This document provides background information on Reliance Fresh Stores and the food retailing industry in India. It discusses Reliance Industries' launch of Reliance Fresh convenience stores and their success exceeding expectations in sales and foot traffic. It also outlines opportunities for growth in India's retail sector given the expansion of the middle class and shift away from traditional markets. Key factors like agriculture being the backbone of the Indian economy and inefficiencies in the existing farm supply chain are noted.

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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
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of this case study may be reproduced, stored in a retrieval system, or
School reference
transmitted in any form or by any means, electronic, mechanical,
CS 08-029
photocopying, recording or otherwise without written permission of
London Business School.

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In April 2007, it was time for celebration at the headquarters of Reliance
Industries 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). The
footfalls were as high as 4,000 per day. Launched as 'your friendly
neighbourhood store', the typical Reliance Fresh store was spread over an area
of 2000 sq ft. Just before its launch, in June 2006, its chairman, Mukesh
Ambani had announced a $5.6 billion multiyear investment in the agriculture
and retail sectors. He aimed at making a new company, “Reliance Retail” the
sector's dominant player. “Reliance Fresh” intended to bring high quality fresh
food to the customers at an affordable price. This was to be achieved through
an integrated supply chain process and with efficient delivery of value to the
consumers. Ambani, who visited all 11 shops on the eve of opening, said his
firm offered "unmatched affordability, quality and choice of products and
services to the customers". Yet his confidence and optimism did not mean that
all questions about his business model were fully answered, or that the answers
had been validated yet.
There certainly appeared to have been an overwhelming response to Reliance
Retail in the first year of operations. Looking at the very encouraging response
from the public and the buyers, there were plans to commission more city
distribution centres and city processing centers that would further strengthen
the supply chain. The stores offered fresh produce, vegetables, pulses, breads
and dairy products. "The focus was on fresh fruits and veggies, groceries and
staple products that consumers buy," President and CEO, RIL Foods Business,
Gunender Kapur said. The stores directly procured vegetables, pulses and
spices from the farmers of Andhra Pradesh, Karnataka and Tamil Nadu, which
contributed to quality and pricing advantage. Most of the products were being
retailed under ‘Reliance Select’, a premium food brand launched by Reliance.
In April 2007, the “Reliance Select” brand covered pulses, rice, spices and
vegetables.
Raghu Pillai, President of operations and strategy at Reliance Retail said,
“About 95% of India's retail sector is made up of small, family-run stores and
the sector has not been tapped by big businesses. Reliance Fresh aims to target
and exploit this very segment in which it foresees huge potential for further
robust growth.” Yet Pillai was realistic about the need for strategies to survive
existing and growing competition in this new sector.

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Opportunities for Retailing in Agri-Business
India's retail sector was undergoing a transformation and with a three year
CAGR of 46.64%, retail was the fastest growing sector in the Indian economy.
Traditional markets were making way for new formats such as departmental
stores, hypermarkets, supermarkets and specialty stores. Western-style malls
had begun appearing in metros and second-rung cities alike, introducing the
Indian consumer to an unprecedented variety in shopping experiences.
India's vast middle class and its almost untapped retail industry were key
attractions for global retail giants wanting to enter newer markets. While
organized retail in India was only 2% of the total US$ 215 billion retail
industry, it was expected to grow 25% annually, driven by changing lifestyles,
strong income growth and favourable demographic patterns. A retail consulting
and research agency had predicted that by 2010, organized retailing in India
would cross US$ 21.5 billion mark.1
Unlike in the developed world, food dominated the shopping basket in India.
While food accounted for only 9.7% of the total private consumption
expenditure for an average American, 15% for the Japanese & British, for the
Indian, it was the principal component of their consumption expenditure
accounting for as much 53%. Since much of this was non-branded (including
perishable items like fruits and vegetables), the branded food industry was
homing 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, increased
participation of women in the urban work force. The segment aged between
20-45 years was emerging as the fastest growing consumer group and the mean
age of Indians was now 27 years, a mean age that reinforced spending across
all 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

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Fig-1: Fastest growing retails segments in India
Food & Grocery
Clothing
Furnitures & Fixture
Durables
Footwear & Leather
Watch & Jewellery
0 20 40 60 80 100
Source: KMPG in India Retail Survey 2005.
Agriculture was the backbone of the Indian economy as Nature had been very
favourable to the country. Of the land within its boundaries, 52% was
cultivable, as against the global average of 11%. All the major 15 climate types
existed in India and sunshine hours and day length were ideally suited for good
cultivation round the year. Also, India had great bio-diversity and accounted
for 17% of animals, 12% of plants and 10% of fish genetic resources of the
world. Undoubtedly, this comparative advantage was one of the reasons for the
advent of a number of retail majors into food retailing in the past few years.
Many were leading players in FMCGs, tobacco business, and agribusiness.

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Table–1 Area & Production of Agricultural Products
(Production in million tones)
India India’s rank in world production
Arable Land (Million ha.) 151 2
Irrigated Land (Million ha.) 55 1
Wheat 72 2
Rice, Paddy 124 2
Course grain (including maize) 29 3
Milk 91 1
Fruits 47 2
Vegetables 82 2
Edible oil seeds 25 3
Pulses 15 1
Sugarcane 245 2
Tea 0.85 1
Cattle (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.

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Exhibit 1: Inefficient supply chain in India
In effect, the plentiful natural resources were underutilized or not efficiently
utilized for agriculture in India as Indian rural life had not qualitatively
changed over the decades. There was little attention to value added agriculture
in the whole country. Research on improving farm productivity, pre-harvest
and post-harvest methodologies, processed food product development, packing,
distribution, transport, cold chain, store management warehouse and the entire
supply chain were much neglected both by the Central and State Governments.
At the same time, it was generally recognized that there was tremendous
potential for growth of the food market in the Indian context (Exhibit-2).
Reliance Fresh believed that it could unleash that potential for profitable foods
and vegetables retailing.

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Exhibit 2: Growth in Indian food market
Reliance Fresh
Reliance Fresh was the first foray into retailing by the $25 billion behemoth
known as Reliance Industries Limited. There were three basic reasons for
Reliance Industries Limited (RIL) choosing foods and vegetables for entering
into retailing. First, it wanted to go after the very core of the great Indian retail
opportunity. Food accounted for over two-thirds of the $200 billion Indian
retail 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 perhaps
the best place to start. Third, the grossly inefficient food supply chain provided
a well resourced and well managed organization like RIL with an opportunity
to think of amending the flaws which would also make business sense. In the
traditional supply chain in India, there were several intermediaries, who added
their respective profit margin to the cost. Besides, there was huge wastage in
transit. This offered potential for savings and profits and Reliance Fresh was a
step in that direction.
Reliance Fresh launched by opening new retail stores in Hyderabad on 3
November 2006 (Exhibits 3-4). Stores remained open from 9am to 9pm. On
24th January 2007, 12 "Fresh" outlets opened in Chennai increasing the total
store count to 40. Reliance was testing its retail concepts by controlled entry,

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beginning 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 retail
outlets in different cities.
Retail Format: Small is Sensible
The store’s size varied from 1,500 sq ft to 3,000 sq ft, and stocked fresh fruits
and vegetables, staples, FMCG products and dairy products (Exhibits 5-7). The
stores stocked their own private label in staples and food under the "Reliance
Select" label (Exhibit-8). Eventually the label would include other food
categories such as dairy products, jams and colas. The Fresh model was
engineered to clock a faster turnover of inventory — Reliance expected
consumers 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 this
capital over six times.
“Each of our stores aim at catchments of only about 2,000 households in a 2-3
sq km radius,” shared Jai Bendre, Head of Marketing (foods), Reliance Fresh.
This was the concept of a neighbourhood store. Reliance Fresh opened its 100th
outlet 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 in
the retailing of perishables was part of an overall planned $5 billion project
which was aimed to cater to more than 780 cities and 6,000 rural towns in India
over the next five years. Reliance Fresh aimed at opening stores in the top 70
cities within the next two years and attaining sales of $25 billion by 2011.
Reliance Fresh had consciously adopted a business model of operating through
small and medium size stores. These stores would be of 2,000-5,000 sq ft in
comparison to a supermarket which needed 8,000-10,000 sq ft. In the current
business 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 itself
as a distribution channel for other small outlets in various parts of the city by
building an integrated supply chain to deliver and operate its ‘Farm to Fork
model’. The company had been racing to set up deals with state governments to
establish rural hubs to buy fruit, vegetables, pulses and dairy goods from
farmers as it moved to build a 'state-of-the-art supply chain spanning the entire
country'.
Reliance Fresh’s shelves provided an indication that the group was looking for
higher 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

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or Pepsi’s Lays chips, there was very little shelf space given to the big brand
owners in the country.
The traditional model of vegetable retailing in India involved vegetables being
sold in small “stores” on the roadside, and there were no formal rules regarding
weighing, bargaining and quality issues, let alone cold storage and
sophisticated supply chains. Produce travelled slowly and inefficiently through
a series of intermediaries before reaching the hands of customers, suffering
mark-ups, wastages and quality losses along the way. “Reliance Fresh”
marketing model operates on affordability and a hygienic ambience along with
a good shopping experience”, said Mukesh Ambani, the Chairman of RIL.
Reliance Fresh intended to bring high quality fresh food to the customers at an
affordable price. Reliance Fresh also wanted to establish a benchmark of
hygiene and quality in their sales. It thus sought to provide the consumer
affordable and quality produce in a congenial and pleasing environment and
enforced stringent quality and hygiene guidelines which would help it bring
high value to the consumer
Supply 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 Mumbai
were sourced directly from farmers in nearby districts. This in effect got
translated into lower prices by at least 15% to 20%. “We'll be very affordable
and competitive in the market, but we aren’t playing a price game here. The
full effort is to deliver value to the customer,” said Chief Executive, Customer
Operations, KS Venugopal. Produce from the farmers came to Reliance's city
distribution centre, which connected two very different sides of India, the
poverty-ridden countryside, steeped in tradition, and the wealthy city centers.
“Already, a few hundred farmers have been hooked on to the Reliance Retail
supply chain. In the next five years, that number will grow to millions. Even
contract farming — by assisting farmers in procuring high-quality seeds,
fertilisers and other essential raw materials is on the cards. By going to the
farmer directly, Reliance Retail hoped to disintermediate the supply chain and
eliminate waste. This meant fresher products at lower cost”, reasoned the same
group official. Still, there was a general concern in the industry about the
possibility of steady and high quality supply of vegetables and other perishable
food items to the huge number of proposed retail outlets. How far backwards
would Reliance have to integrate to assure such supply?

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Current Supply Chain Diagram of Reliance Fresh
LOCAL
FARMERS
COLLECTION CENTRES
LINKED
WITH
CONSORTIUMS
(Here grading and standardization takes
place)
RELIANCE
FRESH
OUTLETS
Scale behind the scenes: Rural Business Hubs
Globally, supply chains were fairly mature and efficient. This gave the retailer
little opportunity to improve profit margins. But in India, any retailer who built
an efficient supply chain stood to gain. “With efficient sourcing, we can release
margins 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 by
identifying potential geographical clusters to implement farm initiatives and
create an infrastructure to collect, pack, store, process and distribute fresh and
value-added products at the district level.
The company was planning to set up Rural Business Hubs (RBHs) which
would be the strategic business platform for providing comprehensive range of
products and services to the rural communities. The first such hub would start
by October 2007. RBHs would provide agricultural inputs, financial services,

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veterinary health care, educational and entertainment facilities. Reliance Retail
was planning to set up 1,600 business hubs to cater to rural areas across the
country, reported Daily News Analysis (DNA), a prominent daily. “These
business hubs will act as shop-stops for villagers and will act as procurement
centres, besides facilitating retail, technical and health assistance to farmers”.
Reliance Fresh across India
The 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 build
direct linkages with farmers in procuring a major share of marketable surplus
from farmers at their farm gate and to use it for flour and pulse milling and
processing units catering to domestic and export markets as well. In the next
four years, the number of RBHs would increase to 50 and would cover around
12,400 villages out of 12,700 villages in the state of Punjab. The firm also
planned to establish farms with world class technology to suit local conditions.
Reliance Retail also hoped to bring "prosperity of scale" to the State of Tamil
Nadu's farmers through the sourcing and supply chain for its Reliance Fresh
outlets. 95% of fresh fruits and vegetables sold at the stores were sourced from
farmers. Under its “Ranger Farms” concept, the company had set up 10
collection centers across the State, with 10 more to come up soon. “The
produce will be cleaned, graded and distributed at a centre at Puzhal. This will
eliminate middlemen and pay farmers cash, fair price for quality produce”, said
Gunender Kapoor, President, Agribusiness. Farmers would not only get market
access but also advice on market demand — what vegetables to grow, how
much and when. Ultimately, these collection centers would graduate into 40
rural business hubs across the State, which would help to improve farm
productivity through technology and mechanization and offer services such as
credit, insurance, health and veterinary care.
“The speedy, refrigerated transport and logistics infrastructure being developed
by the company will soon be available to the retail industry at large through a
cash and carry wholesale format. This means even your local pushcart vendor
could be selling vegetables sourced by Reliance," emphatically added Mr.
Kapoor quelling the apprehension that the presence of organized retailing could
doom the fate of small neighborhood retail stores.
Reliance Industries’ (RIL) was planning to acquire over 2,000 acres for its
contract farming venture in the State of Karnataka, which could emerge as one
of its hubs for farm produce exports. The company was also ready to enter into
contract farming operations in the states of Haryana and Maharashtra. Its plan
entailed acquiring 10-acres each of the nearly 200 administrative sub-divisions
in the state. It was learnt that RIL had recruited a vast number of agriculture
graduates for this project. Also in the pipeline were the company’s plans to set
up warehouses across the states. It had already unveiled ambitious contract

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farming plans nationwide, which would see it operating a massive fleet of
cargo 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 Fresh
were getting better returns on vegetables produced by them. For example,
‘Rangers Farm’, the farm produce procuring arm of ‘Reliance Retail’ was
buying 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 vegetable
wholesalers. Most farmers were also able to save on time, effort and money as
they 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 one
catch, however. Vegetables before being accepted by the Reliance arm were
required to be graded based on their quality and freshness.
Although wholesalers refused to admit any impact of Reliance and other chains
on arrivals of farm products in the wholesale markets, there was no denying the
fact that a quiet revolution was taking place in the countryside as more and
more farmers had started to see the benefits of selling their produce directly to
the retail chains. Efficient supply chains, backed by superior logistics
management, had the potential of saving 30-35% in costs, particularly for
perishable items like flowers and vegetables. And at the same time,
government was getting improved tax revenue as vegetables and groceries
were now taxed through these outlets.
Major Players in Food and Vegetable Retailing in India
Godrej Aadhar, a venture of Godrej Agrovet was a complete solution
provider for the Indian farmer. It provided professional guidance with an
objective to improve productivity, higher returns and improved cost-benefit
ratio. The services offered were crop advisory services, soil & water testing
services, crop finance, supply of agricultural inputs and animal feeds, transfer
of information (weather, price & demand–supply), door delivery of products
etc. It already had 33 stores across the country, which it planned to increase to
45 very soon. The company started its fruits, vegetables, dairy and poultry
retail business through their Nature’s Basket stores in the urban areas. While
seven Nature’s Basket stores were already functioning in Mumbai, the group
planned to add another eight in Mumbai itself, before it set base in Delhi,
Gurgaon, Hyderabad, Chennai, Chandigarh, Amritsar and Ludhiana. The target
was for setting up 1000 outlets by 2010. It had adopted a “Hub and Spokes
Model” for its distribution network.

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Subhiksha: The Chennai-based discount retail chain Subhiksha announced a
$0.7 billion (Rs.30 billion) expansion plan to venture beyond its home base of
Tamil Nadu by setting up nearly 450 stores in the National Capital Region and
four other states. As part of expansion, the company planned to increase the
number of stores to 600 from 150 now by end of 2007 to create a national
footprint. Besides Delhi, the company proposed to open stores in the states of
Maharashtra, Gujarat, Andhra Pradesh and Karnataka. For the Delhi market,
the company had earmarked an investment of $0.2 billion (Rs.10 billion) over
two years. The company had been making profit for the last eight years, and its
revenues 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) last
year. 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, Hyderabad
and Pune, with their own cold chain supply to wholesale and retail clients. It
was the first of 140 stores that ITC planned to open in 54 Indian cities over
three years at an investment of $1.9 billion (Rs. 80 billion). ITC had designed
the supply chain in collaboration with Ingersoll Rand and Mitsubish's
Snowman. Ingersoll Rand had designed the climate-control shelves, the freezer
trucks in which farmers send produce, the pre-coolers, and Snowman managed
the logistics of the produce. The store stocked only fresh fruit and vegetables,
sourced directly from farmers from all over the country. And it expected the
organised retail market for fresh produce would touch $12.4 billion (Rs. 500
billion) in the three years.
The e-choupal project was empowering farmers and in turn, helping create new
businesses for the company. These projects essentially worked on digital
infrastructure (IT, Internet access), physical infrastructure (rural Internet
enabled offices) human infrastructure (managers and IT professionals) and
network orchestration by ITC. As an intermediary, ITC had brought a network
of insurance companies, banks, micro-finance entities, seed and fertiliser
companies, FMCG, e-learning and training organisations to rural India.
Launched in June 2000, in 7 years the 6,500 strong e-choupal kiosk's services
reached millions of farmers growing a wide range of crops and seafood,
soyabean, coffee, wheat, rice, pulses, shrimp, in over 38,000 villages across
nine states of the country.
Hariyali Kisaan Bazaar: The Hariyali Kisaan Bazaar was a pioneering micro
level effort, which created a far-reaching positive impact in bringing a
qualitative change and revolutionising the farming sector in India. The chain
successfully ran its business through 33 stores in five rural locations in North
India. Each Hariyali Kisaan Bazaar centre operated in a catchment of about 20
km. A typical centre catered to agricultural land of about 50,000-70,000 acres

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and made an impact in the life of nearly 15,000 farmers across India. Each
centre provided support through a team of qualified agronomists; provided a
complete 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. The
centres also provided access to modern retail banking and farm credit, farm
produce buyback opportunities, access to new markets and output related
services.
Bharti Retail planned to invest $2-2.5 billion by 2015 in its pan-India
operations. It was looking at approximately 10 million square feet of retail
space across all cities in India that had a population of over 1 million. It
planned to employ 60,000 people. The company planned to launch its retail
outlets in multiple consumer friendly formats, including hypermarkets and
supermarkets. They had plans to serve all regular shopping requirements of an
Indian 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 Andhra
Pradesh, covering retail space of more than 15,000,000 sq ft. The company had
grown exponentially with the number of stores, more than tripled in 5 years. In
2003-04, the company acquired another chain Fab Mall which operated 12
outlets and achieved sales worth $12.4 million (Rs.500 million). Trinethra and
Fab 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 new
states by 2008. This expansion would see the number of outlets increase from
present 92 to 175.
Adani Agri Fresh launched operations in Himachal Pradesh last year, when it
procured a major chunk of apples from the hill state. The orchardist in the
largest 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 and
transporting it to big markets in Delhi, Mumbai, Ahmedabad and Kolkata.
Adani had already made an investment of over $280 million (Rs. 11 billion) in
the hill state for setting up controlled atmosphere packaging and storage units.
This year, the company planned to invest over $408 million (Rs.16 billion) to
set up its own cold chain of refrigerated vehicles for transporting apples, kiwi,
almonds and peaches.
Future Plans and Challenges
Senior officers in the company were known to have set a “conservative” sales
target of $25 billion for the next five years. The firm expected to employ
500,000 staff as well as create at least one million jobs indirectly. Reliance
planned to invest $7-8 billion in setting up its stores arm that would cover

15. - 15 - CS-08-029
1,500 Indian cities and towns in the country, said a senior Reliance official.
The company had hired 6,000 managers for the new business. Reliance was
selecting locations for the stores, setting up agreements with farmers to buy
their produce and tying up with manufacturers for merchandise ranging from
consumer electronics to apparel. The company had aimed at setting up as many
as 60 distribution centres across the nation to feed its retail chain and planed to
initially contract trucks and warehouses with cold storage facilities and then
build its own.
It was recognized that different retail formats other than the city based stores
might be necessary in different markets. In towns and villages, it would have
so-called hypermarkets – warehouse style stores spread over 150,000 square
feet, or about 14,000 square meters, selling groceries, fresh food, consumer
electronics and clothes. The company would also open smaller, 75,000 square
feet, supermarkets. Larger metropolises like New Delhi and Mumbai would
have smaller stores depending on the availability of real estate.
Yet, despite these dramatic expansion plans, several questions remained: How
would competitors, including the formidably resourced ITC and Godrej groups
respond to these expansion plans? Were they perhaps ignoring the most
obvious source of competition- the traditional small neighbourhood grocery
store, where the shopkeeper knew every customer (and his needs) by face, and
was willing to extend credit till the next pay check? How necessary and
realistic were Reliance Fresh’s plans to backward integrate all the way to
farming? And what would be the social consequences of this expanding
corporate presence into the largely unorganized, but politically mobilized
farming sector? How would intermediaries and small grocers react, and where
would the people’s (and Government’s) sympathies lie?

16. - 16 - CS-08-029
References
India Retail Report, 2007
India Retail Report, An Images KSA Technopak Study, 2005
Retailing in India : The Emerging Revolution. Mckinsey & Company, Inc.
2000.

17. - 17 - CS-08-029
Exhibit 1
Reliance Industries Ltd. (RIL) Chairman Ambani in discussion with his
lieutenants.

18. - 18 - CS-08-029
Exhibit-2
Vertical 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

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Exhibit-3
Store Façade – Bright, Striking, Primary Colours

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Exhibit-4
Visible Store Promotions and Co-branded Promotions
Highly visible store promotions, re-iterating value for money
proposition

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Exhibit-5
Vegetables in Baskets

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Exhibit-6
Layout and Ambience – Well-lit, Neat, Bright, Easy To Read Signage

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Exhibit-7
Private Label Competing With Branded In Some Categories
The consumer has three options in cereals & pulses – branded, store
brand “Reliance Select” or packaged unbranded

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Exhibit-8
BusinessDailyfromTHEHINDUgroupofpublications
Saturday,Dec16,2006
Farmers take a `Fresh' look at retailing
ATTRACTIVE RATES for produce, and no commission
Twenty-five-year-old Mr Rami Reddy, whose joint family owns 20 acres in
Lakshmareddy Gudem, a small village in Rangareddy district near Hyderabad,
has been growing brinjals in one or two acres for the last eight years. But he
never 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 to
the 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 their
plans to procure quality brinjals for their upcoming outlets in Hyderabad," he
told Business Line.
Mr Reddy is not alone. "It has become a hot topic for discussion among the
villagers. Everybody talks about the attractive rates," he said.
Collection centre
He is not exaggerating. About 200 farmers from villages in the area have
started selling their produce at the Collection Centre set up by Reliance at
Shankarpally. The centre collects 7-8 tonnes of vegetables a day and send the
lot to the central processing centre at Medchal. Vegetables from 2-3 such

25. - 25 - CS-08-029
centres get graded again and processed there before getting into the 17 `
Fresh'
outlets the company opened in the twin cities.
"We used to sell a 20-kg bhindi (okra) bag for just Rs 150. But now we are
getting Rs 10-11 a kg," Mr Jangaiah of Alamkhangudem said. "It is not just the
higher price. We also save on the 10 per cent commission we pay at the market
yards," he said.
But they understood quite well that the ‘maal’ (produce) should be fresh. "It
should be plucked too in a certain way. All my life I grew bhindi (okra) the
way my father did and sold as he did in the market. They (Reliance) do not
take the second grade vegetables. But it seems I have to change," said.
Mr Venkatrami Reddy of Chinnareddy Gudem saw another advantage. "They
would tell me what quantity of vegetables they need from me. I'll go there and
get my consignment graded at their collection centre," he said.
The centre would get the price-band and quantity of vegetables it needed to
collect that particular day.
Mr Vithal, Secretary of the Agriculture Market Committee at Shankarpally, felt
that the procurement by ‘Ranger Farms’ (through which Reliance procures
vegetables) has no impact on the arrivals at the committee.
The committee accepts vegetable consignments two days in a week. "Some
days we receive more and some days we see less arrivals. We haven't yet seen
any decrease on account of their (Reliance's) entry," he said.
Asked about farmers' claim that they paid 10 per cent as commission, Mr
Vithal said the committee charged four per cent. The farmers also needed to
pay for weighing and hamalis, he explained.

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Exhibit-9
The Economic Times
24 July 2007 1023 hrs IST, AGENCIES
We don' want Reliance to colonise us, say farmers
t
MUNDHA KHERA, INDIA: It's a hot, humid Sunday morning in northern
India, but the oppressive heat does not deter a group of about 15 farmers from
trudging door-to-door, offering advice and sometimes warnings. "Do not sell
your precious land. Even if you are offered millions of dollars, do not sell. It is
your only source of livelihood," Mahavir Gulia, the leader of the group, tells a
villager in Mundha Khera, 100 kilometres (60 miles) from New Delhi.
"Sell your land and you will lose your identity," he warns another as the group
winds 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 earmarked
for a Chinese-style business enclave - a joint venture between the Haryana state
government and Reliance Industries, India's largest private conglomerate.
"We want to be sure our fertile land that gives us three crops a year does not
end up as part of the Reliance empire," he said. "We don't want Reliance to
colonise us. Land is what sustains us farmers with food, respect and dignity."
In Neemana village, 10 kilometres away, Pratap Singh, 75, understands the
message -- but a little too late.
Eight months ago, he was the owner of a 20-acre (eight-hectare) fertile field
that yielded three harvests a year.
"My sons were lured by the promise of good and quick money. They persuaded
me to sell most of my land to the big company," says Singh, squatting on the
sandy floor of the one-room house that he and his wife share with a buffalo. He
did get some cash, but it did not last him long in the world outside his usual
farming routine.
"We have a saying here that our land is our mother," Singh added sadly. "How
can you get any respect when you have sold your mother?"
India' "Great Land Grab"
s
Singh's land is now part of the 25,000-acre Reliance-Haryana government
Special Economic Zone (SEZ) -- a project encouraged by the Indian
government to spur industrialisation, infrastructure development and push
economic growth into double digits.
For foreign and domestic corporate giants, the SEZs are a tempting option --
promising a way around the country's notoriously slow, corrupt and spirit-
crushing bureaucracy.

27. - 27 - CS-08-029
But opponents say the government is merely sidelining the still-crucial farm
sector -- stealing labour and prime land from a sector which employs more than
60 percent of the workforce and generates more than a fifth of India's gross
domestic product.
Journalist-turned-activist Praful Bidwai says the years 2006 and 2007 "will be
noted in history for the launch of the Great Land Grab".
"It's happening across India," added social activist Vandana Shiva, pointing to
farmers' protests in the Communist-ruled eastern West Bengal state in March.
Fourteen farmers were killed when police entered their village to evict them
from land designated for a SEZ - causing a furore and polarising public
opinion.
Not that land grabbing is a new concept in India - tribal peoples have long seen
their forest land shrink with the march of urbanisation.
But SEZs are different, says Shiva. "These are enclaves of privilege, insulated
from 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 India's trade ministry, the 126 enclaves already operating have
generated 32,578 jobs, and this will swell to 1.5 million by December 2009. It
also hopes SEZs will generate 25 billion dollars worth of exports in 2008-2009.
While the figures look impressive, critics argue that Indian democracy is
suffering.
"When there is large scale displacement of people involved, you need their
consent. In a democracy, people have the right to decide their own future," said
prominent community activist Aruna Roy.
"All the villagers should decide -- not just the village headman." She also
points to what she sees as the irony of Prime Minister Manmohan Singh's
government -- elected on a pro-poor platform in May 2004, but aggressively
pushing through the SEZs.
"It's a case of schizophrenia," Roy said. Those who may end up profiting from
the affair are India's Maoists, who have seized on the land grabbing issue and
already hold sway in much of the impoverished east.
"Agitations like the Maoists' insurgency are triggered by the repeated failure of
governance to deliver basic rights," says Roy.
Economist Paranajoy Guha Thakurta says India's ambition to emulate the
Chinese SEZ model is basically flawed - "because India is a democracy".

28. - 28 - CS-08-029
"The Chinese SEZs are like giant urban agglomerations, independent nation
states with their own rules for labour and environment," he said.
India following the same model will only create "huge islands of industrial
affluence in a sea of deprivation and poverty.
"This will be unacceptable in a democracy."

29. - 29 - CS-08-029
Exhibit 10
WAL-MART IN JOINT VENTURE FOR INDIA
By Amy Yee in New Delhi, FT.com site
Published: Aug 06, 2007
Wal-Mart has succeeded in getting its toe in the door of the Indian market, via
a long-planned joint venture with local partner Bharti Enterprises.
The world's largest retailer stressed it would “work with and develop local
supplies and create local beneficiaries along the supply chain”, in an apparent
effort to play down controversy over the potential disruptive effects of
corporate retail in India.
The 50-50 joint venture, called Bharti Wal-Mart, is a “wholesale cash-and-
carry” business that will use Wal-Mart's back-end logistics technology,
inventory systems, cold chain infrastructure, truck tracking and fuel
management.
Bharti, one of India's largest companies and owner of Airtel, the country's
leading mobile phone operator, recently announced investments of up to
$2.5bn in Bharti Retail, its own 100 per cent-owned supermarket chain that
will be supported by Wal-Mart's logistics and supply chain technology through
a franchise agreement.
The plans come amid controversy over Wal-Mart's entry into India. Activists
and small trade associations insist corporate retailers will disrupt millions of
Indians whose livelihoods depend on farming and retail dominated by small
'mom-and-pop' shops.
Manmohan Singh, Indian prime minister, this spring called for an independent
study on corporate retail advances into the country. The report is yet to be
finalised.
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 the
meantime, they are allowing corporations to expand their retail plans at an
alarming”
India FDI Watch and other activist groups plan demonstrations across India
this week. Hakim Singh Rawat, president of the Hawkers Association, said
street traders would be hit hard by Bharti Wal-Mart and warned the Indian
government about favouring “only a few huge corporations”.
Opponents insist the joint venture is a “back door” into India's $300bn retail
industry. Under current law “multi-brand retailers” that sell more than one

30. - 30 - CS-08-029
brand of products are barred from India. Single-brand retailers such as
Benetton and Nike are allowed 51 per cent foreign direct investment.
In the next seven years, Bharti Wal-Mart plans to open 10 to 15 wholesale
centres in smaller cities, starting late next year. A typical facility will sell
groceries, stationery, clothing and consumer durables. The companies did not
disclose details of their investment in the joint venture.
Formal shops, or “organised retail”, comprise just 2-3 per cent of India's
$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 of
farm products never make it to market because of lack of cold storage and poor
transport and roads.