Food World-A- Market entry Strategy

Target Segment- Decided as middle and upper middle class families.

As per the study- Housewives were the prime decision maker on purchase or provisions. Most consumers
purchase on monthly basis, usually in the beginning of the month and 2-3 need based purchases during
the month. Avg. monthly purchase were Rs.1000 to 1500 and Rs. 200 on additional purchases. Survey
indicated that purchase pattern was similar across different income segments. Upper income household
spent more on provision items & visited supermarket more frequently.
Positioning strategy Position as full service supermarket, with limited assortment of fresh food. It
was decided to offer the top brands in the market across categories supported by FoodWorld store
brands.
As per the study- the superior quality products compared to those available from current shop would add
value. Ambience of the shop was less important, they were looking for basic cleanliness and neat display.
The analysis indicated that most preferred type of store as value for money store which ios close to place
of residence & offer extra add-on facilities with parity pricing policy, standard quality, air conditioned
shop ambience, selling standard, variety/ range of grocery items and not range of products like
televisions, furnitures, toasters etc.
Site Selection/ Location Identify on residential high streets with minimum 6000 household in 2/3
kilometer radius, preferably in shopping area of locality. 3000 to 3500 sq. ft with min 40 ft frontage to be
selected.
As per the study- Many preferred retail outlets to be located within 10 minutes of walking distance or to
have shop in their locality. As per the study location of shop, extra facilities (like credit facility, door
delivery) and price were found to be more important. Other attributes like quality of products & shop
ambience were important to some extent.
Merchandizing strategy & supply chain Management- strategy was to offer everything that a
typical household would shop for on a daily, weekly or a monthly basis. The list was decided on the basis
of the typical shopping list of customers as well as the budget. Maximum stock keeping units were
restricted to 3000.
As per the study- the superior quality products compared to those available from current shop would add
value. Customers were looking for the variety & range of grocery products, which was at least on par
with the current outlet. One of the benefit which housewives were expecting from supermarket store is
accuracy in weights
Pricing policy- Pricing was to be in line with that of the corner grocer. Key SKU in the destination or
staples category would be discounted to match the cheapest in category and balance products to be in
line with the prevailing market prices. Top 15 SKU to be sell at 3% below the maximum retail price.
Aimed to build an image as value for money store. For fresh vegetables top 5 items would be cheaper
than market price.
As per the study- respondents preferred the prices to be lower than the standard market prices. Even
parity price was acceptable but were unwilling to pay any price preminum for products made available
through retail outlets.
Promotion policy- The focus of marketing strategy was to drive the traffic and to increase basket and
billing size. Direct mailer & shopping guides would be the main communicators. Bright prominent in-store
display using posters, large shelf talkers, bulk merchandizing and floor displays would be used effectively
to attract customers. Mass media would be used only to limited extent and would confine to
announcement of stores openings.
Organization Structure and Human Resource management- A team of experienced professional
managers managed the company. The company recognized the supply of Competent and trained
personal to mange different shops professionally as potential problem area and started RPG Institute of
Retail Management to train people.
As per the study- pleasant behavior of store personnel was perceived to connote good service.











Retail Strategy


The case discusses in depth the issues of store location, store design and promotional
initiatives that were given special attention while establishing FW outlets. The case
also talks about the rationale behind FW's 'private brand' initiative and briefly discusses how the
company made use of information technology for achieving operational excellence. Finally, the
case takes a look at the developments in the Indian food retailing industry and talks about FW's
future prospects.

Issues:
Understand the impact and importance of store location, store design, merchandising, and
promotional exercises in the success of a retailing initiative.


Examine how information technology tools can be utilized for improving the operational
efficiency, especially in a hub and spoke setup for a retail outlet chain.

The Private Brand Initiative
Having built up sizeable brand equity amongst the masses, it seemed to be natural for FW to tap
the private brand initiative. Ever since its inception, FW used to sell products like rice and pulses
under the brand name FoodWorld.

FW had also launched a sub-brand, 'Great Taste' for its own products, which was dropped later
and the company decided to use the FoodWorld brand only. In May 1998, FW decided to
introduce a new range of health food and herbal beauty products. However, as by now,
customers had started associating the name 'FoodWorld' with grocery products, the company
decided to sell the new range under the brand name 'Natures Bounty. FW's private brand
initiative remained rather limited, until 2001, when the portfolio was expanded to include a large
number of products under the FoodWorld label. It was considered by industry observers the
biggest such initiative ever undertaken in India...


Using Technology For Success
Much before it started its operations, RPG had identified technology as one of the crucial areas
for success. This was one of the primary reasons that it did not start FW until a suitable
technology partner (Dairy Farm) was identified. RPG noted that item-by-item inventory control
would be critical for the success of FW.

So it invested in state-of-the-art cash registers and bar code scanners. At that time, there were
no established norms for bar coding in India, so an entirely new bar-coding system was designed
and implemented. In December 2001, FW decided to use the Internet and became the first
Indian retailer to opt for the reverse auction mechanism for plastic carry bags in association with
the leading Indian Internet Service Provider (ISP), Sify. FW usually procured 15 tonnes of plastic
carry bags per month. To make the reverse auction process more viable, the quantity was
increased to 45 tonnes (three month's requirement). The lowest bid that FW received was Rs 66
per Kg against the Rs 73 per Kg that it was paying at that time...


The Road Ahead
By the end of June 2002, FW had established 81 supermarkets in Chennai, Bangalore, Hyderabad
and Pune. More than 1,500 employees served over 600,000 customers per month (refer Exhibit I
for FW's presence in India). The focus on private labels resulted in the success of 'Natures
Bounty' and 'FoodWorld' brands, together accounting for about 22% of its sales by 2002. New
stores were being opened regularly with the latest store opening in early-2003, in Hyderabad.
Having stabilized to a great extent by February 2003, FW had begun experimenting with varying
retail formats...