New Future for fruit & vegetables

Sruthijith K K & Chaitali Chakravarty, ET Bureau Feb 13, 2010, 12.00am IST Tags:

retailer| Kishore Biyanis Future Group

NEW DELHI: Kishore Biyani's Future Group is making a vigorous push to increase its share in the fruit and vegetables business, a category that has traditionally been an Achilles heel for the country's largest retailer. The group behind supermarket chains such as Food Bazaar and Big Bazaar is forming a specialised entity that will set up and manage an efficient supply chain for fruits and vegetables (F&V), marking a shift away from the outsourced model it has followed so far. Ads by Google

Buy Original Mobile Phone1 Yr. Warranty. Next Day Delivery Genuine Products. COD Available www.Saholic.com/BestSellers Supply Chain ManagementSoftware solution for Chain stores to manage operations centrally www.GoFrugal.com

"Globally, F&V sales for most retailers is about 10% and we want to take it to that level. Within a year, we want to definitely hike the billing share of fruits and vegetables to 810%," Mr Biyani, chief executive of the Future Group, told ET. Fruit and vegetables currently account for 3-4% of total supermarket sales for the group, which expects to end the fiscal in June with retail sales of 9,200 crore. A team headed by S Radhakrishnan, a 15-year veteran of the retail trade, will manage the new company and own an equity stake in it. Mr Radhakrishnan helped set up the Food World chain for RPG Group's Spencer Retail and was head of Reliance Retail's value format businesses until the beginning of this year. Mr Biyani is betting that by putting in place new sorting and grading technologies, better cold storage and aggressively cutting out middlemen, he can bring down the prices of fruits and vegetables by about 15-20% across categories. "The efficiencies created by this exercise will be passed on to the consumer," he observed. He declined to reveal how much he was investing in new company or what stake the new management team will have.

The Future Group now outsources retailing of fruits and vegetables to vendors, who are allowed to use space in its shops in exchange for a share of their revenue. Mr Biyani's move to take direct control of the fruits and vegetables business brings to focus the challenges faced by organised retailers in selling fresh and perishable goods. India lacks a network of cold storages and refrigerated trucking facilities that can efficiently transport fresh fruits and vegetables from a farm to the shop-floor while retaining its freshness. Smaller, unorganized 'kirana' stores sell fruits and vegetables to most of the country's population, but the extensive network of middlemen and high levels of wastage mean that the price paid to farmers is only a fraction of the retail price. The organised retail trade relies heavily on APMC 'mandis' and agents to source the bulk of its stock of fruits and vegetables. Among the large ones, Reliance Retail procures the most from farmers about 50% of its daily need of 700 tonne, a company official said. Future Group has a separate company that handles its dry vegetables supplies as well, but the new entity will have independent profit and loss responsibilities as well.

Future Groups fruit, vegetable shop

Last updated : November 25, 2010 19:31 IST

New Delhi: Kishore Biyani-led Future Value Retail plans to open standalone farm fresh stores selling only fruits and vegetables in neighbourhood locations on the lines of the Safal fruits-and-vegetables chain.

Although we sell fruits and vegetables in Food Bazaar, the category is not as big as other categories. Besides revamping the existing farm fresh stores, we are looking to open dedicated stores for this category, he said. The move is aimed at cornering maximum sales and increasing contribution of the category in Food Bazaars annual

revenues to 10% in the next two years from 3% now, said Mr Radhakrishnan. Mr Radhakrishnan said that fruits and vegetables is a profitable category and promises up to 10% profit margin after taking into account wastage and supply chain losses. Currently, the group sells fruits and vegetables at about 191 Food Bazaar outlets across the country. The size of Food Bazaar outlets ranges from 8,000 square feet to 15,000 square feet and the company is looking at dedicating an area of 1,000-2,000 square feet only for food and vegetables. The new format is already in place in Kolkata, where it is sourcing 60% of the produce directly from farmers. Similar exercise will be followed in Delhi, Mumbai, Pune, Ahmedabad, Hyderabad, Bangalore and Chennai, which is expected to get over by the March next year. Future Value Retail, a wholly-owned subsidiary of Pantaloon, currently operates Big Bazaar and Food Bazaar stores, among other formats, in over 70 cities across the country, covering an operational retail space of over seven million sq ft. The company is working on strengthening supply chain and increasing direct sourcing from farmers going ahead.