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From IRF 2007 — The rural agenda: So much to do… so little done

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Unlocking the rural potential, from the retail perspective and also as an end in itself for the overall development of trade, industry and the economy itself, is an issue that is on top-of-mind of not only retailers but economic thinkers and statesmen as well.

According to Subodh Kant Sahai, chairman, India Food Forum, and minister of Food Processing Industries, “In UK only 7 per cent of the population is involved in agriculture; in the US it is a mere 4 per cent; and in India we have around 70 per cent of the populace involved in agriculture, and yet we are not growing.”

The minister feels that supply chain in the food industry has to be developed, but care has to be taken that no one is eliminated in the process, especially the agricultural and rural populace. “In the process of modernising food retailing, the industry should not bypass the locals; they should make avenues to include them as well,” he says.

For unleashing the economic potential of the rural segment, Sahai also lays stress on the need to develop cooperatives and contract farming.

CK Vaidya, MD, Godrej Agrovet, gives a clear message about the importance of rural India for marketers when he says: “Rural India’s share of FMCG and durables sales is larger than that of its urban counterparts.” He feels that playing the cards right in agricultural and rural development can percolate economic growth down and across income divides.

Vaidya is of the view that India’s cherished dream of becoming a global superpower can be actualised only with the upliftment of rural consumption. “We have close to six lakh villages with a population of around 700 million people who constitute around 128 million households,” he points out.

According to Krishan Kalra, secretary general, PHD Chamber of Commerce and Industry, despite 500-600 million Indians being engaged in agriculture, the country’s productivity per acre land is among the lowest in the world.

“Our farmers are being driven by poverty to sell their lands; very soon we will have them on streets or migrating to urban areas. This highlights how important the development of organised food retailing is. The USD 180 billion food industry in India is expected to grow to USD 300 billion in the next 3-4 years and we can also expect FDI in food retail to increase.”

Kalra also pointed out that even though India is the largest producer of milk, 30-35 per cent of Indians still do not have access to milk and milk products.

Sahai, Vaidya and Kalra were speaking at industry sessions during India Retail Forum 2007.

The conundrum of processed foods: Retailer vs Manufacturer

Rex Mehta, CEO and founder, My DollarStore, believes the most exciting SKUs for supermarket and c-store operators in India can be those in the processed food category, provided that the products are selected with a finger firmly on the pulse of the market. Mehta’s research – which says that with the sharp rise in the number of nuclear families and dual-income households in urban India, ready-to-eats and takeaway meals will see a rapid rise in demand – backs up this belief.

Mehta, however, says that for c-store and dollar store chains in India, western-style models and merchandise mixes cannot simply be transported to the Indian terrain with equal success. “From what I have seen, the average shopper at a MyDollarStore in India, unlike his counterpart in the US, is a demanding upper-middle-class individual looking for a value-for-money proposition – in both quality and range provided,” he explains.

On the other hand, Ravi Naware, CEO of ITC Foods division, believes there are two distinct hurdles for processed food manufacturers. One, Indians have traditionally preferred fresh food to canned and processed varieties, which explains why the industry is moving at a slow pace. And two, the high cost structure prevents processed food manufacturers from passing on value-for-money benefits to consumers. “India is a highly taxed country as far as food is concerned; this has to be revised if the industry is to grow,” he says.

Rex Mehta’s and Ravi Naware’s comments came during industry sessions at India Retail Forum in Mumbai.

The processed food market is the most important segment of the food industry, accounting for over 32 per cent of the total food market in India. While the country has an abundant supply of food, the food processing industry is still nascent: only two per cent of fruit and vegetables, and 15 per cent of milk produced are processed.

And while the domestic market may be moving slower than manufacturers and food retailers would like it to, the ‘Made in India’ tag on food products is gaining ground in overseas markets. Indian food brands and fast moving consumer goods (FMCGs) are now increasingly finding prime shelf space in the supermarket chains of the US and Europe. These include Cobra Beer, Bikanervala Foods, MTR Foods’ ready-to-eat foods, ITC’s Kitchen of India and Satnam Overseas’ Kohinoor basmati rice.

India could well be seventh flagship wonder for Nokia

Very likely, going by what Cliff Crosbie, global director, retail marketing, Nokia, seems to suggest. While restating what industry watchers already know – that India is a key market for the global cellphone major to expand its retail footprint – Crosbie tells us that India is also very much on the radar at Nokia to open a flagship store here.

According to him, “An India flagship store is very much on the cards. It will be in Mumbai or New Delhi, and we are already in talks with real estate companies.” In fact, Crosbie does not rule out the possibility of opening two flagship stores of Nokia in India. However, he will not disclose a definite timeline or investment plans for the India flagship project for now.

And what would the flagship format entail in space and brand aesthetics? Crosbie says it would replicate the existing six flagships around the world – one each in Moscow, Hong Kong, Helsinki, Chicago, New York and Mexico City. “A flagship store will essentially have to be about 300-400 square metres in size. It will store all the products that we offer in a particular market and will be very interactive in nature,” he said on the sidelines of India Retail Forum in Mumbai.

India is currently the third-largest mobile phone market in terms of volume sales for Nokia, after the US and China, respectively. While as a cellphone brand, Nokia is miles ahead of competitors in India, its user-friendly image has taken a beating in recent months due to a much-publicised battery fault, which the company says is a result of counterfeit accessories being used by dealers.

Perhaps the push into exclusive store retailing reflects Nokia’s urgency to be in greater control of the retail end of the business, even as rivals Samsung and Motorola hit back at Nokia’s lead with low priced models to expand their market shares in India.

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