BRAND:- SUBHIKSHA

BACKGROUND OF THE GROCERY RETAILING MARKET IN INDIA

IGD estimates India's grocery retail market to be worth US$ 299.2bn in 2008, making it the fifth largest grocery retail market in the world after the USA, China, Japan and France. The retail sector in India is highly fragmented and organised retail, which is estimated at 4% of the total market, is at a very nascent stage. The traditional channel consists of 'mom-and-pop' stores known as 'kirana' stores, ownermanned general stores, paan/beedi shops, convenience stores, hand-cart and pavement vendors, wet markets and employs about 40 to 50 million people. Of the 12 million traditional retail outlets in India, some 7.3 million sell FMCG and 41% of these are in urban India. Sales in the kirana stores are typically over the counter, and the shopper cannot browse or touch the brands before buying. The kirana stores continue to perform well despite the increase in competition from modern retail chains, owing to their excellent customer service and ability to provide branded goods at low prices. Retail is being hailed as Indias industry of the future, incited by the countrys huge urban middle class population. Food and grocery is the second-largest segment of the retail industry and the potential for new entrants in this segment is enormous, particularly in untapped markets like rural and semi-rural areas. Growing at the rate of 30%, the Indian food retail is going to be the major driving force for the retail industry. The paper on FOOD RETAIL AN EMERGING FACET maps out the Background of food retailing as well as current scenario catching up the retail front, Up-and-coming multiple formats of food retail. The food industry is on a roller coaster ride as Indians continue to have a feast. Fuelled by large disposable incomes the food sector is witnessing a remarkable change in consumption patterns, especially in terms of food. Food retailing has come of age -- from a period when food items were sold in small road side grocer shops & mandis, haats and bazzars by vendors to a stage when food products (processed and groceries) are retailed through supermarket stores where consumers can inspect, select and pick up the products they like in a comfortable ambience and still pay a fair price for the product and the merchandise and sometimes even pay less than the price they would have paid at the nearest food stores. Shopping for groceries is no longer a strenuous and uncomfortable affair.

Instead, it is a pleasurable experience. From simple trading activity, food retailing is now heading to the status of an industry. Imagine yourself walking through the air conditioned lanes smelling fresh food and groceries, enjoying light music, experiencing five star ambiences and above all buying food products (vegetables, spices and beverages) without bargaining with the vendors. Food retail has surpassed the dominating apparel and accessories sector. "Contrary to the belief that fashion is the largest segment of organised retail in India, food & beverages is the major segment, worth Rs 8,97,000 crore," said Arvind Singhal, Chairman, Technopak, at the Indian Retail Forum held in Mumbai. There is an old industry saying that customer is king Food retailers today will update that saying to customers is the dictator because of fierce competition, new technology and business practices the market power of customer is strong and growing stronger. Retail is being hailed as Indias industry of the future, incited by the countrys huge urban middle class population. Food and grocery is the second-largest segment of the retail industry and the potential for new entrants in this segment is enormous, particularly in untapped markets like rural and semi-rural areas. Growing at the rate of 30%, the Indian food retail is going to be the major driving force for the retail industry. The paper on FOOD RETAIL AN EMERGING FACET maps out the Background of food retailing as well as current scenario catching up the retail front, Up-and-coming multiple formats of food retail.

BACKGROUND OF THE COMPANY

Subhiksha- The Retail Phenomenon that Flattered to Deceive

The Chennai based Food and Grocery retailer sprung up as a wonder kid in the Indian Retail scenario during the years 2007 and 2008 to give every other retailer a run for their money through their aggressive expansion, ably supported by sky rocketing revenues. However, the retailer lost their Midas touch towards the last quarter of 2008 and Subhiksha now seems to be a prospective case study on What Not to Do in Retail.

SUBHIKSHA means prosperity in Sanskrit. Founded by R.Subramaniam, an IIT-IIM alumnus in 1997. Was one of the largest retail value chain in India. (in terms of number of stores). 1600 outlets selling groceries, fruits, vegetables, mobile phones, medicines.

People associated with Subhiksha

1. Chairman R.Subramaniam 2. Ms Rama Bijapurkar (IIM A alumnus) board of director 3. Mr kannan Srinivasan (Prof of marketing at Carnegie mellon university) board of director 4. Mr S.B.Mathur former L.I.C. Chairman 5. Ms Renuka Kamnat, Managing Director of ICICI venture 6. Mr Rajeev Bakshi, Deputy Manging director of ICICI venture and former CEO of Pepsico India. 7. Mr Azim Premji as board member. MAJOR SHAREHOLDERS 1. ICICI Venture 23% 2. Azim premji (wipro) 10% 3. ICICI Prudential 5%

SUBHIKSHA over a period of time

Good Old Days Subhiksha kicked off its pursuit in the emerging sector in March 1997 by opening their first store in Tiruvanmiyur, Chennai as a value focused Food and Grocery retailer. The founder, R Subrahmaniyam is an alumnus of IIT-M and IIM-A, the best pedigree one could ever desire in India. The maiden store of Subhiksha incorporated his insights from the market study, that if customers have to ditch their trusted neighbourhood stores for Subhiksha, they need to carry food and grocery at a price lower than the market price and make it available at a convenient location nearest to their customers. Thus, they pioneered value retailing in India, when organized retailing was meant for elite class.

Subhiksha started expanding rapidly by March 1999. In the next 15 months, they increased their number of stores from 14 to 50. By the end of 2002, the tally of Subhiksha stores in Tamilnadu stood at around 130. The rapid expansion spree of Subhiksha started in the second half of 2006, when they started to roll out stores one after another across the country. Subhiksha, which was a local player with approximately 150 stores till September 2006 increased their store numbers to more than 1600 (increase of roughly 1100%) by September 2008 to be Indias largest F&G retailer by number of stores, riding on the fresh private equity infused by I-Venture, the venture capital arm of ICICI. The revenue of the chain increased by nearly 700% during this period (Rs. 3.3 bn in FY06 to Rs. 23.05 bn in FY08). The growth of Subhiksha even attracted Azim Premji; a renowned Indian entrepreneur, to acquire 10% stake of the chain for Rs. 2.3 bn. The trouble started trickling in by August 2008 when unconfirmed reports started dribbling in about the retailer not paying salaries to its staff and defaulting on rent. Towards the end of the year, most of its suppliers backed out from supplying to Subhiksha, owing to nonpayment of their previous dues. The subsequent events lead to a shameful low that the retailer had to ask its employees to take inventory from the store instead of salary!!! The battle for survival, however, did not last long and the cash starved retailer was forced to bid adieu to India retail sector (hopefully temporarily) by early 2009. The ignominy of the retailer aggravated with the revelation from the EPFO that the retailer had failed to remit the provident fund deductions to the PF trust from June 2008. The shameful turn of events was not yet over for retailer and it continued till the extend of its creditors vandalizing the shut stores in a couple of locations. R. Subramanian, MD of Subhiksha Trading Services says that they need at least Rs 3 bn to re-start their business. Talks are still on about extending a CDR scheme to the retailer, but nothing seems to be turning the Subhiksha way. The reluctance from Kotak Mahindra Bank, one of the lenders of Subhiksha and the retailers disinclination to appoint KPMG as an independent auditor to audit their books of account (as suggested by ICICI) did not help the matter either. Though Deloitte is the official auditor of the retail chain, they have surprisingly failed to prepare the audited financials for FY08 and FY09.

November 14, 2009: Subhiksha has finally got a breather from the Supreme Court of India, as they granted a stay over the cases pending against the retailer in Madras high court including

a host of winding up petitions filed by Kotak Mahindra Bank, Adlabs Films and HCL Infosystems. The case will again be taken up for hearing on November 23rd and then the retailer would have to convince the apex court with the formula which calls for 50% write off of the principal amount and a 10 year repayment period for the rest of amount.

SEGMENTATION The target segment for Subhiksha was lower and upper middle class. When Mr Subramaniam started Subhiksha then only they decided that it will be for the AAM ADMI so that every one can buy goods on low prices. Shops are not located on the main roads so that people living in the locality can easily approach the shop.

POSITIONING Low Prices: Subhiksha positioned itself as a value retail chain/discount retail chain. Trust: Subhikshas name inspires trust and its consumers rely on it. Savings: Focuses on the concept of constantly sustainable low pricing.

REASONS FOR FAILURE Expanding rapidly without sufficient funds in hand. Thought of raising equity but were late Global scenario went wrong October 2008, company ran out of enough funds to run the organisation.

And then after financial crisis also loomed large over the company with payment dues of advertising not cleared, huge list of outstanding wages and rent, disruption in supplies by the whole sale suppliers.

COMPETITORS 1. 2. 3. 4. Reliance fresh More (Aditya birla venture) Food bazzar National handloom

5. Spencers 6. Adanis

BRAND BUILDING TIPS FOR SUBHIKSHA Subhiksha should come back with a bang it has to invest more in advertising to compete with other brands Subhiksha should advertise itself with an endorser who has a good market reputation and image of trust worthiness Should concentrate on low pricing strategy as before Still India is a growing sector in retail and there is huge scope of penetration and with a brand name of Subhiksha success can be theirs again.