplied to McDonald’s, are
also offered to institutions like star-rated hotels, hospitals,
project sites, caterers, corporate canteens, schools and
colleges, restaurants, food service establishments and
coffee shops.
 McDonald’s needed the process-grade variety of potato for
its products, which is required, according to its
international quality standards.
 McDonald’s and its supplier partner, McCain Foods Pvt.
Ltd., began to work closely with farmers in Gujarat, M.P.
and Maharashtra to develop process-grade potato
varieties. Leaders in agronomy, technology and innovation,
McCain Foods
 Pvt. Ltd. Along side McDonald’s worked with agronomists
and field assistants to demonstrate best practices to
farmers. This included the impartation of better agronomy
techniques such as irrigation systems, sowing seed
treatments, planting methods, fertilizer application
programmes and more robust storage methods for
produce.
 In addition to this, the farmers also benefited through
incremental monetary gains since they sell directly to
McCain Foods Pvt. Ltd. instead of to commission agents.
The result of these efforts has been that the Gujarat
potato crop has been utilised to make McDonald’s
‘Chatpatey’ Potato Wedges.