The fresh foods retail sector in India is undergoing a rapid transformation, as both Indian and international retail groups look to develop fresh food and produce offers as part of their expansion strategies. Reena Mital reports.
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The Indian retail market for fresh foods, until recently a fragmented and unstructured market, is undergoing a transformation, as more and more large-scale retail operators, both Indian and international, enter the sector.
The US$200bn Indian market for fresh food, vegetables and fruits has been traditionally dominated by street vendors, and open marketplaces or bazaars, where vendors with tie-ups with wholesalers bring in fresh produce daily, disposing of leftover stocks at throwaway prices at the end of each day. The volumes carried by each retailer are relatively small, with vendors generally using public transport to move goods from wholesale markets to their pitches.
However, changing lifestyles and the expansion of organised retailing has resulted in just about every large-scale retailer investing in selling fresh foods and fruit. In fact, this segment today attracts as much as 70% of total investment in retailing. Companies such as Future Group’s Food Bazaar and Big Bazaar, Godrej’s Nature’s Basket, Reliance Retail’s Farm Fresh, Metro AG, and RPG’s Spencers chain are all active in the market.
Moreover, international players, including Wal-Mart, Carrefour, Auchan, are finalising plans to enter the Indian market, and will bring with them significant aspirations in the fresh foods segment, which is growing at a rate of 15% to 20% per annum.
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By GlobalDataSmaller, local retailers still continue to source their goods on a daily basis from the wholesale markets, but the quantities sourced are much bigger, and the prices are therefore lower.
However, with large national retailers entering the market, the sourcing, handling, and other backend operations in this specialised segment is also undergoing a significant change. While the large retailers still depend on local wholesale markets for sourcing some of their requirements, in the long run, this is expected to change, with retailers increasingly working with farmers directly and offering them an assured market, at profitable rates. Some are going further by helping farmers to adopt better farming practices, and providing financial assistance to assist in improving production, productivity and quality.
Reliance Retail, which is planning to open 100m sq ft of retail space by 2010-11, has taken over a large number of farms in Maharashtra and Karnataka. Similarly, Bharti Group, which is partnering with Wal-Mart in India, has a number of farms in various parts of the country. The company has also set up a subsidiary company – FieldFresh – which is engaged in procuring and supplying fresh produce worldwide. Another retailer, Vishal Retail Limited, has also taken over some farms in Punjab.
While farm production may be improving, a study by the Federation of Indian Chambers of Commerce and Industry (FICCI) has revealed that as much as 40% to 45% of the fresh output is wasted due to inadequate handling and storage infrastructure.
However, according to Chander Mohan Kohli of Oswal Retail, a division of the Oswal Group textiles conglomerate, this is set to change. “This is the unfortunate part about this segment,” he told just-food. “The market is lacking in knowledge and awareness about handling, storage, warehousing and packaging. India’s production of fresh foods is huge, and more than sufficient to meet the demands of the growing retail sector and the existing vendors. With more organised players entering the market, there will be more changes to the scientific handling of these goods.”
It is estimated that retailers are investing around US$500m in creating backend infrastructure for the fresh foods market. Reliance Retail already has its own cargo carriers for moving produce from the farms to the food processing plants, or retail outlets. The company has also invested heavily in tracking systems to monitor the movement of goods and plan inventories. Reliance Farm Fresh has also entered into tie-ups with food processing plants to ensure quantity and quality of output. Other Indian retailers are expected to follow suit.
Analysts have observed that as the fresh food retail market is in its infancy, consumers are not yet as demanding as they might be, which means retailers can get away with keeping stocks on shelves when they are sometimes past their best.
While in the short term, retailers can take advantage of the relatively undemanding consumer standards, companies are aggressively working towards understanding and implementing best practice. Many retailers are training personnel in agricultural marketing, handling and the packaging of fresh foods to increase shelf life.
International giants such as Wal-Mart and Metro already have that scientific and professional know-how, and Indian retailers realise that to survive in this fast evolving market, they will need to get their act together.
