Food Retailing Presentation Copy

8/9/2019 Food Retailing Presentation Copy

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A) INTRODUCTION:

By the turn of the 21st

century, the face of the Indian retailing changed significantly. Theretailing industry which until the early 1990s was dominated by the unorganized sector ,

witnessed a rapid growth in the organized sector with the entry of corporate groups such as

reliance, Tata, RPG, ITC,etc into the retailing sector.. The organized retail food and grocery

sector constitutes the largest opportunity for growth and account for 2% of total sales at present.

Growing at the rate of 30%, the Indian food retail is going to be the major driving force for the

retail industry. Rated the fifth most attractive emerging retail market, India is being seen as a

potential Goldmine.

Retail is India's largest industry, accounting for over 10 per cent of the country's GDP and

around eight per cent of the employment. It has emerged as one of the most dynamic and fastpaced industries with several players entering the market. With the introduction of 100% FDI, it

would definitely give a guaranteed facelift to the industry. The future is promising, the market is

growing, government policies are becoming more favorable and emerging technologies are

facilitating operations.


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B )UP-AND-COMING FOOD RETAIL FORMATS:With the changing food consumption patterns, consumers need for

convenience, choice and value for money the set-up of retail format is changing. The Indianconsumers do visit about eight to ten outlets to purchase various food products, which make upthe daily consumption basket. These outlets include neighborhood kirana stores, bakeries, fruit

and vegetable outlets, dairy booths and chakkies (small flour mills), which is very time-consuming and unproductive way of shopping for food. With changing lifestyle there is growingscarcity of time, and convenience in food shopping is emerging as an important driver of growthof one-stop retail formats that can offer consumer 'value for time' in addition to 'value formoney'. These are giving an opportunity to various other retail formats:

a) Neighborhood Stores

In India about 90% of food purchases are made within a distance of 1.5 km from the customer'shome. This means that an organized retailer would need to have a 'neighborhood store' close to

customers in order to capture the share of wallet that is spent on food. These stores would caterto the consumer's daily and weekly needs. The outlets closest to a neighborhood store in Indiaare 'Safal' outlets operated by Mother Dairy in Delhi, Margin Free in Kerala and Subhiksha.

b) Supermarkets

This format caters to the consumers' need for choice and variety. These needs translate into 'morewidth' and 'more depth' in each category. These stores cater to the consumers in a catchment areawith a radius of 3 to 4 km and therefore need to be destination stores. A supermarket can cater tothe consumers' weekly, monthly and occasional needs. Examples of supermarkets already inIndia are Food World, Trinethra and Nilgiri's.

c) Hypermarkets

Hypermarkets are essentially destination stores catering to the consumers' bulk shopping needsin both food and non-food categories. The key added values for the customer are 'choice' and'value for money' because products are sold at a discounted price. The hypermarkets model offood retailing is new to India. Spencers (RPG), Big Bazaar (Pantaloons), Star India Bazaar.

d)Cash & Carry (C & C) Stores

These stores sell their products to their members only. The members are typically retailers andinstitutions. The key added value is a wide range of products under one roof, available atwholesale prices. Metro has started the first C & C store in India in Bangalore. The typical areaof a C & C store is 70,000 to 100,000 sq. ft. and both food and non-food products are stocked


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C) KEY DEVELOPMENTS IN FOOD RETAIL:

The major development in food retail is consideration of Foreign Direct Investment (FDI)with a limitation that all companies would have to meet mandated export obligations. Food

processing minister Subodh Kant Sahay told ET that We are considering a proposal to allowFDI in food retail. It should be in such a way that it would boost our agriculture. Our farmersmust also get benefits of economic liberalization.

The government is also considering the opening up of the $330-billion retail market withadequate provisions to protect neighborhood stores.

In every retail format food trade is growing. More and more corporate houses such as HLL,ITC, Godrej and Reliance are already working into food retail. Huge increase is expectedfrom the corporate players, which will help grow the entire food retail sector. Daburs AmitBurman has also forayed into food retailing. According to Amit "Food and beverages retailing

is a very attractive segment and with Lite Bite Concepts we are targeting Rs 1,000 crore sales ina couple of years with around 200 outlets," Well-established players such as Subhiksha, FoodBazaar and Spencer's Daily are also tapping into backward linkages, while trying to match theirexpanding geographies with retail formats. Also, most food retail players have been region-specific as far as geographical presence is concerned. Take the RPG Group's FoodWorld,Nilgiris, Margin Free, Giant, Varkey's, all of which are more or less spread in the Southernregion; Sabka Bazaar, Big Apple has a presence only in and around Delhi; names such as Haikoand Radhakrishna Foodland are Mumbai-centric; while Adani is Ahmadabad-centric.

Retailers' entrance in the unbranded food space

Modern food formats like Food Bazaar and Spencer's have their eye on the unbranded part of theconsumer's shopping basket. This constitutes as much as 60% of the total purchases and growingsharply, says AC Nielsen estimates. Retailers are offering a package of convenience andfreshness, and have an edge over manufacturers that focus mainly on packaged conveniences.

Food retailers are offering 'live kitchen' formats, which offer on-the-spot home-style gravies, dal,cooked rice and kneaded dough with options like grinding coffee fresh at store, idli batter,paneer, curd and cut vegetables.


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D) EMERGING TRENDS IN FOOD RETAILING:

a) Big becoming biggerGlobally, retailers have realized that size drives profitability, not just through economies of

scale in operations but also through higher bargaining power leading to better margins. Whilemany players are entering the retail space in India currently, the growth stage will beCharacterized by rapid expansion and consolidation among these players.

b) Rise of organic foods and health and wellness segmentorganic food is increasingly becoming popular due to its perceived health benefits its biggestadvantage is that it is produced processed and packaged without use of any chemical people arebecoming more health conscious now.

C) Increasing focus on private labelsAs competition in the organized retail market increases, discounts and promotions are

expected to play a critical part in generating footfalls. To counter the impact on profitability,organized players will find it more attractive to promote private labels or store brands giventheir higher margins. The consumer too would benefit from lower prices.


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E) RETAILING A TECHNOLOGY INTENSIVE

INDUSTRY:

Retailing is a `technology-intensive' industry. Successful retailers today work closelywith their vendors to predict consumer demand, shorten lead times, reduce inventory holding andthereby, save cost. Wal-Mart pioneered the concept of building a competitive advantage throughdistribution and information systems in the retailing industry. They introduced two innovativelogistics techniques - cross-docking and electronic data interchange. Today, online systems linkpoint-of-sales terminals to the main office where detailed analyses on sales by item,classification, stores or vendor are carried out online.

Besides vendors, the focus of the retailing sector is to develop the link with theconsumer. `Data Warehousing' is an established concept in the advanced nations. With the helpof `database retailing', information on existing and potential customers is tracked. Besidesknowing what was purchased, by whom, during which time of year, festive seasons shopping

pattern, all these information are compiled, analyzed and future shelf planning, discount offer orseason sales planning is made.

F) CONCLUSION:

The past 4-5 years have seen increasing activity in food retailing. Various business houses have

already planned for few investments in the coming 2-3 years. Though the retailers will have to face

increasingly demanding customers and intensely competitive rivals, more investments will keep

flowing in and the share of organized food sector will grow rapidly.

Food Retailing Presentation Copy

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