Organised Retail & Supply chain


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Why worry about Organised Retail (or FDI in retail) when its impact goes beyond the narrow singular vision of the trading mindset. Retail will bring organisation and promote economic co-operation and development.

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  • Why worry about FDI in retail when its impact goes beyond the narrow singular vision of the trading mindset
  • One of most talked and deeply debated topics – retail.Also one of most documented and with established growth patterns – a success, irrespective of FDI or not.It is well understood that organisations feed on collaborative practises, build competition and scopes value chain optimisation.
  • Organisation of a sector, whether via foreign or domestic inputs has always brought cleartransparent value sharing across all stake holders.Organised Retail will have to deal in collaborative fashion with all stake holders- Producer, aggregator, logistics, merchandiser – they form the complete supply chain.
  • India’s Growth is clearly translating into consumer spend with Food spendingbeing largest.There are Two important stakeholders – producers and consumers, and both are pushing for more (growth).
  • The green revolution has proved that the Indian Farmer is capable of meeting demand at a robust pace.Yet a demand outstrips supply and studies indicate the supply chain has not coped as a bridge between producer and consumer.Similarly, food processing has developed robustly with strong support from the MoFPI.
  • These sets of resource attributes – to service specific demand types – need to be developed. Develop through hard experience or by jump starting through shared global expertise - that is the decision for India!But to service a modern India this expertise Needs to be Learnt, and quickly!
  • Retail as it got organised, visibly promoted various Partnerships from production source to consumer. See example of Safal and Amul, McDonalds or Dominos.Such partnerships, PPP or private… hastens and aids the growth that India is undergoing.Be it FDI or domestic investment, the benefits have been seen to seen accrue all across the Indian value chain.
  • In understanding all of previous, the planning commission has recommended various enabling actions, including opening of FDI inmultibrand retail.By streamlining the value chain and strengthening the supply chain the beneficiaries would be farmers and consumers.
  • Excise waived on F&V, meat preparations, ice cream, other RTE instant food mixes. Automatic approval for 100% foreign equity in processed food items. (except alcohol, beer, etc)Priority lending status to cold chain industry at lower interest rates.Mega food parks scheme extended with government grants of up to USD10 million. GoI is initiating National Highway Development Program and is partnering with Indian Railways to establish storage infrastructure.Indian Railways is planning to invite private parties to run refrigerated container trains for transporting agricultural products across the country.Integrated Food Regulations (FSSA) notified and to implementation being enacted.National Centre for Cold Chain Development (NCCD) and inter-ministerial group established for special focus on cold chain development.Stated target to develop a multi-modal National Green Grid for Perishables for fast track movement of perishable commodities.New PPP-IAD subsidy scheme deployed to enable fresh round of investments under PPP mode to develop agriculture marketing at a priority.
  • A nodal agency set up by the government on recommendation from the Industry. Its members are industry and government participants.It may be noted NCCD is not only for agriculture produce but will for synergy across all cold chain sectors is aimed at.
  • Organised Retail & Supply chain

    1. 1. Capt. Pawanexh Kohli
    2. 2. India is 5th largest retail market worldwide. 60% of retail comprises food; fresh & processed 4% 6% 1,968,000 Consumer Food outlets expected by 2015600500 Retail U$ Billion400 61%300 543 9%200 353100 Retail Segments 205 Split India 0 2002-03 2009-10 2014P Food Fashion 2,000 160 Leisure / entertainment Fashion accessories Food Service Outlets (‘000) 1,800 140 Consumer durables Health, beauty, Pharma 1,600 120 Furniture Telecom 1,400 1,200 100 Books and music 1,000 80 800 60 600 40 400 200 20 Retail Market is growing irrespective. It is clear 0 0 indication that India is ever growing. 2005 2006 2007 2008 2009 2010 2011 2012E 2013E 2014E 2015E Organised retail structures demand patterns. Standalone (LHS ) Leisure (RHS ) Retail (RHS )Note : Total Food Service Outlets is a sum of Standalone , Leisure and Retail outletsSource : Euromonitor , IBEF , ORKASH and CrossTree Analysis
    3. 3. Collaborate with Source Retail Chain Stakeholdersor Producer. • Farmer • Processor • PHM • Cold Storage • AggregatorCollaborate withproduce aggregator. Producers InventoryCapacity utilise PostHarvest infrastructure. Market TransportPrepare to Access theconsumption market. • Outlets • Vendor • Distribution Hubs Extensions • ReefersAttract or reach theconsumers door step. Organisation means: collaboration, resource building, good practices and promotesAppease the Indian transparency in value chains.Consumer demand. “Partnerships Perforce”
    4. 4. GDP USD 1.93 trill in 2011 from 1.25 Domestic spend (₹) 31-Jan-2012 50,164trill in 2006 (+54% in 5 years) 39,267Per Capita domestic disposable 29,667 36,760spend doubled 2005 to 2011. 23,712 28,232Spending growth: $991 billion in 22,1812010 to $3.6 trillion by 2020 (5.8% of 17,682global consumption, doubling fromcurrent 2.7%) [Boston Consulting & CII – Feb2012] FY05 FY07 FY09 FY11 Per Capita Disposable Income Per Capita Disposable Spending “Growth… Increase in Unstoppable” consumer class pop. India Spends on Quality & Hygiene Purchasing 61% Food and Grocery power, Rise in consciousness Increased income Others Demand for (Cold Chain) Quality Foods Clothing and Fashion Electronics Easy Changed Beauty and Wellness consumer consumer credit mindset Furniture and Fixtures Source: MoSPI- Govt of India.
    5. 5. Fact! Green Revolution 160 Production of Horticulture Produce 140 Million 146.6 149.6Proving ground that 120 Metric Tons 128.4 129.1 134.1 2.7 timesfarmers’ efforts and 100 2.5 timesgovernment support 80 88.6 101.2have translated into 60 65.6 68.5 71.5 74.9 77.5robust response in 40 58.5 50.9production. 20 28.6 43.0Yet, food items lead 0inflation… indicating Fruits Vegetables Plantation Crops Othersthat supply systems areinefficient in meeting Within Horticulture, perishable commodities trends higher to meet demand & drivesdemand side. growing demand for perishable handling.
    6. 6. 138 million operational holdings, mostly marginal andsmall. Around 20 million engaged in horticulture.High Fragmentation, but some areas are showing signsof consolidation of the operational farm holdings.Transition from peasant mode of production toproduction for markets.HVA is growing faster than conventional agriculture.Agriculture contributing about 14 % to the GDP of thecountry, currently valued at approx Rs 13000 billion.Contribution of Horticulture to GDP of agriculture isestimated to be around 30% and growing.Perishables market and logistics needs to keep pace! Logistics artistes need to convey this Supply to meet Demand.
    7. 7. Supermarkets Requirements: Supplier requirements :• Seamless value chains Any Cold Supply Chain Solutions • Quality assurance• Outsource process driven activities Partner will require the following • Low cost services• Lower inventories attributes and services: • Traceability• Quality, Brands focus  Commercial Network. • Product Integrity• Risk Management and food safety • Continuity of demandand traceability.  Inventory Management. • Expanding markets• Increased shelf life.  MultiModal Connectivity. • Cold Chain Integrity• Just in time distribution  Aggregation, Storage. • Quick time to market• Traceability  Pick and Pack.  Build up, Cross Dock. Storage requirements :  Documentation. • Lower costs Shipping/Airlines requirements :  Fumigation, Quarantine. • Extract efficiencies from value chain • Cargo capacity utilisation • Quick turnaround • Flexibility  Traceability, Process. • Increased flexibility • Specialisation – cargo freighters  Quality Assurance. • Multi Modal Connectivity • Specialist Forwarding agents  Farm to Door care. • Continuity of supply and market • Simplified Handling demand  Chain Integrity. • Information Flow • Traceability • Security  Cost efficient. • Consolidation of handling • Centrally located hub function These sets of resource attributes – to service specific demand types – need developing.
    8. 8. Post Harvest or Source Management.Refrigerated Transport Connectivity. “These Enablers are not the business – they are but the toolsCold Storages & Distribution Hubs. for efficient trade.”Packaging & Unitisation. Cold Chain is already successful in Ice creams, Processed Dairy, FrozenHandling & Traceability. foods, meats. It has not been able to prove itself in the fresh farm food segment. Because unlike others, the market for freshHygiene & HAACP. food was not structuredFARMER to MARKET – Linked, Accessible, Distant.
    9. 9. By consolidating demand, simplifying supply.By extending market footprint for farmers.By infusing ownership in the total value chain.By creating brands versus commodity selling.By diverting would be loss into processing.By laying onus on better handling practices.By adding to existing private participation.By perforce infusing capital into rural India.By linking producer owners with consumer.
    10. 10. Four Pronged Strategy Recommended to Govt. Economic Market Institutional Financing & Agents Linkage Change Incentives• Farmer co- • Direct Link: • Better synergy • Catalyse & operatives , between various strengthen PPP & • to private co-operative wholesale schemes.• Producer investments. organisations, markets • Strengthen cold • Concessional line of • cooperative Supply chain finance through• Private enterprise, wholesale through NCCD. NABARD.• Private investors markets • Schemes on tap and • Model APMC. better synergy • Transparency in between Depts and commerce. & model • Link through WDRA Ministry to benefit through • Develop cold chain • Promote FDI in NWR (perishables). for non-horticulture retail. products. Investors, Processors, Producers, Service Providers, RetailersDr. Saumitra Chaudhari Committee Report
    11. 11. Central Excise Duty Exempt • 100% exemption for specified equipments for storages or transport, self loading/unloading trailers/semi-trailers.Customs Duty Exempt • Full exemption from basic customs duty for manufacture of refrigerated vans/trucks; bio-polymer/bio-plastics; and • Concessional duty of 5% for initial setting up or substantial expansion of a cold storage, cold room, processing, etc.Service Tax Exempt • Exemption for ‘Erection, Commissioning or Installation’ of Mechanized Handling Systems; Cold Storage equipment; transport; and • Technical Testing; Analysis & Technical Inspection & Certification Services.Foreign Direct Investment • Cash & Carry: 100% FDI in wholesale trade / Multi-Brand Retail: 51% FDI. • Cold Chain & FPI: 100% FDI through automatic route.
    12. 12. VGAgri/Foods identified as National Vegetable 100% FDI in food NCCD takes shape PPP – IAD scheme Funding, Infrastructure priority sector Initiative sector status Urban Encourages Promoting Encourages proximity Grants & Liberalising holistic integrated Investments Vegetable Subsidies FDI Inflow development PPP Production Government as ‘Catalyst’ Increased focus on creating enabling infrastructure by govt. Cash & Carry: 100% FDI in wholesale trade / Multi-Brand Retail: 51% FDI with state level permission. Cold Chain & FPI: 100% FDI through automatic route. NCCD to play pivotal role to correlate industry with policies.
    13. 13. Industry, PSUs, Government, Investors, Entrepreneurs, Farming Associations & Knowledge Houses - All Working Together. Training, HRD and R&D Committee. 2 Committee for Application of non-conventional EnergyTechnical Specification, Sources in Cold Chain 3 Infrastructure. Standards, Test Laboratory & Product 1Certification Committee. Executive Committee Networking with 6 Committee for Supply NHB, FHEL and other NLAs of NHM 4 Chain & Logistics. NCCD Members, other 5 cold chain sectors
    14. 14. Author is founding Chief Advisor to incubate theNational Centre for Cold-chain Development and is the founder advisor of think tank CrossTree