The document discusses competition and pricing in the Indian food retailing industry. It provides background on the emergence of modern retail formats in India and the classification of different retail store types. It then focuses on food retailing, describing some of the major players in the industry like Reliance Fresh, Subhiksha, Food Bazaar, and More Retail. It also discusses opportunities for new food retail formats and the factors influencing the business environment for different formats.

1. Competition & Pricing
In Food Retailing
Surjeet Singh Dhaka
PhD Scholar

2. WHAT IS RETAILING?
 Retailing – a set of business activities that adds value to the
products and services sold to consumers for their personal or
family use.
 A retailer is a person that sells products and/or services to
consumers for personal or family use.

3. RETAILING IN INDIA
 Emergence of modern retail formats
 Increased pressure on opening up FDI in retail sector
 Rapid Evolution of New-age Young Indian Consumers
 Rapidly increasing middle class
 Rising Incomes levels
 Increased Awareness Level among Consumers
 Exposure to International Brands

4. INDIAN RETAIL SCENARIO
 Total Private Consumption Expenditure in India – 375 Billion USD
 Retail Sale – 205 Billion USD (55%)
 Organized Retail – 6.2 Billion USD (3%)
 Retailing – 35% of GDP
 Outlet Estimates – Over 12 Million
 Format – Only 4% larger than 500 sq.ft.
 Second Largest Employer after Agriculture

5. CLASSIFICATION OF RETAIL STORES
Classification of Retail Stores
Store Based Retailing Non-Store
Retailing
Form of Ownership
Independent retailer
Chain retailer
Franchise
Leased departments
Consumer co-operatives
Merchandise offered
Convenience stores
Supermarkets
Hypermarkets
Speciality stores
Departmental stores
Off price retailers
Factory outlets
Catalogue showrooms
Direct selling
Mail order
Tele marketing
Automated Vending

6. Overview
6

7. ORGANIZED RETAIL
 The Indian organized retail industry is valued at about $300
billion and is expected to grow to $427 billion in 2010 and $637
billion in 2015.
 Retail Market India today is the second fastest growing economy
of the world after China.
 In organised retail the front liners like shop floor executives, sales
executives etc are in great demand.
 Organised trade in India is highly under-developed as compared
with other emerging markets in Asia, Latin America and Eastern
Europe and developed markets like the US.

8. FOOD RETAILING
 Food retailing has come of age –
Food items were sold in small road side grocer shops & mandis,
now being sold through supermarket stores.
 Shopping for groceries is no longer a strenuous and
uncomfortable affair.
 Food & beverages is the major segment, in organized Retail of
India, worth Rs 8,97,000 crore.
 Food retail has surpassed the dominating apparel and
accessories sector.
 From simple trading activity, food retailing is now heading to
the status of an industry.

9. SOME FACTS ABOUT FOOD
RETAILING IN INDIA
• Food Retailing is growing at 30% rate which makes it a major
driving force of the economy.
• At US$ 175 billion today the food industry is likely to grow to
US$ 400 billion by 2025.
• Modern state of the food retailing is not a demand led but the
supply led one.
• Food has the largest consumption in the Indian economy and will
remain the single largest category.
• There are 10 million street vendors in India, of which 6 million
only sell food.
• Indian consumers are happy with store goods than branded goods.

10. FACTORS PAVING THE WAY TO
REVOLUTIONIZING FOOD RETAILING IN
INDIA
Changing life styles and tastes
Growing need for convenience
Increasing disposable income
Increasing numbers of working women
Change in consumption patterns
Higher aspirations among youth
Impact of western lifestyle
Plastic Revolution – Increased use of credit cards and
debit cards

11. ORGANIZED FOOD RETAIL CHAIN

12. Focus on General Merchandise Retailers –
Department Stores
 Competition from:
Discount Stores on Price
Category Killers on Assortment and Service
 Possible Competitive Responses
Lower Costs By Reducing Services
More Sales (by Expansion, Acquisition)
Focus on Strong Categories (e.g., Apparel, Home,
Jewelry)
Improve Services
Develop Private Labels, Exclusive Brands
Adapted from Levy and Weitz

13. Focus on General Merchandise Retailers –
Discount Stores
Big Three – Wal-mart, Target, Kmart
 Competition from Category Killers – Toys ‘R Us, Best Buy,
PetSmart
 Possible Competitive Responses:
Continue to Reduce Costs
More Focus on Apparel Because It Offers Higher Margins
… Except Wal-Mart, Which is Focusing on Food!
Adapted from Levy and Weitz

14. UP-AND-COMING FOOD RETAIL
FORMATS
 Neighbourhood Stores
In India about 90% of food purchases are made within a distance
of 1.5 km from the customer's home. The outlets closest to a
neighbourhood store in India are 'Safal' outlets operated by
Mother Dairy in Delhi, Margin Free in Kerala and Subhiksha.
 Supermarkets:
This format caters to the consumers' need for choice and variety.
These stores cater to the consumers in a catchment area with a
radius of 3 to 4 km. Examples of supermarkets already in India
are Food World, Trinetra and Nilgiris.

15. UP-AND-COMING FOOD RETAIL
FORMATS
 Hypermarkets: Hypermarkets are essentially destination stores
catering to the consumers' bulk shopping needs in both food and
non-food categories. Spencer’s (RPG), Big Bazaar (Pantaloons),
Star India Bazaar.
 Cash & Carry (C & C) Stores: These stores sell their products
to their members only. The members are typically retailers and
institutions. The key added value is a wide range of products under
one roof, available at wholesale prices. Metro has started the first
C & C store in India in Bangalore. The typical area of a C & C
store is 70,000 to 100,000 sq. ft.

16. FOOD RETAIL FORMATS
“Food Retail Format” as a retail offering that can be
segmented based on the different value that it offers to the
consumer along three key dimensions – Choice, Service and
Price.

17. THREE MODERN FOOD
RETAIL FORMATS• Hypermarkets:
- Self service stores, mix of food & non food.
- Essentially low price
- 40,000– 75,000 Size (sq.ft)
• Supermarkets:
- Food, laundry and household maintenance products.
- Self service
- low cost
• Convenience stores:
- Mix of products
- 500-1,000 (sq.ft)

19. OPPORTUNITIES FOR NEW FOOD
RETAIL FORMATS
1. Limited-Range Discount Stores
2. Mini-Marts
3. Compact Hypermarkets
4. Specialty Food Stores
5. Convenience Plus

20. LIMITED-RANGE
DISCOUNT STORES
 Small
 Easy-to-shop
 Easy-to-access configurations
 Low-priced

21. MINI-MARTS
 low-priced neighborhood stores
 Limited range of fresh food
 Dry groceries and household products

22. COMPACT HYPERMARKETS
 Small in size than hypermarkets
 Reduced range and assortment
 Brings together the strengths of both
hypermarkets and supermarkets

23. SPECIALTY FOOD STORES
 Large produce sections
 Area between 200 and 500 square metres

24. CONVENIENCE PLUS
 Neighborhood shops
 Stand to do well in markets with busier lifestyles and an
ageing population

26. THE BUSINESS ENVIRONMENT AND ITS
INFLUENCE ON FORMATS
1. The cost and availability of real estate

27. 2. Regulatory environment

28. 3. Development of distribution in infrastructure
4..State of technology

29. KEY PLAYERS IN INDIAN FOOD
RETAIL
SECTOR
 Reliance fresh
 Subhiksha
 Food bazaar
 More retail
International player
Wall mart- Super center

30. RELIANCE FRESH
Type Supermarket
Founded 30 October 2006
Headquarters Mumbai, India
Key people Mukesh Ambani, CEO

31.  Reliance Fresh is the convenience store format
 Headed by MUKESH AMBANI.
 Reliance plans to invest in excess of Rs 25000
crores in the next 4 years in their retail division.
 The company already has in excess of 560
reliance fresh outlets across the country.
 Reliance Fresh store is approximately 3000-4000
square. feet and caters to a catchment area of 1-2
km.

32. VISION
To create a blend of a typical Indian Bazaar
andInternational Supermarket atmosphere with
theobjective of giving the customer, all the
advantages ofQuality, Range and Price associated
with large format stores and also the comfort of
being able to touch andfeel the products.

33. SUBHIKSHA
Type Discount department
store
Founded Chennai, India
(1997)
No. of locations 1000 stores
Key people R. Subramanian
Industry Retail
Employees 25,000

34.  Subhiksha is an Indian retail chain with more than 1400
outlets
 selling groceries, fruits, vegetables, medicines and mobile
phones.
 It was started and is managed by
R. Subramanian
 Subhiksha plans to open 1000 outlets by December 2008.
 plans to invest Rs.500 crore to increase the number of outlets
to 2000 across the country by 2009

35. FOOD BAZAAR
 Food Bazaar, the supermarket variant of
future group.
 Has adopted the 'negotiated and predetermined' model to
source vegetables and fruit from farmers across states.
 The company will use the model to procure potatoes from
farmers in Uttar Pradesh where the quantity and quality of the
produce is predetermined. The company decides the price after
the harvest to give maximum benefit to the farmer.

36. • 35+ stores; pan Indian format Bhubaneshwar, Nagpur, Nashik,
Durgapur….Sangli
• Simple, Indian model
• Minimum habit change for the customers
• Use small entrepreneurs to the hilt, for category management
• Largest Food Retailer – But just a small spec in the market
• Shooting for Rs 1000 Cr this year; Rs 2000 Cr next year

37. MORE RETAIL STORE
Type Department store
Founded 2007
No. of locations 40-50(Mumbai)
Industry Retail

38.  The more. chain of supermarkets, are bright and
clean stores, at convenient locations with layouts
that allow ease of navigation. The product display
is well organised and facilitates ease of choice.
The stores have been designed by Fitch, the
leading international retail design firm.

39. WAL-MART SUPERCENTER
• The number of non-traditional retail outlets,such as warehouse
clubs and discount mass merchandisers,has increased
substantially in the pastdecade.
• Traditional supermarkets are facing seriouscompetition from
these retail outlets because nontraditionalretailers with low-
operating margins areable to provide low-price appeal to
consumers.
• supercenters,ranging in size from 100,000-200,000 square feet.

42. COMPETITIVE ANALYSIS
(FOOD RETAIL)

44. SUBHIKSHA
 Subhiksha is an Indian retail chain with more than 1400 outlets
selling groceries, fruits, vegetables, medicines and mobile phones.
 Subhiksha plans to open 1000 outlets by December 2008.
 Plans to invest Rs.500 crore to increase the number of outlets to
2000 across the country by 2009.

45.  Subhiksha has seen a considerable growth by offering goods at
cheaper rates and there by increasing its customer base.
 It is also dubbed as India's largest retail chain.vision to deliver
consistently better value to Indian consumers.

46.  Subhiksha now has the pan Indian presence with
stores across Delhi, UP, Punjab, Hariyana,
Gujarat, Maharashtra, AP, Karnataka and TN. It
has recently commenced operation in Kerala also.

47.  Thinking:-
 Bringing in a model that is Indian, capable of supporting the
middle class of India.
 A business model from India is superior to a business model
imported from the West.
 We genuinely believe that through efficiency, we are helping the
consumers save more.

49. RELIANCE FRESH
Reliance Fresh is the convenience store format which
forms part of the retail business of Reliance industries of
india.
Mukesh Ambani Reliance plans to invest in excess of Rs
25000 crores in the next 4 years in their retail division.
Stores would provide direct employment to 5 lakh young
Indians and indirect job opportunities to a million people,
according to the company.

50.  The company also has plans to train students and housewives in
customer care and quality services for part-time jobs.
 Company-owned stores currently totals just $8 billion in India.

52.  The MORE chain of supermarkets, are bright and clean stores, at
convenient locations with layouts that allow ease of navigation.
 MORE is the answer to the shopping needs of the Indian housewife
who wants a modern and convenient option in her neighbourhood.

53.  MORE also has a range of products from its own
stable available across value, premium and select
ranges.
 The Rs 9,000-crore pan-Indian plan would have
neighbourhood supermarkets catering to daily and
weekly household shopping needs of customers.

55.  Food Bazaar supermarket variant of Pantaloon Retail Ltd, has
adopted the predetermined' model to source vegetables and fruit
from farmers.
 Almost 20% of the cost is saved if the produce is procured
directly from the farmers.

56.  Kishore Biyani-run retail major, Pantaloon, is awaiting
amendments in the Agriculture Produce Marketing Committee
(APMC) Act in different states to source its produce directly
from the farmers.
 The floor area for the stores will range from 5,000 sqft to
20,000 sqft.

57.  Of the 8,000 stock keeping units available across
the stores, 10% constitute the farm fresh segment,
while the international standard is around 12%.
The company wants to push the former to 15% in
the next three years.

58. KEY SUCCESS FACTORS FOR FOOD
RETAILING
 Increasing need for convenience
 Eight to ten outlets to purchase various food
products
 Time-consuming and inefficient way of shopping
for food
 Changing lifestyle
 ‘Value for time' and ‘Value for money'

59.  Availability of quality retail space
 In late 1990s cost of real estate was high and hence food retail
business models were not financially viable in metropolitan
areas
 In the last few years, various factors have led to increased
availability of real estate for organized retail formats
 300 malls are at various stages of construction across metros and
mini metros in the country
 The average size of a mall is about 100000 sq ft
 Additional retail space of 30 to 40 million sq. ft. over the next
three to five years

60.  Taxation: Implementation of VAT helping organised
retailers
 The Indian government has launched value added tax (VAT)
nationwide April 2005
 Aim was to: boost state revenues, reduce inter-state barriers to
trade and make accounting more transparent
 This was in favour of organized retailers given their multi-
location presence

61.  Increasing share of private labels
• Share of private labels in the basket of key food retailers is
increasing
• Fierce competition with the well-established brands of the
leading FMCG companies
• Trent (A Tata Group Company) has now launched a
hypermarket with focus on Star India Bazaar and aim to
achieve a significant share of sale through private labels.

62.  Retailers' eye on the unbranded food space
• Modern food formats like Food Bazaar and Spencer's have their
eye on the unbranded part of the consumer's shopping basket
• Retailers are offering a package of convenience and freshness
• Food retailers are also offering 'live kitchen' formats
• Examples: Grinding coffee fresh at store, idli batter, paneer, curd
and cut vegetables

63. KEY CHALLENGES IN FOOD
RETAILING Penchant for fresh/home-made and value consciousness
• Dietary patterns, poor electricity supply, low penetration of
refrigerators and a family structure
• Value conscious
• A TSMG study indicates that packaged food players need to
drive down prices by almost 35-40% to be comparable on cost
with home made food

64.  Diversity of tastes and preferences
 Multiple cultures, languages and religions
 Preferences of the Indian consumer.
 A challenge for players aspiring to develop a pan Indian
presence.

65.  Willingness to travel
 Sourcing base and efficiency
 Real estate availability and cost
• Rentals account for 7-7.5%
• Real estate availability and costs
• Factors like adequate parking, ambience and proximity the key
drivers of footfalls
 Manpower availability

66. EMERGING TRENDS IN FOOD
RETAILING
 Big becoming bigger
 Size drives profitability, not just through
economies of scale in operations but also through
higher bargaining power
 The growth stage will be characterized by rapid
expansion and consolidation among these players.

67.  Rise of organic foods and health and wellness segment
 Consumer attitudes and preferences are undergoing a shift
 Factors like increased disposable incomes, changes in lifestyle
patterns, shift in age structure, increased number of working
women and multi cultural exposure
 Increasing health consciousness in the future
 Organic foods and wellness products

68.  Increasing focus on private labels
 Competition in the organized retail market
 Discounts and promotions are expected to play a critical part
in generating footfalls
 More attractive to promote private labels or store brands given
their higher margins.
 Consumer would benefit from lower prices.

69. FUTURE OF FOOD RETAILING
 Innovation on Retail format
• by targeting specific customer segments and serving their
needs better e.g. working women, single office goers, etc
• by changing the product mix e.g. entirely private label stores,
exclusively fresh produce stores
• by offering new forms of convenience and wider range to the
customer e.g. tele retail and internet retail

70.  Technological Innovations
 Self-scan checkouts
 Using RFID tags
 Web-enabled POS systems, e-SCM systems, e-Procurement
systems and warehouse management systems
 Use of cutting edge analytics

71. THANK YOU..