Food Retailing Has Now Become Industry
Food retailing has come of age -- from a period when food items were sold in small road side grocer shops & mandis and bazzars to a stage when food products are retailed through supermarket stores where consumers can inspect, select and pick up the products they like in a comfortable ambient and still pay a fair price for the product and the merchandise and sometimes even pay less than the price they would have paid at the nearest food stores. Shopping foods is no longer a strenuous and uncomfortable affair. Instead, it is a pleasurable experience. From simple trading activity, food retailing is now graduating to a status of an industry.
The first visible sign of the change in food retailing was seen in mid-eighties. Around that time a few new food stores were set up in all metro cities in India. Calcutta was the only exception where it started a little later. We had at that time couple of leading food stores started operating such as "Morning Stores" and "Modern Stores" in Delhi, "Nilgiri" in Bangalore, "Food Land" in Mumbai "Spencers Food Stores" in Chennai.
Food business analysts are of the opinion that food retailing will be changing and supermarket will soon be established in various smaller towns and thus food retailing industry has been predicted to be an in thing. To a large extent we can see that it is happening.
Spencers were the first to tie up with a Singapore based large retail chain -- "Dairyland" and had set up the food stores in Chennai. This was a technology tie up. The most crucial issue related to retail business is system and inventory management. A great deal of knowledge and experience are required in these areas in order to achieve ideal or optimum stock rotation and pricing for perishable and nonperishable foods and also for processed and fresh foods. Failing which one can lose money in the retailing business.
In Mumbai, Garware group during late eighties had set up large food store which is now reported to have been closed down. But Food Land is still operating.
Prior to that, in cities like Mumbai and Delhi we had co-operative stores like "Apna Bazzar" in Mumbai and "Kendriya Bhandar" in Delhi. Both were very successful and are operating many outlets in all strategic localities in the city. When Escorts group was thinking in late eighties to diversify into non auto sectors which is their main business we deliberated a great deal and decided to get into agri business or food business. Escorts' the then Chairman Mr. H.P. Nanda had also rationalised that decision by saying that "we sell tractors and harvestors for agricultural sectors and our decision to diversify into agro sectors therefore is but a natural extension". And I was hired to give their dream a shape. Having worked in food business earlier for long years I knew that both failure rate in food business and the gestation period are higher than those of other consumer product businesses where risks are relatively lower. I therefore was looking for a relatively lower risk food project and finally zeroed in on food retailing after drawing up an ambitious plan. At that time MRTP provisions were restricting large group's entry in many industry sectors. But the then prime minister Late Mr. Rajiv Gandhi first created a ministry of food processing and gave it a priority status by putting it under Appendix I category. Nanz Group of West Germany, a two and half billion dollar food retail store chain was roped in by me in joint venture with Goetze (an Escort group company) and all clearances were obtained which paved the way for setting up first foreign food retail store in India. Later on "Marsh" food chain of USA also joined this by taking 30% equity in the joint venture. Today there are twenty food stores under "Nanz" operating in northern India alone -- some directly owned and some are franchised. Recently, I enquired about the financial performance of Nanz stores. I was told that they are still not making profit although very close to the break even point. The first "Nanz" store that I had started at South Extension was in 1990. Today after eight years of the stores existance the company is still in the red. Some stores are making money but some are still losing. Mr. Briganza, CEO of Spencer's food store in Chennai which belongs to the RPG Group told me that their store is making money. But still all such food retailing ventures did not work. Mr. K.V. Rao of Dolphin International also ventured into food retailing in Delhi and subsequently in Bangalore. The name of the store was Green Food Store located in Green Park which was closed down after running it for three years.
In India, particularly in metro cities the real estate cost is very high and to make a store of good size financially viable daily sales has to be minimum of Rs.1 lac which many stores could not generate. And as a result, like any other food industry the failure rate is very high here as well.
Oberio hotel group runs a few stores of processed and frozen meat and meat products including sausages, chicken drumstick, hotdogs etc. One such shop is located in Vasant Vihar in New Delhi. The product quality is comparable to what one gets in Europe or American stores.
Although the process of development and growth of food retail stores might still be slow. But as we can witness today, the future is going in that direction.
Once developed, these food stores will become
really a dominating trade partners for the food industry,
who will be forced to give special discount and trade terms
for them to get the shelf space in those successful food
stores. Once established, the store label brands will become
a real threat to the industry as manufacturers have to compete
with the store label brands which are normally sold at a
lower price. In Great Britain we have such big food stores
namely "Sainsbury" and Tesco". Soon we are
going to see either these stores in India or at least their
equivalent.
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