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Indian Food & Grocery Retail Poised for Significant Growth

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Although food and grocery constitute 69 percent of India’s total retail market (which is estimated to be worth about $490 billion), the share of the category in the country’s $37-billion organised retail market has increased from one per cent to three per cent, according to a recent study. Hence, a huge opportunity lies ahead as this sector is poised for a significant growth in the years to come.

Experts at the session, “The Opportunity in Food and Grocery Retail for India’s One Billion,” held at the India Food Service Forum discussed ways to tap the huge potential by eradicating bottlenecks and roadblocks; the learning’s in the industry over the last decade, and how it should move forward. Shivnath Thukral, Group President, Corporate Branding & Strategic Initiatives, and former Managing Editor, NDTV Profit moderated the session.

, CEO, Food Bazar, informed that in Indian hypermarkets, food has a 40-50 percent share, and that occasional shoppers have grown from 54 percent to 68 percent. The proportion of male customers in hypermarkets has grown substantially to 30 percent. Big Indian retailers have started the private label journey. The evolution of private label in India will be different from that of the West. In India, food and grocery retailers are trying to build their private labels at the same time as they are building their retail brand.

He opined that in India categories like frozen food, ready to cook,international/gourmet food, fresh vegetables, and dairy will explode and contribute phenomenal growth of retailers’ revenues.

J P Meena, Joint Secretary, (MOFPI), informed the processed food sector is growing annually at the rate of 7.2 percent with investments increasing at the rate of 21 percent annually.

The growth drivers for food processing industry are a strong domestic demand, rising export, supply side advantages and policy support. Within the industry grain processing, milk and milk products (only 35% of milk is processed), F&V (around 18% wastage), marine products, meat and poultry have been growing sharply and show a lot of potential.

The ministry predicts that cold chain logistics companies could see 15-25 percent growth due to the growing quick service restaurants. There exists a gap of 32 MT in cold chain infrastructure space, a big opportunity for existing and new players in this industry.

, CEO, , stated that has adopted a cluster-based roll out strategy for key markets. The retailer will get into Noida and develop a similar clustered store infrastructure there. “Earlier, Indian retailers looked towards the West for inspiration, but soon they realised the Western hypermarket model cannot be air-dropped in India and expect to sustain,” he said.

As the head of a hypermarket chain, Ashman also shared his key learnings from HyperCity’s operations such as 50,000 sq.ft. floor space is the ideal format for an Indian hypermarket, and on a lower side the 25,000 sqft floor space is ideal for a compact hypermarket.

According to him, the biggest challenge for HyperCity is to import international products.

, CEO, – Domino’s Pizza & Dunkin’ Donuts  said that if we divide the market into Elite, Affluent, Aspirational, and Strugglers, around 50 percent falls in the Struggler segment, and in the next few years it is going to be 1 billion. A huge young population, changes, growth of working women, and rising income are all going to have a huge impact on consumption.

, CEO, Trent Hypermarkets, opined that new categories are evolving in India and consumers are creating their own categories as they are getting more exposed and smart. To substantiate his point he gave several examples including that of a Bhajiawala in South Mumbai who has moved to selling pasta from bhajia and sikh boti. But the challenge is to capture on this movement.

He also stated that sustainability in retail will evolve with the industry as a whole. “It is very early days as such for retail and it will come with time; 80-90 percent of the brands sold in retail are other brands, hence, brands have to partner actively for it to evolve.”

Gajendra Bhujbhal, Economic Advisor, MOFPI, spoke about Government initiatives to provide special assistance to help foreign investors.