Fruit & Vegetable retail in India is gradually transforming with organized players revisiting their business model at every step of the value chain from farm to fork, in order to restructure it. They are reinventing their distribution and marketing strategies, and also testing newer retail formats and practices that may lead to fresh growth channels. Farm2Kitchen is India's leading provider of organic foods and is expanding it's retail presence across India in 2014-15.

1. 28 • PROGRESSIVE GROCER • APRIL 2014 • AHEAD OF WHAT’S NEXT
COVER STORY
O
rganised retailing is gaining momentum
in India. The trend has also picked up
pace in food and grocery selling which
is the largest category, comprising
almost 60 percent of total retail. Unlike
other food segments, the organised fresh fruits and
vegetables (F&V) sector has been a slow mover. The
economic liberalisation in 1991 paved the way for
modern retailers to foray into F&V business. The entry
of corporate retailers like Reliance Fresh, Safal (Mother
Dairy), More (A B Group), Heritage Fresh, Big Baazar
and Food Bazaar (Future Group), Nature’s Basket
(Godrej), etc, into this business was significant too as
it made the sector more organised, more modern and
more challenging.
Fruit & Vegetable retail in India is gradually transforming with organised
players revisiting their business model at every step of the value chain
from farm to fork, in order to restructure it. They are reinventing their
distribution and marketing strategies, and also testing newer retail
formats and practices that may lead to fresh growth channels
By Namita Bhagat
Ripe Time for
FRESH
They brought with them a fresh approach to the trade by
opening new format stores that offered convenient and superior
shopping experience. It seemed that their huge investments would
give them quick traction and rapid growth. Traditional retailers
and small vendors regarded them as a potential threat of ‘big fish
eating small fish’. But after all these years, fruits and vegetable
selling still remains the mainstay of conventional vendors,
hawkers, and peddlers. Operating through mandis, small roadside
kiosks, or pushcarts, they continue to be fiercely competitive and
hold over 96 percent of F&V retail. On the other hand, the extent
of modern retail is only up to 3-4 percent of the total retail. This is
forcing organised players to revisit their business and distribution
models to increase their market share. Further, as the modern
consumerist culture takes deeper roots in India, a bigger tussle
between organised and unorganised players is inevitable.
Pix: shutterstock.com

2. AHEAD OF WHAT’S NEXT • APRIL 2014 • PROGRESSIVE GROCER • 29
The F&V trade
in India is quite
complex, uncertain,
ambiguous and
volatile. Despite
being a low margin
business, it offers
tremendous market
potential. As of
now, the organised
retailing in this space
is very low in our
country.
Pure
organised F&V
retail segment
is still niche.
It takes time
and patience to
understand and
sustain in this
category, as one
is dealing with
products that
have only 1 or 2
days of
shelf life
ORGANISED RETAIL GAINING GROUND
In the U.S., Australia, Canada and Asian
countries like Indonesia, Malaysia,
Thailand, and Philippines, organised F&V
retail is highly developed. In contrast,
the Indian market is in the early stages
of development. “The F&V trade in India
is quite complex, uncertain, ambiguous
and volatile. It is further compounded by
the perishability factor intrinsic to the
category, seasonality and cyclic nature of
production system. Despite being a low
margin business, it offers tremendous
market potential. As of now, organised
retailing in this space is very low in our
country. The local fruit and vegetable
vendors dominate the market,” observes
Pradipta Kumar Sahoo, Business Head
– Horticulture, Mother Dairy Fruit &
Vegetable Pvt Ltd. The company is a
leading organised retailer of fruits and
vegetables across Delhi/NCR under the
Safal brand. Having pioneered the concept
almost 25 years ago, it currently runs
350 Safal stores. According to Sahoo, the
idea of Safal was to provide a continuous
and reliable supply of fresh produce to its
customers, all the year around, without
compromising on the core values of
safety, freshness, and value for money.
Hyderabad-based Heritage Foods
has affirmed significant presence in the
southern states through 68 Heritage
Fresh supermarkets where F&V is the
main attraction. S Jagadish Krishnan,
Chief Operating Officer of the company’s
retail and bakery divisions, comments,
“Fresh produce retailing in India is largely
unorganised. The vendors procure their
stock from wholesale mandis and sell by
going from street to street or through
small roadside shops. Besides, there are
local weekly bazaars that spring up in
various localities. So, pure organised F&V
retail segment is still niche and there are
not many players in it. It takes time and
patience to understand and sustain in this
category as one is dealing with products
that have only 1 or 2 days of shelf life.”
Kovai Pazhamudir Nilayam (KPN) is a
leading retailer of fruits and vegetables
based in Coimbatore, Tamil Nadu. It began
its journey in 1965 as a single shop and by
1985 had expanded to four outlets only.
However, over the years, it has expanded
to become a multi-crore chain of 44
outlets spread across the state. Senthil
Natrajan, the Managing Director and
son of KPN’s founder N. Natrajan, feels
that traditional sellers will always remain
their primary competition since they are
deeply connected with buyers and know
exactly what they are selling, and (mostly)
understand quality also. Apart from this,
they don’t have rentals or high fixed costs.
“Where we can be better is in our ability
to provide more variety given the vast
space in our outlets, hygienic shopping
conditions, and ambient atmosphere, ” he
adds. The business model of KPN is very
basic and suitable for tier 2 and 3 cities. Its
further growth will depend on its capacity
for maintaining fresh stocks, competitive
pricing, adding products that would entail
efficient logistics, and a proper cold chain.
— Pradipta Kumar Sahoo,
Mother Dairy F&V
— S Jagadish
Krishnan,
Heritage Fresh
Safal store
Heritage Fresh store

3. 30 • PROGRESSIVE GROCER • APRIL 2014 • AHEAD OF WHAT’S NEXT
COVER STORY
IMPACT ON SUPPLY CHAIN
There is growing awareness amongst farmers, producers,
suppliers, wholesalers, retailers, and even the end-consumers,
regarding the benefits of organised play. The organised F&V
supply chain helps in doing away with too many middlemen
and hence bringing greater value and profitability to all. “In the
traditional model, there can be as many as 2 to 4 intermediaries
between the consumer and the farmer. The reforms under the
Agriculture Produce Marketing Committee (APMC) Act have
enabled retailers to directly procure from farmers in many states.
Corporates and chains procure fruits ex-farm for both domestic
distribution and exports. For vegetables, however, sourcing is still
largely dependent on wholesale mandis,” notes Krishnan from
Heritage Foods.
Nonetheless, structuring is catching up at every step of
the value chain. There are a number of
agribusiness and large retail chains that work
on the contract farming model. Desai F&V,
a fruit exporter; Fieldfresh Foods (a Bharti
& Del Monte joint venture), a vegetable
exporter; and Champion Agro Fresh, supplier
of fruits and vegetables to the domestic and
overseas market; all sign contract farming
agreements with growers. While Namdhari’s
Fresh is an F&V exporter as well as retailer
with 20 outlets in Bangalore, Heritage
Food’s agribusiness division not only feeds
its supermarkets but also supplies to other
organised retailers and general trade.
Large retail chains like Reliance Fresh, Food
Bazaar, More, Easyday, Spencer’s, and Safal
also have networking with farmers for direct
sourcing under this model. Additionally, they
buy from local markets to maintain daily stock
requirement. Sahoo at Safal informs, “We
have farmer’s association across 14 states and
they supply us fruits and vegetable round the
year. Our field team empowers them with
information on crop planning, good agricultural
practices, and most importantly, with market linkages.”
KPN’s Natrajan informs, “Our business model consists of
a centralised warehouse integrated with the cold chain, and a
strong distribution network that is well connected to its outlets.
The central warehouse also acts as a collection centre for farmers
and agents.”
Most recently, Mahindra & Mahindra (M&M Ltd), Mahindra
Group’s agribusiness vertical, launched its fresh fruit brand
Saboro in Hyderabad. It offers a wide range of fresh fruits,
including imports. It is the first Indian corporate to offer such
a wide variety of branded fruits to the consumer. Sharing the
motivating factors that drove the conglomerate into fruit
growing, Ashok Sharma, Chief Executive – Agri & Allied Business,
M&M Ltd, reveals, “Saboro is a natural extension of our already
established farm equipment business. The F&V industry in India
is valued at Rs 2 lakh crore and consumption has been growing
at a CAGR of 10 percent in value terms over the last decade.
There is also a big consumer segment that is extremely health
Our fresh fruit
brand Saboro
caters to a
big consumer
segment that
is extremely
health
conscious
and quality
conscious.
Only
organised
production
can
guarantee
high quality
standard.
COVER STORY
conscious and quality conscious. Only organised production can
guarantee high quality standard. Thus, we see a lot of potential
in this business. We deliver ‘FarmTech’ prosperity to farmers
linked with us via our signature services model that includes
end-to-end extension services such as agronomy, certification,
grading and packaging, and finally procurement. We make the
produce available through modern retail stores and currently
are in partnership with Heritage Foods for our retail supply in
Hyderabad. We’ll look for similar alliances in other cities too.”
Big Bazaar is also planning to introduce its own branded
vegetables. The supply side is further strengthened by importers
like Ind Thai Fresh Agro Impex from Piranoor (Tamil Nadu),
East Asia Trading from Mumbai, Gokul Fresh from Kolkata,
and many others which procure fresh produce from outside of
India to be distributed locally. Explains Bhavin Shah, Director,
Gokul Fresh, “We import exotic fresh fruits and vegetables
from across the globe as well as procure premium produce
from India. Presently, we are distributing mainly to all premium
resellers and retailers in Kolkata. Additionally, we supply to
the hospitality industry and cater to weddings and other
events.” He informs that F&V import companies have to face
several regulatory issues at point of entry by the FSSAI, Port
Health Officer, Customs, Plant Quarantine, etc. The company
is planning to set up four company-owned retail outlets in
Kolkata, and also plans to branch out to tier 1 and 2 cities in
eastern India.
The sector’s back-end is also being strengthened by
modern wholesalers like the homegrown Adani Fresh, and the
international Metro of Germany and Carrefour of France. All of
them are serving as a potent link between farmers and retailers
by providing the much-needed infrastructure to purchase and
market fresh produce in the country.
— Ashok
Sharma,
Agri & Allied
Business, M&M
Ltd
Pix:shutterstock.com
Namdhari’s Fresh store

4. AHEAD OF WHAT’S NEXT • APRIL 2014 • PROGRESSIVE GROCER • 31
INNOVATIONS IN F&V RETAIL
Distribution of fresh produce is continually
evolving. Time and again, there are
newer formats and practices that are
experimented with. Such innovations may
lead to discovery of potential new growth
channels. In recent years, with e-commerce
wave has encapsulated various retail
segments, and the F&V sector has also
been invaded by e-tailers such as N-Fresh,
Blive, Veg on Call in Delhi, Veggie Bazaar
in Chennai, and Farm2kitchen in Gurgaon,
etc. Ease of online ordering system from
home and delivery to the doorstep are
their unique selling propositions.
However, most of the web stores have
been unable to compete with physical
stores. But Farm2kitchen seems to have
gained a sound footing in this space.
Founded by Seema Dholi in 2011 in
Gurgaon, it sells farm fresh produce via
Facebook and the company’s website. As
a women entrepreneur, she understood
the hectic lifestyle of working women and
found them to be her potential (primary)
customers. She explains, “The population of
working women has increased significantly
in recent years. Their growing proportion
means that the kitchen is getting re-
defined with regards to grocery shopping.
Also, they value time, space and privacy.
All these are taken care of when one shops
from an online platform like ours.”
What’s more, Farm2Kitchen is working
on being the producer, processor and
retailer of organic food. It has collaborated
with Nashik-headquartered Sahyadri
Farmers Producer Company Ltd, a leader in
food safety practices especially pertaining
to fresh F&V, to help with procurement
and logistics. “We have moved into offline
retailing along with our online business.
With the recent roll out of Farm2Kitchen
Organic Food & Lifestyle Retail Store in
Pune, we plan to open more outlets in
major cities in 2014,” discloses Dholi.
Traditional sellers
will always remain
our primary
competition; where
we can be better is in
our ability to provide
more variety given
the vast space in our
outlets, hygienic and
ambient shopping
atmosphere
Retailing in India
is gearing towards
convenience and
quality. Our concept of
mobile retail outlets
provides fresh produce
at consumers’
doorsteps. I see farm
to fork becoming a
game changer in the
near future
As there is a
lesser number of
organic farmers,
we have to deal with
a number of small
suppliers with issues
of perishability,
shrinkage, and unsold
inventory adding
to the total cost
structure
— Senthil Natrajan
Kovai Pazhamudir
Nilayam
— Sharmila Banerjee
Founder/CEO,
Taaza Plaza
— Seema Dholi
Founder,
Farm2Kitchen
Nature’s Basket by Godrej also
deserves a mention. The corporate retailer
sells fresh organic produce besides other
food items and ingredients through both
offline and online modes. Presently, it has
30 stores across five key cities.
While Safal by Mother Dairy has come
up with eco-friendly vending carts in
Delhi, Taaza Plaza is a unique ‘retail store
on wheels’ concept launched in Mumbai
last year. It is a public-private partnership
(PPP) between Star Agriwarehousing &
Collateral Management along with Fuzion,
and the Maharashtra State Agriculture
Marketing Board. Sharmila Banerjee,
Founder and CEO of Taaza Plaza sheds
light on the venture, “Taaza Plaza aims
to connect farmers with consumers and
create alternative marketing systems for
purchasing and selling of fresh produce by
eliminating middlemen. We are replicating
the Western concept of mobile retail
outlets. Our mobile vans, fitted with
weighing machines, are parked inside
residential premises to provide fresh
produce at consumers’ doorsteps. We
have trained and professional van staff.
We have E-bills and also home delivery.
Retailing in India is gearing towards
convenience and quality. I see farm to
fork becoming a game changer in the near
future.” The venture is looking to expand
across Maharashtra.
Gokul Fresh, in addition to regular
products, will also be focussing on
the organic F&V category to benefit
from rising consumer demand for such
products, especially amongst health
conscious consumers. They are also
planning to invest in a customer education
initiative by having an in-house expert
team to inform consumers on the health
benefits of organic produce.Kovai Pazhamudir Nilayam store

5. 32 • PROGRESSIVE GROCER • APRIL 2014 • AHEAD OF WHAT’S NEXT
COVER STORY
Traditional retail is making way for
organised formats like supermarkets,
departmental stores and convenience
outlets. Most of them sell horticulture
produce, or fruits and vegetables, and the
category amounts to 3 to 4 percent of their
entire business. It may be a small figure vis-
à-vis traditional trade, but industry experts
view it as an encouraging scenario. But
do they cater more to upward and urban
consumers? Perhaps not. Besides metros
and class A centres, Reliance Fresh, More,
Safal, Heritage Fresh, Big Bazaar Kovai
Pazhamudir Nilayam, Namdhari’s Fresh,
etc, are present in class B and C cities also.
Although most consumers prefer whole fruits and vegetables
over pre-cut, still a number of working women, singles or couples,
students living away from home, and even housewives are
finding comfort in pre-cut fresh fruits and vegetables as these
save cutting/cooking time, and suit their their busy lifestyle.
But the category has yet to find favour among mass
consumers. Bangalore-based Wyn Brands, marketer of fresh fruits
and vegetables, experimented with supplying pre-cut veggies and
fruits to the city’s grocery stores during 2003-2006. Says Stephen
Poonen, Founder, Wyn Brands, “We began supplying pre-cut F&V
to many grocery stores in Bangalore in 2003. Those were the
early days of modern retail in the country. The idea didn’t garner
the anticipated response because of issues of insufficient chilled
storage space and lack of initiatives to popularise the category.
Also, large size households find pack size of 250 gms insufficient.”
Poonen is of the view that veggies are normally the loss
leaders in the supermarket format and they are essentially used
to draw footfalls in a store. Yet he believes that customers are
more receptive to the pre-cut category while the traditionalists
prefer whole veggies. “But, even today, I do not see more shelf
space allocated to cut as compared to whole F&V,” he opines.
Even established fresh produce retailers like Heritage Foods
did not find the category gainful and discontinued sale of
pre-cut veggies at its stores. However, in the past few years
the scenario has been gradually changing.
Having recognsied the emerging consumer
segment, Reliance Fresh, Max Hypermarkets,
Spencer’s, etc are stocking their shelves with
packaged pre-cut fresh F&V.
Ponnu Subramanian, Sr. Vice President
- B&M (Foods) & SCM, Max Hypermarket
India, talks about the current demand
scenario for pre-cut F&V: “The demand for
pre-cut fruits and vegetables at our stores,
though small at this moment, has really
picked up, especially in the last one year.
We have observed that the cut veggies are
more popular with bachelors, while the
cut fruit segment is bought by all types
PRE-CUT FOR SUCCESS?
KEY GROWTH DRIVERS
The foray of modern retail
into smaller cities is a testimony
that the country’s F&V retail
sector is slowly but steadily
transforming. On the demand side,
the transformation is led by factors
like rising incomes, improved
living standards, busy lifestyle, and
demand for quality. On the supply
side, modern retailers are creating
value in the front-end by having
convenient locations, a broad range
of products, quality at comparative
prices, comfortable shopping
atmosphere, and better services.
of customers. The more popular products are peeled garlic
and onion, skinned out pineapple, straight-cut beans, skinned
sugarcane bits, sweet corn kernels, de-husked baby corn, etc.
While mix cut vegetables like Pulav mix, Chinese cut veg mix are
doing well in the north, pre-prepared products like peeled garlic
and onion are doing well in the south.
In the case of pre-cut F&V, higher input costs like extended
refrigeration or transportation costs, extra handling, cleansing and
cutting, extra packaging, etc lead to higher pricing as compared
to the whole variant. Subramanian (Max Hypermarket) says,
“Normally, we do not procure cut fruits and vegetables separately,
and it is done internally. However, we face the challenge of
educating customers about real pricing of pre-cut category. At
face value, the cut fruits and vegetable appear to be too expensive
but if one calculates net useable portion of any whole fruits or
vegetables, the cut variety will come across as a practical solution
from the pricing point of view. However, this knowledge and
approach is still to develop in the customer’s mind.”
Regarding storage and wastage issues, Subramanian ensures
that his company outlets and F&V collection centres have
adequate temperature controlled storage and display so that the
storage issue does not arise. He also points out that for normal
retailers, storage will be a challenge as cut fruits and vegetables
are likely to perish faster.
But is the category cut
out for greater success?
Subramanian states:
“Currently we, at Max
Hypermarket, are not looking
at viability separately as we
are in the business building
stage of this new segment.
The contribution of cut F&V
to the total F&V sale is 1.5
percent in our south-based
stores and it is about 9 percent
in the north. The contribution
is set for a 50 percent increase
in the coming year.”
COVER STORY
Pix: shutterstock.com
Best Price Modern Wholesale store
In F&V
business,
factors like
nature of
market,
consumer
behaviour,
and
traditional
practices
pose a bigger
challenge for
an organised
player than
high capital
requirement.
FDI can be
useful in
strengthening
the back-end
for better
supply chain
linkages,
especially
in the fruits
category

6. AHEAD OF WHAT’S NEXT • APRIL 2014 • PROGRESSIVE GROCER • 33
The silver lining is that demand for safe, healthy fruits
and vegetables is on the rise as more and more people
are looking for healthier food options, remarks Sahoo
at Safal. But he would like to see how complexity and
fragmentation in the entire value chain will be resolved.
People are quite aware of what is available abroad
in terms of both variety and quality and they are
consciously looking for similar products locally,
observes Shah (Gokul Fresh). According to him, even for
products like fruits and veggies, consumers now prefer
modern outlets over traditional shops as they want a
good shopping experience before actually savouring
their purchase.
Kovai Pazhamudir Nilayam is looking for expansion
in a big way, but wants to grow organically. As Natrajan
says, “It will be wiser for us to move to geographies in
closer proximity (nearby cities) where our supply chain
can reach easily.”
Krishnan of Heritage Foods comments, “In
F&V business, factors like nature of market,
consumer behaviour, and traditional practices pose
a bigger challenge for an organised player than high
capital requirement. He believes FDI can be useful in
strengthening the back-end for better supply chain
linkages, especially in the fruits category.”
Viewing public-private partnerships as the future of
the retail industry, Sharmila Banarjee from Taaza Plaza
quips, “The government can play a facilitator’s role but
it’s the private sector that needs to have a larger role.
With urbanisation and fast paced life, a concept like
ours that offers greater convenience to consumers, is
going to impact the industry in a big way and will gain
wider acceptance in the years to come.”
M&M’s Sharma stresses that more than foreign
funding, simplifying regulations, debottlenecking
of the current agro supply chain, and encouraging
private participation through constructive PPP model
will be much more beneficial for making the industry
more organised.
Namita Bhagat has an academic background
in management and finance. She writes
on the retail and franchise business in the
Indian and Middle East markets.
India is the world’s second
largest producer of fruits and
vegetables after China. As
per a report, fresh produce
worth Rs 13,300 goes into
wastage every year due to
acute shortage of cold storage
and refrigerated transport.
To match the growing
production levels, capital
infusion of over Rs 55,000
crore is required by 2015-16,
which will help in removing
supply chain inefficiencies.
Sharma at M&M Ltd
points out, “Fragmented
supply chain, low market visibility for
the producer, lack of clarity regarding
consumer requirements, and lack of
regulations or enforcement of regulations
are some issues peculiar to F&V trade.
The industry will become more organised
with the passage of time.” He hopes that
information technology will also help in
overcoming barriers between the producer
and consumer. All this will lead to more
value creation for both.
At the store operations level, grocers
have to face logistic costs, high rentals,
and other overheads. They also have to
deal with problems typically related to
F&V stock such as storage, freshness,
and wastage. According to Krishnan at
Heritage Foods, managing a fresh produce
value chain requires alertness and close
monitoring. As much as possible, the fresh
produce should be sold at the store level by
cutting down on the material turnaround
time between harvesting and selling.
Multiple handling of the produce must be
avoided as it leads to quality deterioration.
“In our stores, category management at
the front-end is aimed at presenting and
managing the F&V portfolio in a manner
most appealing and tempting for the
consumer. Specific processes have been
enabled to keep the material fresh and
graded at the store level.”
Sahoo at Safal opines, “The shelf life
of the product is critical for deciding how
we should handle it in terms of sourcing
and storage. Products with low shelf
life of a few hours have to be sourced
from nearby areas and distributed with
minimum handling. For products having
a longer shelf life, we have our own and
third party storage facilities across various
centers in India.”
As a supplier, Shah from Gokul
Fresh also has to deal with storage and
freshness issues. “The most important
aspect of our business is to maintain the
freshness of our produce. This is done by
having a strong back-end with trained
employees to continuously monitor the
quality of the inventory while maintaining
the cold chain,” he shares.
A major concern for organic
produce retailers like Farm2Kitchen
is procurement. Seema Dhoil states,
“Backward linkages are very important
for us as we face greater challenges.
Organic fruits and veggies retailing has
enhanced costs and risks. As compared
to conventional farmers, there is a lesser
number of farmers in organic farming.
We have to deal with a number of small
suppliers with issues of perishability,
shrinkage, and unsold inventory adding to
the total cost structure.”
CHALLENGES REMAIN RIPENING MARKET FOR
FRESH
At point of entry, F&V importers have to
comply with regulations of FSSAI, Port Health
Officer, Customs, etc. Also, suppliers need to
have strong back-end and efficient cold chain to
deal with storage and freshness issues
— Bhavin Shah, Director, Gokul Fresh
Pix: shutterstock.com
Heritage Fresh store