On October 23rd, 2014, we updated our
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Mall development is phenomenal in India and is spreading fast even to the
second tier cities in India. Real estate developers are jumping very fast to take
this further from Metro cities to smaller cities and corporate houses like ITC and
Sriram group are making steady progress to make this phenomena feasible in
rural market also.
• Large format malls are increasingly getting prominent with adequate retail
space allocated to leisure and entertainment.
• Some states like Punjab have lifted entertainment tax on multiplexes till 2009.
• With such quantum of new format retail space in the pipeline, innovation,
striking the right tenant mix, effective mall management and provision of ample
parking space are components that will decide the future success of mall
• E.g. Haldiram’s Food Retail Malls
A department store offers an extensive assortment (width and depth) of goods
and services that are organized into separate departments for the purpose of
efficient buying, assortment, promotion and above all ease of shopping for the
• Such a format provides the greatest selection of any general merchandize
and very often serves as the anchor store in shopping mall or shopping centre.
• In India, the number of department stores is less compared to other retail
formats such as supermarkets and discount stores.
• Shoppers' Stop is the first one to open a department store in the early 1990s
and currently operates 19 stores in 10 different cities in India.
• Another operator Lifestyle India began operations in 1998 with its first store
in Chennai in 1999 and in March 2006 it opened one of the largest department
stores in the same city.
• E.g. Westside Gourmet stores in Westside
Hypermarkets have emerged as the biggest crowd pullers due to the fact that
regular repeat purchases are a norm at such outlets. Hypermarkets not only offer
consumers the most extensive merchandise mix, product and brand choices
under one roof, but also create superior value for money advantages of
• With product categories on offer ranging from fresh produce and FMCG
products to electronics, value apparels, house ware, do it yourself (DIY) and
outdoor products, the hypermarkets are becoming popular formats in India.
• Number of players operating hypermarket format are increasing day by day.
• The K. Raheja Corp (C.L. Raheja Group) owns the value retail concept
Hypercity which is the country’s largest hypermarket at 1,200,000 sq ft.
• As the market is expanding and consumers are in a mood to accept changes,
hypermarkets are getting an overwhelming response from consumers. As all
hypermarkets use food and grocery as crowd puller, the price plays major role.
Supermarkets largely concentrate on selling food related products and are
considerably smaller in size compared to hypermarkets. Their value proposition is
also different from the hypermarkets. The supermarkets offer relatively less
assortments but focus on specific product categories. They do not focus on price
rather use convenience and affordability as their salient features.
• In India this role is played by the provision stores and sweet shops.
• Traditionally consumers feel conservative to buy fruits and vegetables from air
• They prefer to buy either from the local mobile vegetable sellers or from the
nearest sabji market. Probably that works as deterrent factor for the growth of
supermarkets in India.
• A supermarket normally sells grocery, fresh, cut vegetables, fruits, frozen
foods, toiletries, cosmetics, small utensils, cutlery, stationery and Gift items.
• In India Food World, Food Bazaar, Nilgiris, and Adani are the leading super
• One more retailer Reliance Retail is on the move, Fabmall a part of Trinetra
Super Retail Limited is also expanding.
• A Food Store stocks an average of 7,000 stock keeping units (SKUs) and
over 50,000 articles. The SKU's are divided into the broad categories - staples,
fresh produce and branded foods, home & personal care products.
• The objective of the store is to offer variety at affordable price in each
• Food Bazaar is made the transition from a just grocery retailer to
developing emotional bonding with shoppers by providing some value added
services to the shoppers. Some of these initiatives include:
Live chakki: which allows customers to buy fresh wheat and have it
grinded there at the store
Fresh Juice counter: This provides customer to have fresh juices.
Live dairy: This provides customers with fresh milk and milk products.
Live kitchen: Customers have the option of buying vegetables, getting
them chopped, cooked fully or partly. Soups, salads and sandwiches are
A Convenience store offers location advantage for the shoppers and provides ease
of shopping and customized service to the shoppers. It charges average to above
average prices, depending on the product category and carries a moderate
number of stock keeping units (SKUs).
• In India, Convenience stores occupied 23 thousand sq. meter of retail space
with sales of about Rs 1347 million in 2005 and are expected occupy 150
thousand square meter of selling space by 2014.
• During the same period, sales is expected to touch Rs 7000 million and
number of outlets are likely to grow from 510 to 3500.
• Twenty Four Seven- a new format of convenience store is operational in Delhi
from June 2005. Twenty Four Seven's portfolio comprises 3,500 stock keeping
units (SKUs) of branded fast-moving consumer goods and another 3,500 SKUs of
prescription and over-the-counter drugs besides 300 private labels products
across food, focusing on staples such as pulses and rice.
Practically the discounters offer several advantages such as lower price, wider
assortment and quality assurance.
• The discounters like Wal-Mart and Aldi were able to quickly build scale and
pass on benefits to the consumer.
• Though, in the long run success depends on the operational efficiency and
consistent value delivery to the consumer.
• The same retailer Wal-Mart struggles in Asian countries like China but
extremely successful in USA. It is believed that the average Indian consumer is
highly price-sensitive and looks for savings in term of money in grocery purchase.
So price-value equation is a critical component in most of the grocery purchases.
• There is hardly any national level discount chain operating in India.
• Due to regulatory issues no such retailers are allowed to sale their products
directly to consumer.
• If these retailers are allowed to operate in India through their retailer stores
they may find it extremely difficult in the early stages because of lack of
experience in the grocery retailing in this market.
Dollar stores have their roots in America's homey five-and-dimes, the general
stores that offered a range of products at low prices. But modern dollar-store
retailers are having more sophisticated operations; leveraging their growing
buying power to strike special deals with vendors and continuously striving for
unique advantage of both convenience and price.
• Some chains sell all their goods at $1 or less. Others offer selected items at
• Most sell a combination of paper products, health and beauty supplies,
cleaning products, paper and stationery, household goods, toys, food and
sometimes clothing, both private-label and brand-name goods.
• US based My Dollar Store started operation in Mumbai through master
franchise arrangements with Sankalp Retail Value.
• In September 2005, Mallz99 chain of dollar stores has also started
operation in Malviya Nagar, South Delhi.
Retail Development in Rural India
• Chennai based market research firm Francis Kanoi estimated the size of the
rural market to be INR 1,50,000 crore annually.
• Rural incomes are growing steadily as well. NCAER shows while the number
of middle-class households (with annual income between Rs 1 lakh and Rs 3.5
lakh) is at about 20 million in urban India, the figure stands at about 18 millionin
the rural areas, data from.
In recent times rural retailing is witnessing explorations by both corporate
houses and entrepreneurs – ITC's Choupal Sagar, HLL's project Shakthi and
Mahamaza are some of the models being tried out.
• The Godrej Adhaar, the rural retail initiative of Godrej Agrovet Ltd operates
a chain of 40 stores providing a host of services to farmers and their families and
is planning to set up at least 1,000 stores across rural India in the next five years.
• Apart from Godrej Adhar and Choupal Sagar other formats operating
successfully in the rural area are, M & M Shubh Labh stores, Escorts rural stores,
Tata Kisan Sansar, and Warnabazaar, Maharashtra (annual sale Rs 40 crore).
The importance of internet retailing is growing all over the world.
• Some internet retailers such as ebay and rediff.com are providing a platform
to vendors to sell their products online and they do not take the responsibility of
delivering the product to buyer.
• They provide virtual shopping space to the vendors.
• On the other hand online retailers like amazon.com and walmart.com have
to maintain their warehouse to stock products and take the responsibility of
delivering products to the buyer.
• In India internet retailing is growing by 29% CAGR and Euromonitor report
estimates that the a CAGR 48 per cent and in value term it going to touch INR 60
billion by 2015 from INR 4 billion in 2005.
• The report also predicts that the contribution of internet retailing to non-
store retailing to is likely to be 46 per cent by 2015.
• E.g. In food retail, Bigbaseket.com in Internet Retailer
Introduction: Indian Biscuit Industry
• Indian Biscuit Industry size is Rs. 21213 crore
• It is the third largest Biscuit Industry in the world
• Segmentation in the biscuit industry:
– Less than Rs. 100/kg: Economy segment
– Rs. 100-125/kg: Middle segment
– Rs. 125- 150/kg: Premium segment
– More than Rs. 150/kg: Super-premium segment
• Economy segment likely to grow at 15-18% annually while premium
segment is to clock 30% growth
• Exports of Biscuits was 14% of the annual production during the year
2010-11 which declined to around 12.5% in 2011-12.
Introduction: Indian Biscuit Industry
• Biscuit is a comparatively low margin food product in the PMCG
(Packaged Mass Consumption Goods ) sector.
• The commodity is also price sensitive, as a consequence of which,
even when the Excise Duty was doubled on biscuits in 2000-01
biscuit manufacturers, including the major brands, were not able
hike MRPs to the extend of the steep increase in the Duty.
• Rural-Urban penetration of Organized Players in Biscuit Industry:
Urban Market: 75% to 85%
Rural Market: 50% to 65%
Two Sectors of the Biscuit Industry
• Biscuit Industry is divided into two main sectors:
• The organized sector accounts for 80% and the unorganized
sector accounts for 20% of the total industry volume.
• The organized sector is valued at above Rs 8000 cores.
• In terms of volume biscuit production by the organized
segment is estimated at 1.30 million tones
• The organized sector is dominated by Britannia, Parle which
accounts for more than 60% of the industry’s volume
Rivalry in the Industry:
• A few major players
dominate the market
• High competition
•Big players have deep
pockets and unorganized
players cannot compete in
Threat of New Entrants:
• Small players cannot
enter as high entry of
barriers in terms of capital
intensive production etc.
• Some other big player
Threat of Substitutes:
• Many variants in the
• Traditional home-made
snacks making a come back
Bargaining Power of
• Availability of many
variants in all
prices, quality, tastes etc.
• Medium brand loyalty
Bargaining Power of
• Manufacturers are big
players and suppliers are
small players and
• Ingredients are basic
wheat, sugar etc.
Factors leading to growth in Biscuit Industry
New routes to growth: Players have prioritized
right markets with right deals
Margin improvement: Managing costs
sustainably and getting price right
Execution sharpening: Better consumer
insight, branding and marketing effectiveness
Increased adaptability and responsiveness:
Optimized business structures
Margins and Growth
• Food and grocery retailers typically have a 14 per cent gross
margin in India, compared with around 17 per cent in
• Gross Margin of Britannia in 2007-08- 10.36% and in 2011-12-
• In FY2011, FMCG sector (other than cigarettes) contributed
15% to total Gross Revenue of ITC
Industry consists of
Major Players Minor Players Emerging Players
Unibic (tied up
SURYA FOOD AND
Established in 1896
90% of Britannia’s
annual revenue of
Rs2,200 crore comes
GOLD, TIME PASS
Established in 1929
the largest selling brand
of biscuits in the world
70% market share in
India in the glucose
Parle-G, Hide and
Jack, Monaco, Parle
Shakti, Parle 20-20.
selling of biscuit under
brand “ PRIYAGOLD”
in October1993. Key
Bite, Bourbon, Marie
Lite, Magic Gold, CNC
Main Players in Organized Retail, their
Distribution and Pricing
• The company has 4 factories, 10 manufacturing units of its
own and 75 manufacturing units on contract
• Parle uses Intensive Distribution for Parle G. This is the ideal
strategy for the market leader as intensive distribution has the
– Increases coverage and sales
– Increases product availability
– Encourages retailers to compete aggressive.
– Higher competition leads to narrower margins for the retails
– Increases the ultimate margin for the manufacturer.
The Channel Members of the Distribution
Network of Parle
The Parle distribution network for biscuits has
essentially four levels as below:
The Channel Members and Logistics
• Parle has nearly 1500 wholesalers
• catering to 425000 retail outlets directly or indirectly.
• A 200 strong dedicated field force services these wholesalers
• Additionally, there are 31 depots and Carry and Forward agents
supplying goods to the wide distribution network. Parle has level
1, level 2, level 3 distribution channels levels.
Distribution Channel Levels
•Parle has level 1, level 2, level 3 distribution channels levels.
Availability of Parle biscuits at all departmental stores across
the length and breadth of the country.
Since it's an FMCG product this channel exists for customers
scattered throughout the country.
Mass consumption and suitable for National and International
coverage. For e.g. Parle's international operations consist of
serving markets in the Middle East, Africa, South America, Sri
Lanka, Australia and North America for which the 3 level
distribution channel exists.
• Parle had earlier adopted the Market Penetrating Strategy i.e low
price along with capturing the market.
• Parle, in order to create large potential market, employs mass
marketing for Parle-G.
• Mass-production, mass-distribution and mass-promotion allows
Parle to maintain low-price for Parle while targeting all segments of
• It is available to customers from big metropolitan cities to the
remotest and smallest of villages with population of 1500.
• However, when compared to its competitors, it has more focus and
penetration in rural and sub-urban areas than city areas.
• The major reason being the strategic location of its manufacturing
units, which are closer to rural and sub-urban areas.
Premium Brands of Parle
• Parle entered the premium segment in the late-1990s with its
chocolate chip biscuits, Hide & Seek.
• Today, it markets its premium biscuits without the Parle brand
• The rationale behind that is not to dilute the premium image
of the biscuits by associating them with Parle, which is
synonymous with a mass brand.
• The premium category accounts for around 8 per cent of
overall revenue, but Parle hopes to raise that to 20 per cent in
the next few years.
Britannia Distribution Style
• Intensive Distribution: As biscuits need to reach the
consumer at their nearest locations so this type of
distribution channel is used.
• This type of distribution helps customer look for
location of convenience.
• Britannia products are available in over 3million
stores across India.
• Britannia sells about 6 billion packs of biscuits every
Functions of different Entities
Sorting Allocation Assorting &
Some of the price strategies of Britannia are:-
• Market-Penetration Pricing for economy products
• Product –Quality Leadership for products like Good
Day and Jam Treat as they are Mid-segment and
• Special Event Pricing in festive season
ITC’s Distribution System
• Company used its existing network of convenience stores for Sunfeast: the
hole-in-the-wall pan-beedi shops
• ITC also looked at grocery stores and other retail formats
•As per ITC, brand is now available in nearly 1.8 mn outlets
ITC’s Key Features in Distribution System
• ITC uses FIFO method to reduce the wastage of
goods due to expiry.
• They also keep the good on constant move from low
sales are to high sales area.
• The company collects all the expired goods four
times a year, and destroys them.
• Retailers must return expired or damaged products
within six months after the date of expiry.
• The Indian bakery industry is one of the largest among
the unorganized processed food industries.
• The current estimated market was expected to cross Rs
4,308 crore by 2012.
• At present, the bread & biscuit industry accounts for 82%
of the total bakery products in the country
• Bakery products which include
bread, biscuits, pastries, cakes, buns and rusk, most of
which are in the unorganised sector, is estimated to be in
excess of 3 million tonnes.
• The bakery market is divided into the rural market and
the urban market. The market share is about 22.5%
(rural) and 77.5% (urban) in the country.
Key Challenges in Biscuit Food Retail Sector
Penchant for fresh/home-made and value consciousness :
Demand for freshly cooked food over packaged food. So in order to compete in this
sector, packaged food players need to drive down prices by almost 35-40% to be comparable
on cost with home made food.
Diversity of tastes and preferences :
Multiple cultures, languages and religions have a huge bearing on the tastes and preferences
of the Indian consumer.
Willingness to travel :
Given the current density of retail outlets in India, retailers will have to motivate the
consumer to trade convenience with price, range and ambience.
Difficulties in accessing areas:
Difficulty in accessing vast semi-urban and rural markets due to infrastructure
Key Challenges in Biscuit Food Retail Sector
Sourcing base and efficiency:
The fragmented agri -supply base coupled with an inadequate legal framework make it
difficult for retailers and food processors to procure quality produce at competitive costs
directly from farmers.
Big becoming bigger:
While many players are entering the retail space in India currently, the growth stage will be
characterized by rapid expansion and consolidation among these players.
Rise of organic foods and health and wellness segment:
There will be an increase in health consciousness in the future. Organic foods and
wellness products would be emerging opportunities in the years to come.
Increasing focus on private labels:
As competition in the organized retail market increases, discounts and
promotions are expected to play a critical part in generating footfalls
Indian consumers driven by Price-Value
Quotient. This requires the right balance
between the offering of the product and
the level at which it is priced.
In the Indian context, considering the
current low consumption levels along
with the price-sensitivity, there’s a need
to introduce smaller SKUs to induce usage
and attract a larger Consumer base.
Packaging & Shelf space
They must be strategically located in retail
outlets to maximize visibility and
Unifying Packaging Scheme
Since majority of these biscuit purchases
are impulsive decisions, these products
must have a unifying packaging scheme
that establishes a brand image.
Critical Success Factors
Service to customer
Efficient Distribution systems are
critical if the manufacturers wish to
provide a high degree of service to
Based on Demand
Based on the importance of shelf
space in the industry and that every
customer needs biscuits on a
weekly basis (and, sometimes, even
on a daily basis), manufacturers
cannot succeed in the industry
without proper levels of service and
One of the biggest complaints
amongst Biscuit-eaters was
Purchasers would be irritated if
they purchased a pack of biscuits
that were almost inedible because
the product had basically been
reduced to a sack of crumbs.
As a result, successful performance
in the industry requires producers
to emphasize producing a quality
Critical Success Factors
Product Innovation & the
Diversification of Products
Correct Size & Variety
Based on the impulsive nature of
consumers’ buying habits and the
short shelf life in consumers’
homes, biscuit manufacturers need
to have the correct size of a product
as well as a variety of products to
attract the attention of consumers.
Regional Flavours is something the
companies could work towards.
Innovation in packaging and product
usage is an important success factor
for processed foods.
Brand Competitiveness &
Competitiveness & Awareness
With promotional activities, it is
critical to educate the consumer and
raise awareness about the
quality, value and usage of product.
High Decibel Advertising
Many brands have been able to work
towards the top of their respective
categories, through their heavy
expenditure on advertising on
Critical Success Factors
Changing patterns in Rural Consumption
- Nearly 55% of the biscuits are consumed by the rural sector.
- Given the smaller pack-sizes available and their strategic pricing, many
say it is abound to increase.
- Despite economic worries, the industry is expanding its customer base while
other food service sectors continue to suffer. Consumers are now willing to
spend moderately and demand high quality for every rupee they pay.
Retail formats are going to be great platforms for product push in the near future
Best of Both Worlds:
Commenting on the future trends in the Biscuits Industry in India, Vinita Bali
(MD, Britannia Industries Ltd) said, “Today, there is a greater consumer
choice both at the local and national level, together with a diversity of tastes
& benefits ranging from Health & Nutrition to Pure Indulgence.”
Agreeing with her, many experts feel Indian consumers are steadily moving
towards increased consumption of premium biscuits. As per their
analysis, Cookies and Sandwich-biscuits will continue to perform well in
future. These categories are expected to see more product launches over the
Apart from the above trend, more action is expected in the health and
wellness segment, due to increasing concern about lifestyle-related ailments.
There will be more products on the market which are naturally healthy. Many
biscuits, which are good for health, but are not advertised as such, will see a
change in their marketing pitch. E.g. Marie biscuits’s Health Quotient isn’t
advertised very often.