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Food & grocery's share 3% of India's organised retail space: Technopak
Friday, September 20, 2013 IST
Our Bureau, Mumbai
Although food and grocery constitute 69 per cent of India's total retail market (which is
estimated to be worth about $490 billion), the share of the category in the country's $37-
billion organised retail market has increased from one per cent to three per cent,
according to a recent study by Technopak.

The inability to modernise would continue to dog the segment for the next ten years.
Policy uncertainties and the lack of structural reforms across the value chain would act
as deterrents. This inability of the food and grocery categories to migrate to the
organised retail platform has been one of the key reasons why organised retail has not
grown to its potential.

The inability to modernise would continue to dog the segment for the next ten years.
Policy uncertainties and the lack of structural reforms across the value chain would act
as deterrents. This inability of the food and grocery categories to migrate to the
organised retail platform has been one of the key reasons why organised retail has not
grown to its potential.

For low-margin categories like food and grocery to flourish, retailers should have a
certain scale of business - establishing a large scale needs time and deep pockets.
The hassles in getting property, permissions and licences to open shops, along with
some of the government laws regarding direct procurement, make it difficult for
organised retailers to attain scale fast.

Some of the states do not allow direct procurement by the retailers from the farmers,
due to the Agricultural Produce Market Committees (APMC) Act. Buying produce from
the traders and other middlemen makes organised retail less competitive in food and
grocery.

Inadequate investments and the lack of latest technology have been deterrents in the
development of a full-fledged cold chain infrastructure across the country. This has
resulted in higher wastage and limited availability of farm produce for organised
retailers.

Organised retail too has been focussing more on the front-end till now. Setting up a
strong back-end and supply chain, especially for highly perishable commodities like
Retailing
food and grocery, needs considerable capital investment.

However, the growth of organised retail of food and grocery is imminent, considering the
fact that across the globe, corporatised retail has played a key role in effectively
bringing food and grocery to consumers.
The study found that there is a growing aspirational element in the consumers choice of
food products and a greater emphasis on health and wellness due to higher awareness
levels. A fast-paced lifestyle has also fuelled the demand for convenience foods like
ready-to-eat and ready-to-cook products.


Retailing

Next five years defining period for retail; E-tailing can't be ignored
Thursday, February 06, 2014 IST
Akshay Kalbag, Mumbai

The 2014 essay of the Retail Leadership Summit (RLS) - organised by the Retailers Association of India (RAI) -
commenced in Mumbai on Wednesday. The theme of the event was Retailing in Emerging Markets. Describing the
next five years as the defining period for retail, B S Nagesh, founder, TRRAIN, and chairman, RAI, stated that it
would be unwise to ignore e-tailing, as 5-8 per cent of the total sales in India were online sales.

Keeping in mind the fact that the Lok Sabha election is slated to take place in 2014, he remarked that foreign direct
investment (FDI) in multi-brand retail would take place in a number of states if the Congress-led United Progressive
Alliance (UPA) is re-elected to power. He added, In India, where 95 per cent of the retailers are traditional, modern
retailers must identify new consumer segments.

Nagesh stated that while the number of people has always been a factor influencing retail trends in the country,
power would now assume a larger role in influencing it, especially when rising costs are a reality and tariff cuts are
being offered by the Aam Aadmi Party (AAP) government in Delhi, and added that the efficient governance of the
Indian retail sector was key to the countrys governance.

The keynote address, titled Decoding Market Evolution was delivered by Sanjiv Mehta, chairman, Hindustan
Unilever Ltd (HUL), and executive vice-president, Unilever South Asia. He stated that the share of HULs turnover in
developing markets was about 55 per cent, and that of Unilevers turnover was approximately 55 per cent. There is a
huge scope in the Indian retail sector, estimated to be worth about $30 trillion.

Mehta pinpointed four agents of change - the growing affluence of India; an increase in the population belonging to
the middle and upper-middle classes; opportunities for new brands, and opportunities to build new categories.
Urbanisation is rising, and 40 per cent of Indias population now lives in cities. Six cities in the country now have a
population in excess of 10 million, and 13 cities have over four million inhabitants, he informed.

Stating that the shift was now in favour of non-grocery consumption, Mehta enumerated the bottlenecks the sector is
facing (namely inadequate infrastructure, poor accessibility and technological issues. He added, It is imperative that
the media reach is increased. Modern trade formats are proliferating, but will co-exist with the traditional kirana
shops. However, active brand engagement is needed.

No market for fast-moving consuming goods (FMCG) in India is close to maturity, remarked Mehta, and adding that
to permit more FDI in multi-brand retail, the Indian government must frame a policy favourable to it. It may be slow,
but Indias retail sector can definitely expect more foreign direct investment in retail. The question is when, he added.

Food retail
The panel discussion that followed Mehtas session was moderated by Nagesh. Mehta was a panellist, as were
Kishore Biyani, founder and group chief executive officer, Future Group (who said that the governments role in retail
was to ensure that there was a shift from a Gandhian economy to the belief that consumption equals development),
and Amit Jatia, vice-chairman, Westlife Development Ltd (McDonalds parent company).

Biyani, who stated that FDI was a misconstrued phrase and multi-brand retail was distinctly Indian, observed was that
frozen French fries was a food product with high growth potential. He added there was a huge scope for investments
in these sectors. Jatia said, Indias growth in the quick service restaurant (QSR) space was rapid until about a year
ago, but then there was a slowdown.

It is currently estimated to be growing at about 20 per cent month-on-month. The QSR space has shown tremendous
growth in the Philippines and Thailand, he informed, adding that there was a huge impact of technology on the
Indian QSR industry, and particularly online and mobile delivery software, which were already in place. About 15-20
per cent of the orders are now placed online, he added.

The trio concurred on two observations - firstly, the impact on e-commerce and social media could not be ignored,
and secondly, with an increase in the number of double-income households which are time-starved, the categories
currently showing high potential for growth were breakfast cereals, packaged foods, frozen foods, chocolates and the
ready-to-cook (RTC) and ready-to-eat (RTE) categories.