FOOD RETAILING

WHAT IS RETAILING?

• Retailing – a set of business activities that adds value to the products and services sold to consumers for their personal or family use.

• A retailer is a business that sells products and/or services to consumers for personal or family use.

RETAILING IN INDIA• Emergence of modern retail formats

• Increased pressure on opening up FDI in retail sector

• Rapid Evolution of New-age Young Indian Consumers

• Rapidly increasing middle class

• Rising Incomes levels

• Increased Awareness Level among Consumers

• Exposure to International Brands

• Retail Space is no more a constraint for growth

INDIAN RETAIL SCENARIO

• Total Private Consumption Expenditure in India – 375 Billion USD

• Retail Sale – 205 Billion USD (55%)

• Organized Retail – 6.2 Billion USD (3%)

• Retailing – 35% of GDP

• Outlet Estimates – Over 12 Million

• Format – Only 4% larger than 500 sq.ft.

• Second Largest Employer after Agriculture

THE RETAIL LIFE CYCLE

Innovation

Growth

Maturity

Decline

Profit

TIME

SA

LE

S

CLASSIFICATION OF RETAIL STORES

Classification of Retail Stores

Store Based Retailing Non-Store Retailing

Form of OwnershipIndependent retailerChain retailerFranchiseLeased departmentsConsumer co-operatives

Merchandise offeredConvenience storesSupermarketsHypermarketsSpeciality storesDepartmental storesOff price retailersFactory outletsCatalogue showrooms

Direct sellingMail orderTele marketingAutomated Vending

RETAILING FORMATS IN INDIA

• Malls

• Specialty Stores

• Discount Stores

• Department Stores

• Hypermarts/Supermarkets

• Convenience Stores

• MBO’s

ORGANIZED RETAIL

• The Indian organized retail industry is valued at about $300 billion and is expected to grow to $427 billion in 2010 and $637 billion in 2015.

• Retail Market India today is the second fastest growing economy of the world after China.

• In organised retail the front liners like shop floor executives, sales executives etc are in great demand.

• Organised trade in India is highly under-developed as compared with other emerging markets in Asia, Latin America and Eastern Europe and developed markets like the US.

ORGANISED RETAIL MARKET IN INDIA (Rs. Cr.)

FOOD RETAILING

• Food retailing has come of age –

Food items were sold in small road side grocer shops & mandis, now being sold through supermarket stores.

• Shopping for groceries is no longer a strenuous and uncomfortable affair.

• Food & beverages is the major segment, in organized Retail of India, worth Rs 8,97,000 crore.

• Food retail has surpassed the dominating apparel and accessories sector.

• From simple trading activity, food retailing is now heading to the status of an industry.

SOME FACTS ABOUT FOOD RETAILING 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 supply led one.

• Food has the largest consumption in the Indian economy and will remain the single largest category.

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

• Indian consumers are happy with store goods than branded goods.

FACTORS PAVING THE WAY TO REVOLUTIONIZING FOOD RETAILING IN INDIA

• Changing life styles and tastes

• Growing need for convenience

• Increasing disposable income

• Increasing numbers of working women

• Change in consumption patterns

• Higher aspirations among youth

• Impact of western lifestyle

• Plastic Revolution – Increased use of credit cards and debit cards

ORGANIZED FOOD RETAIL CHAIN

UP-AND-COMING FOOD RETAIL FORMATS

• Neighbourhood Stores

In India about 90% of food purchases are made within a distance of 1.5 km from the customer's home. The outlets closest to a neighbourhood store in India are 'Safal' outlets operated by Mother Dairy in Delhi, Margin Free in Kerala and Subhiksha.

• Supermarkets:

This format caters to the consumers' need for choice and variety. These stores cater to the consumers in a catchment area with a radius of 3 to 4 km. Examples of supermarkets already in India are Food World, Trinetra and Nilgiris.

UP-AND-COMING FOOD RETAIL FORMATS

• Hypermarkets: Hypermarkets are essentially destination stores catering to the consumers' bulk shopping needs in both food and non-food categories. Spencer’s (RPG), Big Bazaar (Pantaloons), Star India Bazaar.

• Cash & Carry (C & C) Stores: These stores sell their products to their members only. The members are typically retailers and institutions. The key added value is a wide range of products under one roof, available at wholesale prices. Metro has started the first C & C store in India in Bangalore. The typical area of a C & C store is 70,000 to 100,000 sq. ft.

FOOD RETAIL FORMATS

“Food Retail Format” as a retail offering that can be segmented based on the different value that it offers to the consumer along three key dimensions – Choice, Service and Price.

THREE MODERN FOOD RETAIL FORMATS

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

- Essentially low price

- 40,000– 75,000 Size (sq.ft)

• Supermarkets:- Food, laundry and household maintenance products.

- Self service

- low cost

• Convenience stores:- Mix of products

- 500-1,000 (sq.ft)

OPPORTUNITIES FOR NEW FOOD RETAIL FORMATS

1. Limited-Range Discount Stores

2. Mini-Marts

3. Compact Hypermarkets

4. Specialty Food Stores

5. Convenience Plus

LIMITED-RANGE DISCOUNT STORES

• Small

• Easy-to-shop

• Easy-to-access configurations

• Low-priced

MINI-MARTS

• low-priced neighborhood stores

• Limited range of fresh food

• Dry groceries and household products

COMPACT HYPERMARKETS

• Small in size than hypermarkets

• Reduced range and assortment

• Brings together the strengths of both hypermarkets and supermarkets

SPECIALTY FOOD STORES

• Large produce sections

• Area between 200 and 500 square metres

CONVENIENCE PLUS

• Neighborhood shops

• Stand to do well in markets with busier lifestyles and an ageing population

THE BUSINESS ENVIRONMENT AND ITSINFLUENCE ON FORMATS

1. The cost and availability of real estate

2. Regulatory environment

3. Development of distribution in infrastructure

4..State of technology

KEY PLAYERS IN INDIAN FOOD RETAIL SECTOR

• Reliance fresh

• Subhiksha

• Food bazaar

• More retail

International player

Wall mart- Super center

RELIANCE FRESH

Type Supermarket

Founded 30 October 2006

Headquarters Mumbai, India

Key people Mukesh Ambani, CEO

• Reliance Fresh is the convenience store format

• Headed by MUKESH AMBANI.

• Reliance plans to invest in excess of Rs 25000 crores in the next 4 years in their retail division.

• The company already has in excess of 560 reliance fresh outlets across the country.

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

VISION

To create a blend of a typical Indian Bazaar andInternational

Supermarket atmosphere with theobjective of giving the customer, all the advantages ofQuality, Range and Price associated with large format stores and also the comfort of being able to touch andfeel the products.

SUBHIKSHA

Type Discount department

store

Founded Chennai, India

(1997)

No. of locations 1000 stores

Key people R. Subramanian

Industry Retail

Employees 25,000

• Subhiksha is an Indian retail chain with more than 1400 outlets

• selling groceries, fruits, vegetables, medicines and mobile phones.

• It was started and is managed by R. Subramanian

• Subhiksha plans to open 1000 outlets by December 2008.

• plans to invest Rs.500 crore to increase the number of outlets to 2000 across the country by 2009

FOOD BAZAAR• Food Bazaar, the supermarket variant of

future group. • Has adopted the 'negotiated and

predetermined' model to source vegetables and fruit from farmers across states.

• The company will use the model to procure potatoes from farmers in Uttar Pradesh where the quantity and quality of the produce is predetermined. The company decides the price after the harvest to give maximum benefit to the farmer.

• 35+ stores; pan Indian format Bhubaneshwar, Nagpur, Nashik, Durgapur….Sangli

• Simple, Indian model• Minimum habit change for the customers• Use small entrepreneurs to the hilt, for

category management• Largest Food Retailer – But just a small spec in

the market• Shooting for Rs 1000 Cr this year; Rs 2000 Cr

next year

MORE RETAIL STORE

Type Department store

Founded 2007

No. of locations 40-50(Mumbai)

Industry Retail

• The more. chain of supermarkets, are bright and clean stores, at convenient locations with layouts that allow ease of navigation. The product display is well organised and facilitates ease of choice. The stores have been designed by Fitch, the leading international retail design firm.

WAL-MART SUPERCENTER

• The number of non-traditional retail outlets,such as warehouse clubs and discount mass merchandisers,has increased substantially in the pastdecade.

• Traditional supermarkets are facing seriouscompetition from these retail outlets because nontraditionalretailers with low-operating margins areable to provide low-price appeal to consumers.

• supercenters,ranging in size from 100,000-200,000 square feet.

COMPETITIVE ANALYSIS (FOOD RETAIL)

SUBHIKSHA

• Subhiksha is an Indian retail chain with more than 1400 outlets selling groceries, fruits, vegetables, medicines and mobile phones.

• Subhiksha plans to open 1000 outlets by December 2008.

• Plans to invest Rs.500 crore to increase the number of outlets to 2000 across the country by 2009.

• Subhiksha has seen a considerable growth by offering goods at cheaper rates and there by increasing its customer base.

• It is also dubbed as India's largest retail chain.vision to deliver consistently better value to Indian consumers.

• Subhiksha now has the pan Indian presence with stores across Delhi, UP, Punjab, Hariyana, Gujarat, Maharashtra, AP, Karnataka and TN. It has recently commenced operation in Kerala also.

• Thinking:-

• Bringing in a model that is Indian, capable of supporting the middle class of India.

• A business model from India is superior to a business model imported from the West.

• We genuinely believe that through efficiency, we are helping the consumers save more.

RELIANCE FRESH

• Reliance Fresh is the convenience store format which forms part of the retail business of Reliance industries of india.

• Mukesh Ambani Reliance plans to invest in excess of Rs 25000 crores in the next 4 years in their retail division.

• Stores would provide direct employment to 5 lakh young Indians and indirect job opportunities to a million people, according to the company.

• The company also has plans to train students and housewives in customer care and quality services for part-time jobs.

• Company-owned stores currently totals just $8 billion in India.

MORE4 YOU

• The MORE chain of supermarkets, are bright and clean stores, at convenient locations with layouts that allow ease of navigation.

• MORE is the answer to the shopping needs of the Indian housewife who wants a modern and convenient option in her neighbourhood.

• MORE also has a range of products from its own stable available across value, premium and select ranges.

• The Rs 9,000-crore pan-Indian plan would have neighbourhood supermarkets catering to daily and weekly household shopping needs of customers.

• Food Bazaar supermarket variant of Pantaloon Retail Ltd, has adopted the predetermined' model to source vegetables and fruit from farmers.

• Almost 20% of the cost is saved if the produce is procured directly from the farmers.

• Kishore Biyani-run retail major, Pantaloon, is awaiting amendments in the Agriculture Produce Marketing Committee (APMC) Act in different states to source its produce directly from the farmers.

• The floor area for the stores will range from 5,000 sqft to 20,000 sqft.

• Of the 8,000 stock keeping units available across the stores, 10% constitute the farm fresh segment, while the international standard is around 12%. The company wants to push the former to 15% in the next three years.

KEY SUCCESS FACTORS FOR FOOD RETAILING

Increasing need for convenience

• Eight to ten outlets to purchase various food products

• Time-consuming and inefficient way of shopping for food

• Changing lifestyle

• ‘Value for time' and ‘Value for money'

Availability of quality retail space

• In late 1990s cost of real estate was high and hence food retail business models were not financially viable in metropolitan areas

• In the last few years, various factors have led to increased availability of real estate for organized retail formats

• 300 malls are at various stages of construction across metros and mini metros in the country

• The average size of a mall is about 100000 sq ft

• Additional retail space of 30 to 40 million sq. ft. over the next three to five years

Taxation: Implementation of VAT helping organised retailers

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

• Aim was to: boost state revenues, reduce inter-state barriers to trade and make accounting more transparent

• This was in favour of organized retailers given their multi- location presence

Increasing share of private labels

• Share of private labels in the basket of key food retailers is increasing

• Fierce competition with the well-established brands of the leading FMCG companies

• Trent (A Tata Group Company) has now launched a hypermarket with focus on Star India Bazaar and aim to achieve a significant share of sale through private labels.

Retailers' eye on the unbranded food space

• Modern food formats like Food Bazaar and Spencer's have their eye on the unbranded part of the consumer's shopping basket

• Retailers are offering a package of convenience and freshness

• Food retailers are also offering 'live kitchen' formats

• Examples: Grinding coffee fresh at store, idlibatter, paneer, curd and cut vegetables

KEY CHALLENGES IN FOOD RETAILING

Penchant for fresh/home-made and value consciousness

• Dietary patterns, poor electricity supply, low penetration of refrigerators and a family structure

• Value conscious

• A TSMG study indicates that packaged food players need to drive down prices by almost 35-40% to be comparable on cost with home made food

Diversity of tastes and preferences

• Multiple cultures, languages and religions

• Preferences of the Indian consumer.

• A challenge for players aspiring to develop a pan Indian presence.

Willingness to travel

Sourcing base and efficiency

Real estate availability and cost

• Rentals account for 7-7.5%

• Real estate availability and costs

• Factors like adequate parking, ambience and proximity the key drivers of footfalls

Manpower availability

EMERGING TRENDS IN FOOD RETAILING

Big becoming bigger

• Size drives profitability, not just through economies of scale in operations but also through higher bargaining power

• The growth stage will be characterized by rapid expansion and consolidation among these players.

Rise of organic foods and health and wellness segment

• Consumer attitudes and preferences are undergoing a shift

• Factors like increased disposable incomes, changes in lifestyle patterns, shift in age structure, increased number of working women and multi cultural exposure

• Increasing health consciousness in the future

• Organic foods and wellness products

Increasing focus on private labels

• Competition in the organized retail market

• Discounts and promotions are expected to play a critical part in generating footfalls

• More attractive to promote private labels or store brands given their higher margins.

• Consumer would benefit from lower prices.

FUTURE OF FOOD RETAILING

Innovation on Retail format

• by targeting specific customer segments and serving their needs better e.g. working women, single office goers, etc

• by changing the product mix e.g. entirely private label stores, exclusively fresh produce stores

• by offering new forms of convenience and wider range to the customer e.g. tele retail and internet retail

Technological Innovations

• Self-scan checkouts

• Using RFID tags

• Web-enabled POS systems, e-SCM systems, e-Procurement systems and warehouse management systems

• Use of cutting edge analytics

THANK YOU..