Presentation on f&G Retail in India

8/8/2019 Presentation on f&G Retail in India

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APRESENTATION ON

FOOD & GROCERY RETAILIN INDIA

Presented by:MIGNESH PATEL

SUMIT KUSHVAH


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Retail Industry evolutiony Traditionally retailing in India can be traced to:

y The emergence of the neighborhood kirana stores

catering to the convenience of the consumers.y Era of Government support for rural retail: Indigenous

franchise model of store chains run by khadi & villageindustries commission.

yRetail in India is brought up by SHOPPERS stop when itestablished its first customer care associates in the year1993 and was providing a salary of Rs.900 to anemployee.


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y Textile sector with companies like Bombay Dyeing,Raymonds, s kumars and Grasim first saw theemergence of retail chains.

y Later TITAN successfully crated an organized retailingconcept and established a series of showrooms for its

premium watches.y Food world, Subhiksha and Nilgiris in food and FMCG;

planet M and music world in music; cross world andfountainhead in books.

y Post 1995 onwards saw an emergence of shoppingcenters.

-mainly in urban areas, with facilities like car parking


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y Emergence of hyper and super markets trying to providecustomers with 3vs value, variety, and volume.

y

At year end of 2000 the size of the Indian organized retailindustry is estimated at Rs.13000 crore.


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Weekly Markets

Village Fairs

Melas

Convenience Stores

Mom and

Pop/Kiranas

PDS Outlets

Khadi StoresCooperatives

Exclusive BrandOutlets

Hyper/Super Markets

Department Stores

Shopping Malls

Traditional/Pervasiv

e Reach

Government

Supported

Historic/Rural

Reach

Modern Formats/

International

Evolution of Indian retail

Source of

EntertainmentNeighborhood

Stores/Convenience

Availability/ Low

Costs /

Distribution

Shopping

Experience/Efficiency


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Retail industry in Indiay

The Indian retail industry is the fifth largest in the world.y Comprising of organized and unorganized sectors, India

retail industry is one of the fastest growing industries inIndia, especially over the last few year.

y The Indian retail industry is expected to grow fromRs.35000 crore in 2004-o5 to 109000 crore by the year2010.

y The Indian retail market, which is the fifth largest retaildestination globally, has been ranked as the most

attractive.y Retail is India's largest industry, accounting for over 10

per cent of the country's GDP and around eight per centof the employment

y The retail sector is expected to contribute to 22 percent


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Key player in Indian retail sectory Future group,pantaloons

yA.V.Birla Group

y Reliancey K Raheja corp. Group

y Landmark Group

y Trent


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RETAILING FORMATS IN Indiay Malls

y Specialty Stores

y Discount Stores

y Department Stores

y Hypermarts/Supermarkets

y Convenience Stores

y MBOs


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ORGANISEDRETAIL MARKET IN

India (Rs. Cr.)


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Food & grocery Retailin India


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Food & grocery in Indiay Food and grocery is second largest segment of the retail

industry and the potential for new entrants in thissegment is enormous , particularly in untapped marketslike rural and semi-rural areas.

y Growing at the rate of 30% the Indian food retail is goingto be the major driving force for the retail industry.

y The food and grocery market in India is currently valued

at $236 billion, making it the sixth largest grocery marketin the world.

y It is expected to grow to $482 billion in 2020, withanoverall growth rate of 104 per cent.


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y Food and grocery currently contributes to around 70 percent of the total retail sales

y The unorganized segment still constitutes 99 per cent ofthe total food and grocery market, and is characterizedby the traditional mom-and-pop kirana stores.

y The modern formats account for just 1 per cent of thetotal food and grocery market and are characterized bycash and carry stores, hypermarkets, supermarkets,discount supermarkets and convenience stores.

ySome important expectations of customers shopping atmodern formats are staff politeness, freshness of stockand the availability of latest brands


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Retailer Fascia/s Market entry date Format/s No of stores

Future groupFood Bazaar, Pantaloons, Big Bazaar,

KB's Fairprice, Central Mall2002 S, O, H, D 693

Reliance Retail* Reliance Fresh, Reliance Mart 2006 C, H 688

RPG Spencer's Hyper, Spencer's 1996 H, S 420

Aditya Birla Retail more.for you, more. MEGASTORE 1986 S, H 251

Dairy Farm Foodworld, Health & Glow 1999 S, H&B 74

Trent Star India Bazaar 2004 H 4

Spar International Spar 2004 H 3

Shoprite Shoprite 2004 S 1

Top Grocery Retailers in India


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SOME FACTSABOUT FOODRETAILING 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

supplyled one.

Food has the largest consumption in the Indian economyandwill remain the single largest category.

There are 10 million street vendors in India, of which 6 milliononly sell food.

Indian consumers are happy with store goods than brandedgoods.


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FACTORS PAVING THE WAYTO

REVOLU

TIONIZING FOO

DRETA

ILING IN IND

IA

y Changing life styles and tastes

y Growing need for convenience

y Increasing disposable income

y Increasing numbers of working women

y Change in consumption patterns

y Higher aspirations among youthy Impact of western lifestyle

y Plastic Revolution Increased use of credit cards and

debit cards


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Evolving consumer preferences !

Indian consumers are evolvingFrom traditional to

modernized traditional From globalize to

indianise

From functional to

lifestyle

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Evolving consumer preferences !

Indian consumers are evolving From value for money to

value for time and convenience

From cautious to

experimentation

From over-the-counter to

touch-and-feel

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UP-AND-COMING FOODRETAIL

FORMATSy Neighbourhood Stores

In Indiaabout 90% of food purchases are made within a

distance of 1.5 km from the customer's home. The outletsclosest to a neighbourhood store in Indiaare 'Safal' outletsoperated by Mother Dairy in Delhi, Margin Free in KeralaandSubhiksha.

y Supermarkets:

This format caters to the consumers' need for choice andvariety. These stores cater to the consumers in a catchmentarea witha radius of 3 to 4 km. Examples of supermarketsalready in Indiaare Food World, Trinetra and Nilgiris.


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UP-AND-COMING FOOD RETAIL

FORMATSy Hypermarkets: Hypermarkets are essentially destination

stores catering to the consumers' bulk shopping needs in both

food and non-food categories. Spencers (RPG), Big Bazaar(Pantaloons), Star India Bazaar.

y Cash & Carry(C & C) Stores: These stores sell their productsto their members only. The members are typically retailers andinstitutions. The keyadded value is a wide range ofproductsunder one roof,available at wholesale prices. Metro has startedthe first C & C store in India in Bangalore. The typicalarea ofaC & C store is 70,000 to 100,000 sq. ft.


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Food RetailFormat as a retail offering that can be

segmented based on the different value that it offers tothe consumer along three key dimensions Choice,Service and Price.


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THREEMODERN FOODRETAIL FORMATS

Hypermarkets:- Self service stores, mix of food & non food.

- Essentiallylow price

- 40,000 75,000 Size (sq.ft)

Supermarkets:- Food,laundryand household maintenance products.

- Self service

- low cost

Convenience stores:- Mix ofproducts

- 500-1,000 (sq.ft)


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Food is the largest segment in

Retail !

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At 77 % Food & Grocery is thelargest segment in Retail sales

Source: Ernst & Young

Source: KPMG


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OPPORTUNITIES FOR NEW FOODRETAIL

FORMATS

1. Limited-Range Discount Stores

2. Mini-Marts

3. Compact Hypermarkets

4. SpecialtyFood Stores

5. Convenience Plus


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LIMITED-RANGEDISCOUNTSTORESy Small

y Easy-to-shop

y Easy-to-access configurations

y Low-priced


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MINI-MARTSy low-priced neighborhood stores

y Limited range of fresh food

y Dry groceries and household products


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COMPACTHYPERMARKETSy Small in size than hypermarkets

y Reduced range and assortment

y Brings together the strengths of bothhypermarketsand supermarkets


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S

PE

CIA

LTY

FOOD

ST

ORES

y Large produce sections

yArea between 200 and 500 square metres


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CONVENIENCE PLUS

y Neighborhood shops

y Stand to do well in markets with busier lifestyles andan ageing population


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ORGANIZED FOODRETAIL CHAIN


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Theories of Food retailing

markets

1. The Wheel of Retailing: price cut, location, provision

of credit, making home deliveryof the product,advertising expenditure and displayand location.

2. Retail accordion: Wide range of products with morefocused product.

3. Retail Life cycle: Retailing pass through birth, growth, maturity(achieve full potential) and decline. Declineoccurs due to over ambitious.


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Strategies of Foodretailing markets

1. Retail Positioning: considering convenience of

customers2. Store location

3. Product Assortment: No. of varieties

4. Price

5. Promotion: discount, advertising, free gift6. Store atmosphere: design, color, layout


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RELIANCE

FRESH

Type Supermarket

Founded 30 October 2006

Headquarters Mumbai, India

e eo le Muke mbani, O


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y Reliance Fresh is the convenience store format

y Headed by MUKESH AMBANI.

y

Reliance plans to invest in excess ofRs 25000 crores in thenext 4 years in their retail division.

y The companyalreadyhas in excess of 560 reliance freshoutlets across the country.

y Reliance Fresh store is approximately 3000-4000 square.feet and caters to a catchment area of 1-2 km.


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VISION

To create a blend ofa typical Indian BazaarandInternational Supermarket atmosphere withtheobjective of giving the customer,all the advantagesofQuality,Range and Price associated withlarge formatstores and also the comfort of being able to touchandfeel

the products.


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SUBHIKSHA

Type Discount departmentstore

Founded Chennai, India(1997)

No. of locations 1000 stores

Key people R. Subramanian

Industry Retail

Employees 25,000


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y Subhiksha is an Indian retail chain with more than1400 outlets

y selling groceries, fruits, vegetables, medicines andmobile phones.

y

It was started and is managed byR. Subramanian

y Subhiksha plans to open 1000 outlets by December2008.

y

plans to invest Rs.500 crore to increase the number ofoutlets to 2000 across the country by 2009


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y Thinking:-y Bringing in a model that is Indian, capable of

supporting the middle class of India.

yA business model from India is superior to a businessmodel imported from the West.

yWe genuinely believe that through efficiency, we arehelping the consumers save more.


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35+ stores; pan Indian format Bhubaneshwar, Nagpur,Nasik, Durgapur.Sangli

Simple, Indian model

Minimum habit change for the customers

Use small entrepreneurs to the hilt, for categorymanagement

Largest Food Retailer But just a small spec in themarket

Shooting for Rs 1000 Cr this year; Rs 2000 Cr next year


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y Kishore Biyani-run retail major, Pantaloon, is awaitingamendments in the Agriculture Produce MarketingCommittee (APMC) Act in different states to source its

produce directly from the farmers.

y The floor area for the stores will range from 5,000 sqftto 20,000 sqft.


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MORERETAIL STOREType Department store

Founded 2007

No. of locations 40-50(Mumbai)

Industr etail


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MORE

4YOU

y The MORE chain of supermarkets,are bright and clean

stores,at convenient locations withlayouts that allow easeof navigation.

y MORE is the answer to the shopping needs of the Indian

housewife who wants a modern and convenient option inher neighbourhood.


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y MORE also has a range ofproducts from its own stableavailable across value,premium and select ranges.

y The Rs 9,000-crore pan-Indian plan would haveneighbourhoodsupermarkets catering to dailyand

weeklyhousehold shopping needs of customers.


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Food World

yWith 89 stores in Chennai (30 stores), Bangalore(27 stores), Hyderabad (17 stores) and Pune (7stores), two stand alone stores in Coimbatore andMysore.

y Merchandise is divided into six categories, freshfood, dry groceries, processed and canned foods,household cleaning, health and beautyand generalmerchandising.

yFollow tight inventory, ensure qualityand restrictsmargins to the minimumforstables.

y Each store employs about 16 well trained personsand the man to women ratio of 1:5.

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MTR

y Produces awide range of food products that have a gooddemand both within and in US, Europe and Gulfcountries.

y Leaders in ready mix, readytoeat and spices.y

Maintains very high quality standards right fromprocurement to sale.y They have HACCP certificate and it is an ISO 9002

company.y They procure the raw ingredients from places that are

reputed for its production and process the same in theirplantinBangalore.

y Made a beginning in retailing through a chain ofNammaMTR stores.

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Nilgirisy Bangalore based chain started as a dairy in 1904

having 50 franchisee retail outlets.

y

Operated as a store for decades till the mid 1990s,saw opportunity in retailing and expanded all oversouth India.

y Have a different strategy in that has a stress on

convenience and promoting its own brand. It catersto the needs ofhigher income bracket.

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Metro AGy Opened its first Indian outlet in Yeshwanthpur,

Bangalore on a sprawling 6,500 square metres area.

y

Proposed to open one more centre in Bangaloreduring November 2003.

y Capital expenditure for these two centres is Rs.176crores (35 millioneuros).

y Employ 300 local people and head quarter willemploy 750 local people.

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KEYSUCCESS FACTORS

FOR FOODRETAILING

Increasing need for conveniencey Eight to ten outlets to purchase various food products

y Time-consuming and inefficient way of shopping forfood

y Changing lifestyley Value for time' and Value for money'


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Availabilityof qualityretail space

y In late 1990s cost of real estate was highand hence foodretail business models were not financially viable inmetropolitan areas

y In the last few years, various factors have led toincreased availability of real estate for organized retailformats

y 300 malls are at various stages of construction acrossmetros and mini metros in the country

y The average size ofa mall is about 100000 sq ft

y

Additional retail space of 30 to 40 million sq. ft. over thenext three to five years


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Taxation: Implementation of VAT helpingorganised retailers

y

The Indian government has launched value added tax(VAT) nationwide April 2005

yAim was to: boost state revenues, reduce inter-state

barriers to trade and make accounting moretransparent

y This was in favour of organized retailers given their

multi- location presence


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Increasing share of private labels

Share ofprivate labels in the basket of key food

retailers is increasing

Fierce competition with the well-established brands ofthe leading FMCG companies

Trent (A Tata Group Company) has now launched ahypermarket with focus on Star India Bazaar and aimto achieve a significant share of sale throughprivate

labels.


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Diversityof tastes and preferences

y Multiple cultures,languages and religions

y Preferences of the Indian consumer.

yA challenge for players aspiring to developapanIndian presence.


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Willingness to travel

Sourcing base and efficiency

Real estate availabilityand cost

Rentals account for 7-7.5%

Real estate availabilityand costs

Factors like adequate parking,ambience and proximitythe key drivers of footfalls

Manpower availability


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FUTURE OF FOODRETAILING

Innovation on Retail format by targeting specific customer segments and serving

their needs better e.g. working women, single officegoers, etc

by changing the product mix e.g. entirelyprivate labelstores, exclusively freshproduce stores

by offering new forms of convenience and wider rangeto the customer e.g. tele retailand internet retail


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Technological Innovationsy

Self-scan checkouts

y Using RFID tags

yWeb-enabled POS systems, e-SCM systems, e-Procurement systems and warehouse managementsystems

y Use of cutting edge analytics


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Online Grocery Retailing

Worldwide

y Consumers are increasing their spend on groceries online.

y Market is more developed and diversified in Europe (andparticularly the UK) than the US.

y US market is food focused (53% of total online salescompared to 43% in Europe).


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Why Online Groceriesy Convenience No traffic, no queues

y Time Saving and easy shopping

y 24*7 shopping

y Better prices as next shop is a click away

y Better comparison ofproducts and prices


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Online Retailing in India

y UKs online retail industry - $15 billion

y Indias online retail industry - $ 0.23 billion

y Indian online retailing growth - 30% (year on year)

y Indiapoised to have third largest net users by 2013


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Online Grocery Retailing in India

y Failure of Sangamdirect.com (started by HUL, thenhanded over to Wadhwan Group)

y Competition withlocal Kirana Stores as wellas withModern Supermarkets & Hypermarkets

y

A few websites (mostly in South India) but notprofessional

y Supply chain and logistics the major concern

Groceryshop in The Online


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Groceryshop.in The Online

Supermarket

y U.V. Retail - Indias first professional online grocery

retailer withwww.groceryshop.inwebsite

y Started in Powai, Andheri areas of Mumbai, expandingin entire Mumbai, Navi Mumbai and Thane very fast.

y Capturing Bangalore, Delhi NCR, Pune, Hyderabad,Chennai & Ahmadabad markets in 2010 only


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Advantages of Groceryshop.in

y Better customer services

y Delivery in 6 hours with 2 slots of 9:00am and 3:00pm

y Strong Retailand Web Analytics

y Large number of SKUs and good offers

G t P li FDI i


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Government Policy on FDI in

retailingy FDI in retailing in not allowed per say, foreign

retailerscan operate in India through

y Joint ventures,where the Indian partner is aexport house (such as Total Health Care)

y Franchising/Local manufacturing/Sourcingfrom small-scale sector (for example,McDonalds)

y Cash and carry operations (for example,

Giant in Hyderabad)y The McKinsey report states FDI will help the retail

businesses to grow from the present $180 billion to$460-470 billion by 2010.

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Franchise International company gives name and

technology to local partner. Gets royalty inreturn

In case master franchise is appointed forregion or country, he has right to appoint

local franchiseesNike, Pizza Hut, Tommy Hilfiger, Marksand Spencer, Mango

Manufacturing

Company sets up Indian arm for production

Bata India. It also has right to retail inIndia

How they are

present

International retailers in India: Strategies


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Distribution

International company sets up localdistribution office

Supply products to Indian retailers to sell

Also set up franchised outlets for brand

Swarovski, Hugo Boss

Wholesale trading

Cash and Carry operations

100% FDI permitted

Metro Cash n Carry

How they are

present

International retailers in India: Strategies


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Improve competition

Develop the market

Greater level of exports due to increasedsourcing by major players

Sourcing by Wal-Mart from China improvedmultifold after FDI permitted in China

Similar increase in sourcing observed forMetro in India

Provides access to global markets forIndian producers

Benefits of

FDI

Why FDI?


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Investment in technology Cold storage chains solve the perennial problem

of wastage

Greater investment in the food processing sectortechnology

Better operations in production cycle and

distribution Better lifestyle

Greater level of wages paid by internationalplayers usually

More product variety

Newer product categories

Economies of scale to help lower consumer price Increased purchasing capacity of consumers

Benefits of

FDI

Why FDI?


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Government policies impeding


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growth of supermarkets & retail

food chainsy FDI is not allowed in retailing- slowing the growthprocess of

organised retailing in India.y Growth of supermarkets in most developing countries (Brazil,

China,etc.) has taken off in 1990s after FDI was allowed in thissector.

y Retailing is not regarded as an industry, very few banks arewilling to invest in this sector.

y Shortage of warehousing facilities, cold storage and large

scale processing units.y Supply chain is fragmented & marked by existence oflargeno. of intermediariesy APMC Act has failed to achieve the desired objective of

improving conditions of the farmers

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growth of supermarkets & retail

food chains(contd)

y India is still in the second and third partylogistic

provider mode while fourthpartylogistic models havebecome global standards for logistic providers.y Retailing is subject to plethora oflaws and regulations

at central, state and municipal/locallevely Restrictive zoning legislation limits availability ofland

for retail/ commercialpurposesy Restrictions on interstate movement of food grains

deprive farmers from getting remunerative prices.y Restrictive Labour laws

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