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    Reliance fresh Reliance fresh Document Transcript

    • CS-08-029 Reliance Fresh Stores in Food Retailing Version 21/10/2008 This case was prepared by Dr. Debasis Pradhan & Dr. B.K. Mangaraj of XLRI Jamshedpur, INDIA, as a basis for classroom discussion rather than to illustrate either effective or ineffective handling of a management situation.Copyright © 2008 London Business School. All rights reserved. No part London Businessof this case study may be reproduced, stored in a retrieval system, or School referencetransmitted in any form or by any means, electronic, mechanical, CS 08-029photocopying, recording or otherwise without written permission ofLondon Business School.
    • -2- CS-08-029In April 2007, it was time for celebration at the headquarters of RelianceIndustries Limited (RIL). Sales from the recently opened “Reliance Fresh”outlets had exceeded all estimates with an average sale per store greater than$12,000 (Rs. 0.5 million), against expectations of $5,000 (Rs 0.2 million). Thefootfalls were as high as 4,000 per day. Launched as your friendlyneighbourhood store, the typical Reliance Fresh store was spread over an areaof 2000 sq ft. Just before its launch, in June 2006, its chairman, MukeshAmbani had announced a $5.6 billion multiyear investment in the agricultureand retail sectors. He aimed at making a new company, “Reliance Retail” thesectors dominant player. “Reliance Fresh” intended to bring high quality freshfood to the customers at an affordable price. This was to be achieved throughan integrated supply chain process and with efficient delivery of value to theconsumers. Ambani, who visited all 11 shops on the eve of opening, said hisfirm offered "unmatched affordability, quality and choice of products andservices to the customers". Yet his confidence and optimism did not mean thatall questions about his business model were fully answered, or that the answershad been validated yet.There certainly appeared to have been an overwhelming response to RelianceRetail in the first year of operations. Looking at the very encouraging responsefrom the public and the buyers, there were plans to commission more citydistribution centres and city processing centers that would further strengthenthe supply chain. The stores offered fresh produce, vegetables, pulses, breadsand dairy products. "The focus was on fresh fruits and veggies, groceries andstaple products that consumers buy," President and CEO, RIL Foods Business,Gunender Kapur said. The stores directly procured vegetables, pulses andspices from the farmers of Andhra Pradesh, Karnataka and Tamil Nadu, whichcontributed to quality and pricing advantage. Most of the products were beingretailed under ‘Reliance Select’, a premium food brand launched by Reliance.In April 2007, the “Reliance Select” brand covered pulses, rice, spices andvegetables.Raghu Pillai, President of operations and strategy at Reliance Retail said,“About 95% of Indias retail sector is made up of small, family-run stores andthe sector has not been tapped by big businesses. Reliance Fresh aims to targetand exploit this very segment in which it foresees huge potential for furtherrobust growth.” Yet Pillai was realistic about the need for strategies to surviveexisting and growing competition in this new sector.
    • -3- CS-08-029Opportunities for Retailing in Agri-BusinessIndias retail sector was undergoing a transformation and with a three yearCAGR of 46.64%, retail was the fastest growing sector in the Indian economy.Traditional markets were making way for new formats such as departmentalstores, hypermarkets, supermarkets and specialty stores. Western-style mallshad begun appearing in metros and second-rung cities alike, introducing theIndian consumer to an unprecedented variety in shopping experiences.Indias vast middle class and its almost untapped retail industry were keyattractions for global retail giants wanting to enter newer markets. Whileorganized retail in India was only 2% of the total US$ 215 billion retailindustry, it was expected to grow 25% annually, driven by changing lifestyles,strong income growth and favourable demographic patterns. A retail consultingand research agency had predicted that by 2010, organized retailing in Indiawould cross US$ 21.5 billion mark.1Unlike in the developed world, food dominated the shopping basket in India.While food accounted for only 9.7% of the total private consumptionexpenditure for an average American, 15% for the Japanese & British, for theIndian, it was the principal component of their consumption expenditureaccounting for as much 53%. Since much of this was non-branded (includingperishable items like fruits and vegetables), the branded food industry washoming in on converting Indian consumers to branded food. At the same time,a huge population base of 1.08 billion, growing at about 1.6% per annum,provided a large and growing domestic market for food products.Also, the country’s middle class had been expanding due to rapid urbanization,increasing per capita income and credit card ownerships, increasedparticipation of women in the urban work force. The segment aged between20-45 years was emerging as the fastest growing consumer group and the meanage of Indians was now 27 years, a mean age that reinforced spending acrossall retailing channels of grocery, non-grocery and non-stores. Unsurprisingly,food & grocery retailers continued to be the staple of retailing in 2005,accounting for ¾ of overall retailing value sales as shown in Fig-1,1 KSA-Technopak
    • -4- CS-08-029 Fig-1: Fastest growing retails segments in India Food & Grocery Clothing Furnitures & Fixture Durables Footwear & Leather Watch & Jewellery 0 20 40 60 80 100Source: KMPG in India Retail Survey 2005.Agriculture was the backbone of the Indian economy as Nature had been veryfavourable to the country. Of the land within its boundaries, 52% wascultivable, as against the global average of 11%. All the major 15 climate typesexisted in India and sunshine hours and day length were ideally suited for goodcultivation round the year. Also, India had great bio-diversity and accountedfor 17% of animals, 12% of plants and 10% of fish genetic resources of theworld. Undoubtedly, this comparative advantage was one of the reasons for theadvent of a number of retail majors into food retailing in the past few years.Many were leading players in FMCGs, tobacco business, and agribusiness.
    • -5- CS-08-029 Table–1 Area & Production of Agricultural Products (Production in million tones) India India’s rank in world productionArable Land (Million ha.) 151 2Irrigated Land (Million ha.) 55 1Wheat 72 2Rice, Paddy 124 2Course grain (including maize) 29 3Milk 91 1Fruits 47 2Vegetables 82 2Edible oil seeds 25 3Pulses 15 1Sugarcane 245 2Tea 0.85 1Cattle (Million) 186 2 Source: Marketing Reforms & Enhancing Competitiveness, 2006 However, the supply chain that connected the vast natural resources and the farmers to both organized as well as unorganized retail was highly inefficient with several intermediaries and manual handling. The result was lots of wastage (as much as 30%) and small remunerations for the farmers (Exhibit-1). There was hardly any supply chain integrator or channel master for retail channels in this sector. RIL was aware of this and hence was keen on setting up its own supply chain which could be more efficient than the existing ones.
    • -6- CS-08-029 Exhibit 1: Inefficient supply chain in IndiaIn effect, the plentiful natural resources were underutilized or not efficientlyutilized for agriculture in India as Indian rural life had not qualitativelychanged over the decades. There was little attention to value added agriculturein the whole country. Research on improving farm productivity, pre-harvestand post-harvest methodologies, processed food product development, packing,distribution, transport, cold chain, store management warehouse and the entiresupply chain were much neglected both by the Central and State Governments.At the same time, it was generally recognized that there was tremendouspotential for growth of the food market in the Indian context (Exhibit-2).Reliance Fresh believed that it could unleash that potential for profitable foodsand vegetables retailing.
    • -7- CS-08-029 Exhibit 2: Growth in Indian food marketReliance FreshReliance Fresh was the first foray into retailing by the $25 billion behemothknown as Reliance Industries Limited. There were three basic reasons forReliance Industries Limited (RIL) choosing foods and vegetables for enteringinto retailing. First, it wanted to go after the very core of the great Indian retailopportunity. Food accounted for over two-thirds of the $200 billion Indianretail market and yet, it had seen hardly any penetration by modern retail so far.Second, its aim was to build a high-profitability business and food was perhapsthe best place to start. Third, the grossly inefficient food supply chain provideda well resourced and well managed organization like RIL with an opportunityto think of amending the flaws which would also make business sense. In thetraditional supply chain in India, there were several intermediaries, who addedtheir respective profit margin to the cost. Besides, there was huge wastage intransit. This offered potential for savings and profits and Reliance Fresh was astep in that direction.Reliance Fresh launched by opening new retail stores in Hyderabad on 3November 2006 (Exhibits 3-4). Stores remained open from 9am to 9pm. On24th January 2007, 12 "Fresh" outlets opened in Chennai increasing the totalstore count to 40. Reliance was testing its retail concepts by controlled entry,
    • -8- CS-08-029beginning in the southern states. RIL planned to invest $63.50 billion (Rs.2,500 billion) over the next five years in the retail business with 4,000 retailoutlets in different cities.Retail Format: Small is SensibleThe store’s size varied from 1,500 sq ft to 3,000 sq ft, and stocked fresh fruitsand vegetables, staples, FMCG products and dairy products (Exhibits 5-7). Thestores stocked their own private label in staples and food under the "RelianceSelect" label (Exhibit-8). Eventually the label would include other foodcategories such as dairy products, jams and colas. The Fresh model wasengineered to clock a faster turnover of inventory — Reliance expectedconsumers to visit the store at least twice a week for their top-up groceries.Each store would have an investment of approx $127,000 (Rs. 5 million) to$153,000 (Rs. 6 million). Industry sources expected Reliance Fresh to turn thiscapital over six times.“Each of our stores aim at catchments of only about 2,000 households in a 2-3sq km radius,” shared Jai Bendre, Head of Marketing (foods), Reliance Fresh.This was the concept of a neighbourhood store. Reliance Fresh opened its 100thoutlet in the country in the national capital, New Delhi. In addition to this,Bangalore was said to have 40 stores in all by the end of the year. The push inthe retailing of perishables was part of an overall planned $5 billion projectwhich was aimed to cater to more than 780 cities and 6,000 rural towns in Indiaover the next five years. Reliance Fresh aimed at opening stores in the top 70cities within the next two years and attaining sales of $25 billion by 2011.Reliance Fresh had consciously adopted a business model of operating throughsmall and medium size stores. These stores would be of 2,000-5,000 sq ft incomparison to a supermarket which needed 8,000-10,000 sq ft. In the currentbusiness model it had positioned itself as a food and grocery convenience store.It aimed to be a channel for not only consumer sales but also positioned itselfas a distribution channel for other small outlets in various parts of the city bybuilding an integrated supply chain to deliver and operate its ‘Farm to Forkmodel’. The company had been racing to set up deals with state governments toestablish rural hubs to buy fruit, vegetables, pulses and dairy goods fromfarmers as it moved to build a state-of-the-art supply chain spanning the entirecountry.Reliance Fresh’s shelves provided an indication that the group was looking forhigher margins. Most of the staples were under its own private label brand —‘Reliance Select’. Except a few packets of Nestlé’s Maggi, or MTR’s Masala’s
    • -9- CS-08-029or Pepsi’s Lays chips, there was very little shelf space given to the big brandowners in the country.The traditional model of vegetable retailing in India involved vegetables beingsold in small “stores” on the roadside, and there were no formal rules regardingweighing, bargaining and quality issues, let alone cold storage andsophisticated supply chains. Produce travelled slowly and inefficiently througha series of intermediaries before reaching the hands of customers, sufferingmark-ups, wastages and quality losses along the way. “Reliance Fresh”marketing model operates on affordability and a hygienic ambience along witha good shopping experience”, said Mukesh Ambani, the Chairman of RIL.Reliance Fresh intended to bring high quality fresh food to the customers at anaffordable price. Reliance Fresh also wanted to establish a benchmark ofhygiene and quality in their sales. It thus sought to provide the consumeraffordable and quality produce in a congenial and pleasing environment andenforced stringent quality and hygiene guidelines which would help it bringhigh value to the consumerSupply Chain “We will always buy from the farmer, almost never from the mandi(wholesalers),” said a group official. For example, the leafy vegetables,aubergines, tomatoes and green chillies in the one of the outlets in Mumbaiwere sourced directly from farmers in nearby districts. This in effect gottranslated into lower prices by at least 15% to 20%. “Well be very affordableand competitive in the market, but we aren’t playing a price game here. Thefull effort is to deliver value to the customer,” said Chief Executive, CustomerOperations, KS Venugopal. Produce from the farmers came to Reliances citydistribution centre, which connected two very different sides of India, thepoverty-ridden countryside, steeped in tradition, and the wealthy city centers.“Already, a few hundred farmers have been hooked on to the Reliance Retailsupply chain. In the next five years, that number will grow to millions. Evencontract farming — by assisting farmers in procuring high-quality seeds,fertilisers and other essential raw materials is on the cards. By going to thefarmer directly, Reliance Retail hoped to disintermediate the supply chain andeliminate waste. This meant fresher products at lower cost”, reasoned the samegroup official. Still, there was a general concern in the industry about thepossibility of steady and high quality supply of vegetables and other perishablefood items to the huge number of proposed retail outlets. How far backwardswould Reliance have to integrate to assure such supply?
    • - 10 - CS-08-029Current Supply Chain Diagram of Reliance Fresh LOCAL FARMERS COLLECTION CENTRES LINKED WITH CONSORTIUMS (Here grading and standardization takes place) RELIANCE FRESH OUTLETSScale behind the scenes: Rural Business HubsGlobally, supply chains were fairly mature and efficient. This gave the retailerlittle opportunity to improve profit margins. But in India, any retailer who builtan efficient supply chain stood to gain. “With efficient sourcing, we can releasemargins into the system. This can be shared by customers and shareholders,”said Gunender Kapur, president and CEO (Foods), Reliance Retail.The company planned to own and operate a complete value chain byidentifying potential geographical clusters to implement farm initiatives andcreate an infrastructure to collect, pack, store, process and distribute fresh andvalue-added products at the district level.The company was planning to set up Rural Business Hubs (RBHs) whichwould be the strategic business platform for providing comprehensive range ofproducts and services to the rural communities. The first such hub would startby October 2007. RBHs would provide agricultural inputs, financial services,
    • - 11 - CS-08-029veterinary health care, educational and entertainment facilities. Reliance Retailwas planning to set up 1,600 business hubs to cater to rural areas across thecountry, reported Daily News Analysis (DNA), a prominent daily. “Thesebusiness hubs will act as shop-stops for villagers and will act as procurementcentres, besides facilitating retail, technical and health assistance to farmers”.Reliance Fresh across IndiaThe State of Punjab would lease out 150 acres of land to RIL’s RBH at$406.39 (Rs 16,000) per acre per annum for 30 years. RIL planned to builddirect linkages with farmers in procuring a major share of marketable surplusfrom farmers at their farm gate and to use it for flour and pulse milling andprocessing units catering to domestic and export markets as well. In the nextfour years, the number of RBHs would increase to 50 and would cover around12,400 villages out of 12,700 villages in the state of Punjab. The firm alsoplanned to establish farms with world class technology to suit local conditions.Reliance Retail also hoped to bring "prosperity of scale" to the State of TamilNadus farmers through the sourcing and supply chain for its Reliance Freshoutlets. 95% of fresh fruits and vegetables sold at the stores were sourced fromfarmers. Under its “Ranger Farms” concept, the company had set up 10collection centers across the State, with 10 more to come up soon. “Theproduce will be cleaned, graded and distributed at a centre at Puzhal. This willeliminate middlemen and pay farmers cash, fair price for quality produce”, saidGunender Kapoor, President, Agribusiness. Farmers would not only get marketaccess but also advice on market demand — what vegetables to grow, howmuch and when. Ultimately, these collection centers would graduate into 40rural business hubs across the State, which would help to improve farmproductivity through technology and mechanization and offer services such ascredit, insurance, health and veterinary care.“The speedy, refrigerated transport and logistics infrastructure being developedby the company will soon be available to the retail industry at large through acash and carry wholesale format. This means even your local pushcart vendorcould be selling vegetables sourced by Reliance," emphatically added Mr.Kapoor quelling the apprehension that the presence of organized retailing coulddoom the fate of small neighborhood retail stores.Reliance Industries’ (RIL) was planning to acquire over 2,000 acres for itscontract farming venture in the State of Karnataka, which could emerge as oneof its hubs for farm produce exports. The company was also ready to enter intocontract farming operations in the states of Haryana and Maharashtra. Its planentailed acquiring 10-acres each of the nearly 200 administrative sub-divisionsin the state. It was learnt that RIL had recruited a vast number of agriculturegraduates for this project. Also in the pipeline were the company’s plans to setup warehouses across the states. It had already unveiled ambitious contract
    • - 12 - CS-08-029farming plans nationwide, which would see it operating a massive fleet ofcargo flights within India and overseas.Win-Win Situation?According to early news reports published in the Hindu Business Line(December 16, 2006 –Exhibit-9), farm producers selling to Reliance Freshwere getting better returns on vegetables produced by them. For example,‘Rangers Farm’, the farm produce procuring arm of ‘Reliance Retail’ wasbuying Bhindi (okra) at more than $0.25 (Rs.10) per kg against $0.18 per kg(Rs.7.50) (less 10% commission) being offered by traditional vegetablewholesalers. Most farmers were also able to save on time, effort and money asthey were not required to transport their produce to the wholesale markets,which in some cases were located 40-50km away from their villages. Reliance,on the other hand, had set up its procurement centres nearby. There was onecatch, however. Vegetables before being accepted by the Reliance arm wererequired to be graded based on their quality and freshness.Although wholesalers refused to admit any impact of Reliance and other chainson arrivals of farm products in the wholesale markets, there was no denying thefact that a quiet revolution was taking place in the countryside as more andmore farmers had started to see the benefits of selling their produce directly tothe retail chains. Efficient supply chains, backed by superior logisticsmanagement, had the potential of saving 30-35% in costs, particularly forperishable items like flowers and vegetables. And at the same time,government was getting improved tax revenue as vegetables and grocerieswere now taxed through these outlets.Major Players in Food and Vegetable Retailing in IndiaGodrej Aadhar, a venture of Godrej Agrovet was a complete solutionprovider for the Indian farmer. It provided professional guidance with anobjective to improve productivity, higher returns and improved cost-benefitratio. The services offered were crop advisory services, soil & water testingservices, crop finance, supply of agricultural inputs and animal feeds, transferof information (weather, price & demand–supply), door delivery of productsetc. It already had 33 stores across the country, which it planned to increase to45 very soon. The company started its fruits, vegetables, dairy and poultryretail business through their Nature’s Basket stores in the urban areas. Whileseven Nature’s Basket stores were already functioning in Mumbai, the groupplanned to add another eight in Mumbai itself, before it set base in Delhi,Gurgaon, Hyderabad, Chennai, Chandigarh, Amritsar and Ludhiana. The targetwas for setting up 1000 outlets by 2010. It had adopted a “Hub and SpokesModel” for its distribution network.
    • - 13 - CS-08-029Subhiksha: The Chennai-based discount retail chain Subhiksha announced a$0.7 billion (Rs.30 billion) expansion plan to venture beyond its home base ofTamil Nadu by setting up nearly 450 stores in the National Capital Region andfour other states. As part of expansion, the company planned to increase thenumber of stores to 600 from 150 now by end of 2007 to create a nationalfootprint. Besides Delhi, the company proposed to open stores in the states ofMaharashtra, Gujarat, Andhra Pradesh and Karnataka. For the Delhi market,the company had earmarked an investment of $0.2 billion (Rs.10 billion) overtwo years. The company had been making profit for the last eight years, and itsrevenues had grown 25% in the last two years. The company earned revenue of$0.81 billion (Rs.33 billion) with a profit of $2.5 million (Rs.100 million) lastyear. Every store on an average had a billing of $0.86 million (Rs.35 million).The expansion was expected to add around $391 million (Rs. 15,750 million).ITC Choupal Fresh stores were started in the cities of Chandigarh, Hyderabadand Pune, with their own cold chain supply to wholesale and retail clients. Itwas the first of 140 stores that ITC planned to open in 54 Indian cities overthree years at an investment of $1.9 billion (Rs. 80 billion). ITC had designedthe supply chain in collaboration with Ingersoll Rand and MitsubishsSnowman. Ingersoll Rand had designed the climate-control shelves, the freezertrucks in which farmers send produce, the pre-coolers, and Snowman managedthe logistics of the produce. The store stocked only fresh fruit and vegetables,sourced directly from farmers from all over the country. And it expected theorganised retail market for fresh produce would touch $12.4 billion (Rs. 500billion) in the three years.The e-choupal project was empowering farmers and in turn, helping create newbusinesses for the company. These projects essentially worked on digitalinfrastructure (IT, Internet access), physical infrastructure (rural Internetenabled offices) human infrastructure (managers and IT professionals) andnetwork orchestration by ITC. As an intermediary, ITC had brought a networkof insurance companies, banks, micro-finance entities, seed and fertilisercompanies, FMCG, e-learning and training organisations to rural India.Launched in June 2000, in 7 years the 6,500 strong e-choupal kiosks servicesreached millions of farmers growing a wide range of crops and seafood,soyabean, coffee, wheat, rice, pulses, shrimp, in over 38,000 villages acrossnine states of the country.Hariyali Kisaan Bazaar: The Hariyali Kisaan Bazaar was a pioneering microlevel effort, which created a far-reaching positive impact in bringing aqualitative change and revolutionising the farming sector in India. The chainsuccessfully ran its business through 33 stores in five rural locations in NorthIndia. Each Hariyali Kisaan Bazaar centre operated in a catchment of about 20km. A typical centre catered to agricultural land of about 50,000-70,000 acres
    • - 14 - CS-08-029and made an impact in the life of nearly 15,000 farmers across India. Eachcentre provided support through a team of qualified agronomists; provided acomplete range of good quality, multi-brand agri-inputs like fertilizers, seeds,pesticides, farm implements and tools, veterinary products, animal feed,irrigation items and other key inputs like diesel and petrol at fair prices. Thecentres also provided access to modern retail banking and farm credit, farmproduce buyback opportunities, access to new markets and output relatedservices.Bharti Retail planned to invest $2-2.5 billion by 2015 in its pan-Indiaoperations. It was looking at approximately 10 million square feet of retailspace across all cities in India that had a population of over 1 million. Itplanned to employ 60,000 people. The company planned to launch its retailoutlets in multiple consumer friendly formats, including hypermarkets andsupermarkets. They had plans to serve all regular shopping requirements of anIndian household—fruits, vegetables, meat and poultry, dairy products, staples,processed foods besides other FMCG and consumer durables.Trinethra was a 98 outlet strong chain, operating in 9 cities of AndhraPradesh, covering retail space of more than 15,000,000 sq ft. The company hadgrown exponentially with the number of stores, more than tripled in 5 years. In2003-04, the company acquired another chain Fab Mall which operated 12outlets and achieved sales worth $12.4 million (Rs.500 million). Trinethra andFab Mall had drawn up an ambitious plan to breakthrough the $2.5 billion (Rs.100 billion) barrier sales by 2008 and for this plans were afoot to cover six newstates by 2008. This expansion would see the number of outlets increase frompresent 92 to 175.Adani Agri Fresh launched operations in Himachal Pradesh last year, when itprocured a major chunk of apples from the hill state. The orchardist in thelargest apple growing state in the country got a much better price from the agri-major and they were also spared the hassle of packaging their produce andtransporting it to big markets in Delhi, Mumbai, Ahmedabad and Kolkata.Adani had already made an investment of over $280 million (Rs. 11 billion) inthe hill state for setting up controlled atmosphere packaging and storage units.This year, the company planned to invest over $408 million (Rs.16 billion) toset up its own cold chain of refrigerated vehicles for transporting apples, kiwi,almonds and peaches.Future Plans and ChallengesSenior officers in the company were known to have set a “conservative” salestarget of $25 billion for the next five years. The firm expected to employ500,000 staff as well as create at least one million jobs indirectly. Relianceplanned to invest $7-8 billion in setting up its stores arm that would cover
    • - 15 - CS-08-0291,500 Indian cities and towns in the country, said a senior Reliance official.The company had hired 6,000 managers for the new business. Reliance wasselecting locations for the stores, setting up agreements with farmers to buytheir produce and tying up with manufacturers for merchandise ranging fromconsumer electronics to apparel. The company had aimed at setting up as manyas 60 distribution centres across the nation to feed its retail chain and planed toinitially contract trucks and warehouses with cold storage facilities and thenbuild its own.It was recognized that different retail formats other than the city based storesmight be necessary in different markets. In towns and villages, it would haveso-called hypermarkets – warehouse style stores spread over 150,000 squarefeet, or about 14,000 square meters, selling groceries, fresh food, consumerelectronics and clothes. The company would also open smaller, 75,000 squarefeet, supermarkets. Larger metropolises like New Delhi and Mumbai wouldhave smaller stores depending on the availability of real estate.Yet, despite these dramatic expansion plans, several questions remained: Howwould competitors, including the formidably resourced ITC and Godrej groupsrespond to these expansion plans? Were they perhaps ignoring the mostobvious source of competition- the traditional small neighbourhood grocerystore, where the shopkeeper knew every customer (and his needs) by face, andwas willing to extend credit till the next pay check? How necessary andrealistic were Reliance Fresh’s plans to backward integrate all the way tofarming? And what would be the social consequences of this expandingcorporate presence into the largely unorganized, but politically mobilizedfarming sector? How would intermediaries and small grocers react, and wherewould the people’s (and Government’s) sympathies lie?
    • - 16 - CS-08-029 ReferencesIndia Retail Report, 2007India Retail Report, An Images KSA Technopak Study, 2005Retailing in India : The Emerging Revolution. Mckinsey & Company, Inc.2000.
    • - 17 - CS-08-029 Exhibit 1Reliance Industries Ltd. (RIL) Chairman Ambani in discussion with his lieutenants.
    • - 18 - CS-08-029 Exhibit-2Vertical glow sign outside the store -- as typically seen in petrol pumps. Not seen till now in grocery stores. Increases visibility of stores in by-lanes -- where visibility is limited to just 2-3 stores from the main road. Products available listed on the glow sign
    • - 19 - CS-08-029 Exhibit-3Store Façade – Bright, Striking, Primary Colours
    • - 20 - CS-08-029 Exhibit-4Visible Store Promotions and Co-branded Promotions Highly visible store promotions, re-iterating value for money proposition
    • - 21 - CS-08-029 Exhibit-5Vegetables in Baskets
    • - 22 - CS-08-029 Exhibit-6Layout and Ambience – Well-lit, Neat, Bright, Easy To Read Signage
    • - 23 - CS-08-029 Exhibit-7 Private Label Competing With Branded In Some CategoriesThe consumer has three options in cereals & pulses – branded, store brand “Reliance Select” or packaged unbranded
    • - 24 - CS-08-029 Exhibit-8BusinessDailyfromTHEHINDUgroupofpublicationsSaturday,Dec16,2006Farmers take a `Fresh look at retailing ATTRACTIVE RATES for produce, and no commissionTwenty-five-year-old Mr Rami Reddy, whose joint family owns 20 acres inLakshmareddy Gudem, a small village in Rangareddy district near Hyderabad,has been growing brinjals in one or two acres for the last eight years. But henever saw a price for his produce that he got this season from Reliance.Not only that. He could save money, time and effort in taking the produce tothe Bowenpally market, 40 km away. "All we need is to take the produce there.We need not pay any commission not to speak of the hamali charges," he said."Two months ago, Reliance representatives came to me and told me about theirplans to procure quality brinjals for their upcoming outlets in Hyderabad," hetold Business Line.Mr Reddy is not alone. "It has become a hot topic for discussion among thevillagers. Everybody talks about the attractive rates," he said.Collection centreHe is not exaggerating. About 200 farmers from villages in the area havestarted selling their produce at the Collection Centre set up by Reliance atShankarpally. The centre collects 7-8 tonnes of vegetables a day and send thelot to the central processing centre at Medchal. Vegetables from 2-3 such
    • - 25 - CS-08-029centres get graded again and processed there before getting into the 17 ` Freshoutlets the company opened in the twin cities."We used to sell a 20-kg bhindi (okra) bag for just Rs 150. But now we aregetting Rs 10-11 a kg," Mr Jangaiah of Alamkhangudem said. "It is not just thehigher price. We also save on the 10 per cent commission we pay at the marketyards," he said.But they understood quite well that the ‘maal’ (produce) should be fresh. "Itshould be plucked too in a certain way. All my life I grew bhindi (okra) theway my father did and sold as he did in the market. They (Reliance) do nottake the second grade vegetables. But it seems I have to change," said.Mr Venkatrami Reddy of Chinnareddy Gudem saw another advantage. "Theywould tell me what quantity of vegetables they need from me. Ill go there andget my consignment graded at their collection centre," he said.The centre would get the price-band and quantity of vegetables it needed tocollect that particular day.Mr Vithal, Secretary of the Agriculture Market Committee at Shankarpally, feltthat the procurement by ‘Ranger Farms’ (through which Reliance procuresvegetables) has no impact on the arrivals at the committee.The committee accepts vegetable consignments two days in a week. "Somedays we receive more and some days we see less arrivals. We havent yet seenany decrease on account of their (Reliances) entry," he said.Asked about farmers claim that they paid 10 per cent as commission, MrVithal said the committee charged four per cent. The farmers also needed topay for weighing and hamalis, he explained.
    • - 26 - CS-08-029 Exhibit-9The Economic Times24 July 2007 1023 hrs IST, AGENCIESWe don want Reliance to colonise us, say farmers tMUNDHA KHERA, INDIA: Its a hot, humid Sunday morning in northernIndia, but the oppressive heat does not deter a group of about 15 farmers fromtrudging door-to-door, offering advice and sometimes warnings. "Do not sellyour precious land. Even if you are offered millions of dollars, do not sell. It isyour only source of livelihood," Mahavir Gulia, the leader of the group, tells avillager in Mundha Khera, 100 kilometres (60 miles) from New Delhi."Sell your land and you will lose your identity," he warns another as the groupwinds its way through the cluster of austere mud, brick and cement homes.Gulia is trying to spell out the dangers to locals whose land has been earmarkedfor a Chinese-style business enclave - a joint venture between the Haryana stategovernment and Reliance Industries, Indias largest private conglomerate."We want to be sure our fertile land that gives us three crops a year does notend up as part of the Reliance empire," he said. "We dont want Reliance tocolonise us. Land is what sustains us farmers with food, respect and dignity."In Neemana village, 10 kilometres away, Pratap Singh, 75, understands themessage -- but a little too late.Eight months ago, he was the owner of a 20-acre (eight-hectare) fertile fieldthat yielded three harvests a year."My sons were lured by the promise of good and quick money. They persuadedme to sell most of my land to the big company," says Singh, squatting on thesandy floor of the one-room house that he and his wife share with a buffalo. Hedid get some cash, but it did not last him long in the world outside his usualfarming routine."We have a saying here that our land is our mother," Singh added sadly. "Howcan you get any respect when you have sold your mother?"India "Great Land Grab" sSinghs land is now part of the 25,000-acre Reliance-Haryana governmentSpecial Economic Zone (SEZ) -- a project encouraged by the Indiangovernment to spur industrialisation, infrastructure development and pusheconomic growth into double digits.For foreign and domestic corporate giants, the SEZs are a tempting option --promising a way around the countrys notoriously slow, corrupt and spirit-crushing bureaucracy.
    • - 27 - CS-08-029But opponents say the government is merely sidelining the still-crucial farmsector -- stealing labour and prime land from a sector which employs more than60 percent of the workforce and generates more than a fifth of Indias grossdomestic product.Journalist-turned-activist Praful Bidwai says the years 2006 and 2007 "will benoted in history for the launch of the Great Land Grab"."Its happening across India," added social activist Vandana Shiva, pointing tofarmers protests in the Communist-ruled eastern West Bengal state in March.Fourteen farmers were killed when police entered their village to evict themfrom land designated for a SEZ - causing a furore and polarising publicopinion.Not that land grabbing is a new concept in India - tribal peoples have long seentheir forest land shrink with the march of urbanisation.But SEZs are different, says Shiva. "These are enclaves of privilege, insulatedfrom the laws of the land - whether it is labour laws or environment laws."Democratic-corporate "schizophrenia"So far, India has approved 303 SEZs and set aside 1,400 square kilometres(540 square miles) of land on which they are to be built.According to Indias trade ministry, the 126 enclaves already operating havegenerated 32,578 jobs, and this will swell to 1.5 million by December 2009. Italso hopes SEZs will generate 25 billion dollars worth of exports in 2008-2009.While the figures look impressive, critics argue that Indian democracy issuffering."When there is large scale displacement of people involved, you need theirconsent. In a democracy, people have the right to decide their own future," saidprominent community activist Aruna Roy."All the villagers should decide -- not just the village headman." She alsopoints to what she sees as the irony of Prime Minister Manmohan Singhsgovernment -- elected on a pro-poor platform in May 2004, but aggressivelypushing through the SEZs."Its a case of schizophrenia," Roy said. Those who may end up profiting fromthe affair are Indias Maoists, who have seized on the land grabbing issue andalready hold sway in much of the impoverished east."Agitations like the Maoists insurgency are triggered by the repeated failure ofgovernance to deliver basic rights," says Roy.Economist Paranajoy Guha Thakurta says Indias ambition to emulate theChinese SEZ model is basically flawed - "because India is a democracy".
    • - 28 - CS-08-029"The Chinese SEZs are like giant urban agglomerations, independent nationstates with their own rules for labour and environment," he said.India following the same model will only create "huge islands of industrialaffluence in a sea of deprivation and poverty."This will be unacceptable in a democracy."
    • - 29 - CS-08-029 Exhibit 10 WAL-MART IN JOINT VENTURE FOR INDIABy Amy Yee in New Delhi, FT.com sitePublished: Aug 06, 2007Wal-Mart has succeeded in getting its toe in the door of the Indian market, viaa long-planned joint venture with local partner Bharti Enterprises.The worlds largest retailer stressed it would “work with and develop localsupplies and create local beneficiaries along the supply chain”, in an apparenteffort to play down controversy over the potential disruptive effects ofcorporate retail in India.The 50-50 joint venture, called Bharti Wal-Mart, is a “wholesale cash-and-carry” business that will use Wal-Marts back-end logistics technology,inventory systems, cold chain infrastructure, truck tracking and fuelmanagement.Bharti, one of Indias largest companies and owner of Airtel, the countrysleading mobile phone operator, recently announced investments of up to$2.5bn in Bharti Retail, its own 100 per cent-owned supermarket chain thatwill be supported by Wal-Marts logistics and supply chain technology througha franchise agreement.The plans come amid controversy over Wal-Marts entry into India. Activistsand small trade associations insist corporate retailers will disrupt millions ofIndians whose livelihoods depend on farming and retail dominated by smallmom-and-pop shops.Manmohan Singh, Indian prime minister, this spring called for an independentstudy on corporate retail advances into the country. The report is yet to befinalised.Dharmendra Kumar, head of India FDI Watch, which opposes big retail, said:“The government is still to know the likely impact of corporate retail. In themeantime, they are allowing corporations to expand their retail plans at analarming”India FDI Watch and other activist groups plan demonstrations across Indiathis week. Hakim Singh Rawat, president of the Hawkers Association, saidstreet traders would be hit hard by Bharti Wal-Mart and warned the Indiangovernment about favouring “only a few huge corporations”.Opponents insist the joint venture is a “back door” into Indias $300bn retailindustry. Under current law “multi-brand retailers” that sell more than one
    • - 30 - CS-08-029brand of products are barred from India. Single-brand retailers such asBenetton and Nike are allowed 51 per cent foreign direct investment.In the next seven years, Bharti Wal-Mart plans to open 10 to 15 wholesalecentres in smaller cities, starting late next year. A typical facility will sellgroceries, stationery, clothing and consumer durables. The companies did notdisclose details of their investment in the joint venture.Formal shops, or “organised retail”, comprise just 2-3 per cent of Indias$300bn retail industry. The majority of shopping takes place in small mom-and-pop shops, roadside vendors and open air market. About 35-45 per cent offarm products never make it to market because of lack of cold storage and poortransport and roads.