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Expert Speak: It’s good days for organized trade in the F&G sector

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In the aftermath of the new initiatives by Government – demonetizing the Rs. 500, 1,000 notes – to flush out black money from the economy and check funding of terror activities and other evils, the much awaited achhey din seems to have arrived for Food & Grocery Retail in general and Modern Retail in particular.

Expert Speak: It's good days for organized trade in the F&G sector
According to India Brand Equity Foundation, a Government-backed research body and think-tank, the Indian food and grocery market is the world’s sixth-largest, with retail contributing 70 per cent of the sales

Most chains across the country have clocked double digit growth in the past month and are gearing up to handle more business in the days ahead. As a matter of fact, most retail chains have been bumper sales for major key categories throughout the month.

In view of the new trend towards digital payment and the forward momentum building towards the creation of a cashless economy, F&G retail has witnessed a sudden rush from consumers.

In view of this development, retail teams are busy revising MBQs and MOQs to align with the supply chains and to cater better to the new requirements. I believe that these windows of opportunities that are opening up should be able to revive the ailing sector and nudge it on the recovery path. The developments in recent weeks have helped to infuse confidence in the investors, who are buoyed by high hopes for the sector’s future growth and potential returns.

Add to the gaining confidence is the update on new policies wherein the Government might allow a limited sale of beauty and personal care products in food retail outlets as part of plans to ease rules for multinationals to open stores in the country. Once this policy is implemented, it should effectively open up India’s lucrative US $10 billion home and personal care (HPC) market for foreign deep-discount retailers, bringing them in direct competition with consumer goods companies such as Godrej, Dabur, Colgate-Palmolive and yoga guru Baba Ramdev-promoted Patanjali Ayurved.

According to India Brand Equity Foundation (IBEF), a Government-backed research body and think-tank, the Indian market is the world’s sixth-largest, with retail contributing 70 per cent of the sales.

Top US and European multi-product retailers have shown interest in setting up food retail outlets, but they want the Government to allow these stores to sell HPC products in a limited way. Apart from grocery and food, these supermarkets may be allowed to sell soaps, shampoos, cosmetics and toiletries provided the value of personal care products do not exceed 20 per cent of food merchandise sold through each of the outlets, sources said.

While foreign retailers will have to manufacture food products in India, they will also likely be asked to mandatorily invest at least 15 per cent in local back-end infrastructure such as cold chains.These rules will likely be bundled with the clause, allowing them a limited sale of HPC products, said the same sources.

Consultations are currently on for writing the final policy rules to fully open up the food sector to overseas investors. The Department of Industrial Policy and Promotion (), which pilots all FDI policy rules, is examining the finer points of the proposed rules. Allowing 100 per cent is a major initiative taken by the ruling Bharatiya Janata Party despite the persistent political opposition to foreign giants setting up stores in India.

Modern Retail seems to be the sunrise sector of tomorrow. Here is hoping that its growth engine will be firing from all cylinders in view of the new unfolding scenario and the emerging opportunities.