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Food & Grocery Forum 2014


Paving the Way for Growth and Modernisation

Facilitating Thought Leadership

Applauding Achievers, Innovators & Go-Getters

The seventh edition of Food and Grocery Forum India (FGFI) 2014 was all about ideas, innovations, growth strategies being adopted in Modern Trade, and discovering new opportunities to boost the industry. The concurrently held India Food Service Forum 2014 further expanded the scope for a deeper understanding of the food and grocery and foodservice industries. The event was attended by leading international brands from countries such as Canada, Dubai, Ecuador, USA, Singapore, Spain, and Colombia. Over 500 brands from 50 countries were present under the FIFI banner, besides national and regional companies from across the country.

The Forum, considered India’s biggest platform for food and grocery business, was held on 23rd and 24th January at the Bombay Exhibition Center in Mumbai. It is recognised by the national and international retail communities through the organiser, The Images Group, which is seen as a retail intelligence organisation that acts as a catalyst and facilitator for the profitable growth of Modern Trade through its knowledge platform leadership viz B2B Magazines, Conferences, RoundTables, Exhibitions, Research Volumes, and Web Portals dedicated to the Retail Industry. It awards the industry’s achievers and innovators, who are evaluated and selected by an esteemed jury comprising of industry leaders.

FGFI is the only event in India that connects the food and grocery retailers and food service operators. Through an innovative format of Conference, Exhibition and Awards, the Forum enables global best practice exchange, and delivers knowledge, and thought leadership to Modern Retail.

Live Kitchen

Live Kitchen was a major highlight where chefs demonstrated new cooking ingredients, cooking equipments and cuisines.

Drinks Theatre

The Drinks Theatre conceptualised by Tulleeho Wine Academy, featured tastings and seminars with a select audience of brands, importers, the F&B industry, media, travel retail sector, and food retail. A discussion on “Factors constraining the increased presence of Indian wine on top drawer hotels and restaurants’ wine lists” included insights by Sonal Holland – Corporate Head, Wines and Beverages, ITC Hotels; Cecilia Oldne – Global Brand Ambassador/Head International Business, Sula Vineyards; and Gauri Devidayal – Partner, The Table, Mumbai.

Thought Leadership

Progressive grocers, brand owners, retail stalwarts, industry analysts, food testing and certifying agencies, food service operators, service providers, back-end supporters, and all other stakeholders identified the latest consumption trends in domestic markets, lent insights on business planning and growth, and shared knowledge on global best practices through a series of conferences and educative sessions monitored by industry experts. The aim of all the discussions was “Growing Modern Food Retail by Building the Appetite for Food Consumption in India.”

Industry captains Ajay Kaul, CEO, Domino’s; Devendra Chawla, CEO, Food Bazaar, Future Group; Mark Ashman, CEO, Hypercity; Viney Singh, MD, Max Hypermarket; JP Meena, Joint Secretary, MOFPI; Gajendra Bhujbal, Economic Advisor, MOFPI; Jamshed Daboo, CEO, Trent; and Mohit Kampani, CEO, Spencers and many others, discussed and debated on key issues in a series of sessions that gave food for thought on topics ranging from “Top 10 consumer trends in 2014” (that highlighted the growing importance of e-commerce as a convenient channel of grocery shopping); Retail Trends of Future: A Global Perspective (consumers want quality and value for money, so, mediocre has to become good and the good, better); to the opportunities in food and grocery retail in India, which is estimated to be worth ~$490 bn, and constitutes ~69 percent of India’s total retail market.

CEOs, policy makers, industry watchers, experts and consultants shared their insights on the business of food production in the country, trade and consumption. They revealed that consumers frequenting Modern Retail “occasionally” has grown from 54 percent last year to 68 percent. Increasing consumption, comfortable shopping experience, newer product categories, wider variety of brands, attractive price points, and product promotions and trails are driving footfall.

The country is moving at a fairly fast pace, and consumers are creating their own opportunities as they become exposed to information; hence, the challenge lies in serving this change. With 50 percent of the market unorganised, there is a huge opportunity in the migration of traditional to modern trade, and with various changes at the demographic level and in the behavioural patterns of the youth, the definitive impact on the foodservice is huge (after QSR, the FCF (Fast Casual Format) trend in the USA will pick up in India too). Shri J P Meena, Joint Secretary, MOFPI, pointed out the trends, triggers and prospects of the food processing industry, which is growing annually at 7.2 percent as compared to 3.9 percent for the last five years, with investment in the sector increasing annually at 21.66 percent; exports are increasing at the rate of 20.4 percent per annum.

How to Maximise Sales Per Customer

Increasing the Shopping Basket Size of Each Customer Through In-Store Conversion Techniques
By Pankaj Sahu & Neeresh Jain, PGPX, IIMA’14

Through this hands-on workshop, participants learnt the technique of maximising shoppers’ time inside stores by optimising their purchase basket through a deep understanding of a shopper’s psyche, such as what brings her to the store, the shopping mission, and the purchase process, and how to use simple techniques to drive shopper engagement both with the products and the people inside the store. The topics covered included preparing for shopping, shoppers’ category and products universe perception, omni shopper path to purchase, reasons for choosing a channel/a store, visual merchandising, aisle placement, shelves optimisation and eye-leveling, combi-packaging and pack sizes, and creating a store ambience
Ankur Shiv Bhandari, a shopper marketing and consumer behaviour expert, and MD, Kantar Retail India & MD, ASBICON, who conducted the workshop, started with a pertinent question “Why should one care about Shopper Insights?” and peaked the audience’s curiosity by sharing the model PITA (Population, Incidence, Transactions, Amount), which has been actively used to define shopper-centric behaviour. He gave an insightful example on how the number of shoppers’ baskets can be drilled down to the Amount that the brand has been able to generate out of them (the baskets).

The master class also discussed an FMCG MNC’s strategy to increase the amount by increasing the size of product (upsizing), what is the business opportunity? and “who is the shopper?, and gave insights on various categories of shoppers such as Category Acceptors, Category Rejecters; within Category Acceptors he categorised them into Brand Loyalists, Switchers and Rejecters. The audience pitched in with their experiences on below the line and above the line customer purchase behaviour, and how companies are able to influence consumer behaviour.

Bhasin gave good insights into how to strategize in influencing shopping behaviours based on heavy, light and non-purchasing behaviours. His insight was BOGO for rewarding loyal customers and taking them out of the market for a specific period. He gave an interesting example of UK retailers accepting each other’s shopping coupons to acquire customers as part of promoting brand switching.

While discussing “Why are they shopping?”, he said that it is important to understand what are the Shopping Occasions or Shopping Missing that drive shoppers to shop. As an example, he talked about the minimal penetration of Juices and Nectar in India where only 2 percent of the shopping population buys Juices. The data is based on country level research in both Rural and Urban, Organised and Unorganised retailing. The consumption level of the same is 70 percent in the West. This indicates the huge opportunities in this space. A study done on the Juice and Nectar business by a leading brand in India analysed shoppers’ data in both a qualitative and quantitative way, came up with Shopper Missions, for example, easy to shop, easy to consume for breakfast, lunch, etc. The study revealed that shoppers look for flavour first then the brand. In 10 pilot stores, juices were arranged by flavours first then brand-wise, and then the whole category focus was brought in, for example, Juices for Joy. Results showed a 15 percent increase in Juices sale in the 10 pilot stores.

“How much can a company influence shopper’s purchase decisions?” According to Bhasin, there is a cycle of purchase and each element in the cycle can be influenced – post shopping and pre-shopping. The cycle involves Evaluation, Attitude, Preparation, Shopping Pattern, Decision Making and Consumption. It is the Portfolio Strategy which is important to influence shopper behaviour at the store level.

Bhasin elaborated on the OBPPC Principles. Each packing has a distinct role to play; Right pack size is important; Each packing uniquely captures a shopper’s need; and the offering is differentiated across channels. He gave the example of 5 percent overall category explanation by Coke by creating PET bottles in right sizes of 1.25 L, 2.0 L and 2.5 L, and clearly defined role for each pack size. However, it sometimes becomes difficult to convince retailers to stock packs of different sizes such as 200 ML despite a huge need in the category (Just in Time consumption, School Children, Served Chilled).

Bhasin talked about a UK retail giant in Gifts Retail where it used emotive signals for shoppers to shop from Functional to Emotion driven shopping. He discussed focussing on category growth drivers to increase loyalty among consumers. Some of the important things could be bigger packaging formats and labels displaying the products’ nutritional information. He concluded by delivering Category Growth through Insight-driven activators to meet shopper’s needs and the importance of Engage, Entice and Convert. Consumer behaviour is changing in terms of new categories getting added like hand wash, packaged rice, and juices, and the importance of the Path to Purchase model wherein Awareness, Interest, Decision and Acquiring the customer is planned.

As regards sustainability as a growth driver, Bhasin said that it is a favourable driver as the Indian consumer is getting health conscious, and demand for healthy products in increasing, and gave an example of a UK juice brand which became popular for its “all natural” promotion.

Consumer in the Driving Seat 
Winning Strategies in the Consumer-Led Future
By Amit Dingorkar, PGPX, IIMA’14

Indian retail industry is poised for an accelerated growth in the immediate future and focus on Affordability, Health-awareness and Convenience will help the organisations succeed in the Food Retail industry in India. Saloni Nangia, President, Technopak, and Bhavdeep Singh, Executive VP, US Operations, Ahold USA, discussed why these will be the game-changers in Food Retail in India. The discussion was moderated by Shivnath Thukral, Group President of Essar Group.

Nangia charted out some key trends that would drive growth of the Retail Industry in India. “Affordability will be the absolute key among them and this is not only for the underprivileged class but also for the affluent class. Although the power of brands will manifest itself, the consumers will prefer lower price over brand loyalty according to the projections for 2014,” she said.

She also projected emergence of brands specifically targeted at the middle class, and foresees these brands becoming more powerful over the next few years. As regards the restaurant business, she talked about an interesting wave of culinary nostalgia developing in India. According to her, “Grandmother’s recipes are appealing to the younger generation, and companies are quick to tap this trend and catch the fancy of young India.”
Complementing this is another trend – regional cuisine growing national. This trend is catching up across the spectrum of the industry –right from fine dining to packaged food and condiments. At the same time, there is appreciation of Indian consumers towards authentic recipes across the world, for example, authentic burger or authentic pizza. There is a huge business opportunity in this space.

When it comes to winning the customer, “convenience will be the key parameter,” said Nangia. “Today’s urban consumer is time-poor and is spending roughly about six days in a year on shopping for food and grocery. In order to win this consumer, companies need to focus on ease of shopping, ease of listing and ease of buying. The market for processed and semi-processed food industry is expected to explode in the next two to three years,” she added, and predicted the emergence of companies addressing specific part of the value-chain such as delivery, order picking, and order fulfilment.
Another key trend that Nangia talked about is the continued focus on healthy eating and this goes beyond being green and organic. Consumers are becoming more conscious about ingredients, sources and nutritional information. Singh too voiced the same projections and added that the largest consumer segment for healthier food in USA is the youth in their late 20s.

Singh talked about the key trends he has been observing in the US food and grocery market. “Firstly, Customer Value proposition is changing drastically. While there was a clear demarcation between premium and budget consumers earlier, today’s consumer is demanding both at the same time. Secondly, the growing e-commerce business. There are already consumers in US metros who shop only online and this population is growing very rapidly. Thirdly, similar to the trend in India, the consumers are becoming more and more aware of what they eat,” he said.

Nangia expressed her view that although the online food and grocery business is at a nascent stage in India, it would see rapid growth in the next 24 months.

As regards challenges in the Indian Food Retail Industry, the two agreed that the key is to become cost-efficient in the entire retail operations. Singh asserted that maintaining quality of food across the supply chain is very important. Although managing fresh food is the toughest part, there is a huge potential in this space. They summed up the discussion by adding, “We have to figure out how to replicate the customer experience in Food and Retail. India is a huge marketplace and how we track the shoppers, engage them, and remain relevant for them constantly will be the recipe for success,” they said.

Opportunity in Food and Grocery Retail for India’s One Billion

By Neeresh Jain & Deb Sinha, PGPX, IIMA’14

Although food and grocery constitute 69 percent of India’s total retail market (which is estimated to be worth about $490 bn), the share of the category in the country’s $37-bn organised retail market has increased from 1 to 3 percent, 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 discussed ways to tap the huge potential by eradicating bottlenecks and roadblocks; the learnings in the industry over the last decade, and how it should move forward. They discussed ideas and innovations that would enable food captains to offer more to the consumers and grow the overall pie of modern retail and trade, and how the entire cycle of food production, distribution, retailing and consumption was preparing itself to serve the one billion Indian consumers. The session was moderated by Shivnath Thukral, Group President, Corporate Branding & Strategic Initiatives, Essar Group and former Managing Editor, NDTV Profit.

Devendra Chawla, CEO, Food Bazar, Future Group, informed that in Indian hypermarkets, food has a 40-50 percent share, and that occasional shoppers have grown from 54 to 68 percent. The proportion of male customers in hypermarkets has grown substantially to 30 percent. With changing consumer appetite, retailers are adjusting the categories that they stock. Big Indian retailers have started the private label journey. The evolution of private label in India will be different from that of the West, where brands got built first and private label cashed in on the brand identity. 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 a few categories will explode and contribute phenomenal growth of retailers’ revenues. These categories include frozen food, ready to cook, international/gourmet food, fresh vegetables, and dairy. In his view, community-led brands can play a part in the growth of certain categories and SKUs.

J P Meena, Joint Secretary, Ministry of Food Processing Industries (MOFPI), informed the audience that the food processing industry is a priority sector for the Government of India. Processed food sector is growing annually at the rate of 7.2 percent, faster than agriculture and manufacturing. Investment in food processing industry is increasing at the rate of 21 percent annually. Foreign Direct Investment in this industry has been steadily increasing and stands at $2.1 bn in 2013-2014. Out of 500 global companies in food processing, around 13 are present in India.

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 shows a lot of potential. Government is facilitating automatic approval of FDI to 100 percent equity except a few items reserved for SSI. Mega food parks, cold chain, SEZs and agri processing zones are catalysing private investment. To support the onward march of the industry, the government has enacted an integrated food law – one law, one act.

The ministry predicts that cold chain logistics companies could see 15-25 percent growth due to the growing quick service restaurants. Government is providing 50 percent subsidy to the total cost of P&M technical civil works in cold chain subject to a maximum of Rs 100 million. There exists a gap of 32 MT in cold chain infrastructure space, a big opportunity for existing and new players in this industry.

Mark Ashman, CEO, HyperCity, stated that HyperCity 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 that the Western hypermarket model cannot be air-dropped in India and expect to sustain,” he said.

As the head of a hypermarket chain, Ashman shared his key learnings from HyperCity’s operations: Absolute space: The 50,000 sqft 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. This helps bring down overall operating costs. The product mix needs to be regularly evaluated; lower or loss making categories should be pulled out and new higher margin categories should be developed. “When you have a large space to play with, you don’t need to ask what the customer really wants at a category level. The shift has to be from filling stores with products to filling customer baskets with products. Only this will enable retailers to move from loss to profitability,” he said.

According to him, the biggest challenge for HyperCity is to import international products. In December, due to the sudden change in food policy, 600 containers lay in Mumbai port while customers were waiting for the products, leaving the retailer helpless. HyperCity’s deal with Waitrose helps them bring great quality and sustainably sourced products to Indian customers. Currently, they are not able to bring the proposition to Indian customers. He stressed the need for Government, regulators and retailers to jointly work to allow them to responsibly bring in world-class products to Indian consumers.

Ajay Kaul, CEO, Jubilant Foodworks – Domino’s Pizza & Dunkin’ Donuts, started with the question “Are we really having 1 billion who we are trying to serve?” He 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. People are moving from one stratum to other and hence, definitely immense opportunities are there. A huge young population, lifestyle changes, growth of working women, and rising income are all going to have a huge impact on consumption.

In India, 15 percent of the total food and grocery is food services, while the US would have 50 percent, and China around 40 percent. Hence, there is immediate and immense scope in India, which may jump upto 25 percent in the next 10 years. He also commented that various other formats like fast casual format, casual, and fine dining are evolving fast, but penetration and frequency is required. Food retail is just 4-5 percent of retail but there are variations across categories. For some of the new age categories, the percentage is very high ranging from 40 to even 60 percent.

Jamshed Daboo, CEO, Trent Hypermarkets, opined that India as a country is moving and at a fairly rapid pace. New categories are evolving 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 further added that Retail, QSR and Hotels have the potential to change the face of Indian economy. These are the only industries that are generating urban employment and are constantly adding more and more value to the raw material. “We are not seeing many opportunities coming in traditional industries; for example, we don’t see any new steel plant coming in,” he said.

As regards sustainability in retail, he commented that it 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, talked about Government initiatives to provide special assistance to help foreign investors. He also talked about the recent launch of the Investor’s Portal, which helps investors in getting information including on Sectors and State specific information, Locating JV Partners, and Expedite Regulatory approvals, etc. The portal can be accessed from www.mofpi.nic.in, and investors can raise their queries here.

QSR – The Way Forward

By Pankaj Sahu and Amit Dingorkar, PGPX, IIMA’14

Availability of an infrastructure, supplier ecosystem, focus on quality and hygiene, and standardisation is spurring the growth of QSRs in India, concluded the panel that comprised leading players in the QSR space, and was moderated by Samir Kuckreja, President, National Restaurant Association of India (NRAI). They discussed how Indian players can compete with foreign players, how they can distinguish their brands and offerings, and the successful elements in QSR players. A report by CRISIL mentions that India’s QSR market will double by 2015-2016 from 2012-2013. Currently, global brands constitute 63 percent of the total QSR market, but with a lot of domestic, regional, and new international players entering this market, tough competition lies ahead.

Gaurav Jain, CEO, Mastkalandar, said, “Bite as much as one can chew.” Their strategy is to expand to cities that can be managed by overnight journey from Bangalore, although plans are afoot to expand to Delhi and Mumbai. “The key is to not to expand out of desperation.”

Sanjay Coutinho, CEO, Baskin-Robbins, mentioned that they have 530 stores in 120 cities, and since 62 percent of their business was coming from top 18 cities, they plan to have future development concentrated in those areas. Location is important on deciding growth, he felt and highlighted Hygiene and Sanitation, especially with FSSAI coming into play, and logistics in the frozen food segment.

“Vada pav is enjoying a huge fan following in Mumbai and Thane; the challenge lies in standardising the product and creating a brand out of it,” remarked Dheeraj Gupta, MD, Jumbo King Foods. He revealed that they were planning a disciplined growth over the next few years to reach a 1,000-store mark in 5 years. Managing franchisees would be their top challenge. “It becomes a problem when franchisees do not earn money. We have to focus on merchandising, product mix, and marketing,” he said.

According to Kaul of Jubilant Foodworks, the lack of an ecosystem for QSRs in India poses a big challenge for the growth of the industry. He recalled that when the global QSR players forayed into the Indian market in 1995 or so, the ecosystem of suppliers and service providers did not exist at all. The situation remains more or less similar even today. He felt that the unavailability of suppliers who can supply raw or semi-processed materials on a large scale limits new product development. The challenge is more on supply side rather than on demand side, he opined. Other challenges are infrastructure, trained human resources, sanitization and hygiene.

As regards the future growth trajectory for Barista Lavazza, the company’s COO, Nilanjan Bhattacharya, hinted at moderating the level of investments in capital and optimising returns. “Over the years, Barista has realised that the real business comes from public places with a captive audience (colleges, hospitals, business parks, institutions, and malls) as compared to traditional high streets. The challenge for the coffee shop industry lies in matching quality of product with consumer-perceived prices and in coping against rising real estate prices,” he said.

The panelists shared insights while defining differentiators for their brands, outlining the strategic space their brands were operating at. Bhattacharya attributed the differentiation to strengthening linkage between Italian-ness and coffee. Relating with photography and literature has been well received by the patrons and continues to be their key differentiator, he felt.

Jain pointed out that one challenge is the “chalta hai” attitude that hurts any business. As regards consistency of execution, he mentioned that currently they are into the business of fresh food but scaling up would create challenges for them. Coutinho was of the opinion that their challenge was in churning out new flavours consistently, and in off-course distribution and logistics. While the 30-minute delivery remains the key promise of Domino’s, the strategy to avoid franchising model for expansion gives a competitive advantage to them, added Kaul. “The strategy to control the entire supply chain, quality and people has led to internal differentiation that has resulted in building up a unique consumer perspective,” he asserted.

For Gupta, understanding the market and aligning their strategy with the requirements was key to success. He realised that convenience is the sole factor driving the popularity of Vadapav; hence, they built their business model around it. The strategy translated into small-sized stores in crowded places, standard, hygienic products, and quick service.

As part of the Q&A, the panelists mentioned that the best way to motivate their employees is to give a heart to each store, make employees proud of their work, and encourage them to share new ideas and improvements. They suggested that one should think global but implement local. Customize to the local palate, but consider customer feedback. Indian customer relates healthy to hygiene, but relating it to low-fat, low-cholesterol food might not be a good idea sometimes as customers want to indulge when eating out.

The Wow! Experience

By Nikhil Paruchuri, PGPX, IIMA’14

This session dealt with designing, developing and managing a truly memorable experience for customers and what they look for when eating out. Industry experts shared customer winning techniques that create brand loyalty, life-long relationships, and enduring word-of-mouth. The panelists comprised Chetan Arora, Development Agent, Subway; Viraj Sawant, Business Head, West, Zomato; Subroto Mukherjee, CEO, Burgs; Dev Amritesh, President and COO, Dunkin’ Donuts India; Mohit Sharma, CEO, Romio Technologies; Sanjiv Rajdan, GM, Pizza Hut India, Yum Restaurants; and the session was moderated by Samir Kuckreja, President, NRAI. What emerged from the discussion was an interesting insight on what the “wow!” experience incorporates.

Since the early days of civilisation, businesses have continued to grapple with one question: “How to create an experience for the consumer which the consumer will value and choose over a competitor?” Leading fast food brands of the country shared their experiences and views on this ever consuming issue. The panelists covered various elements involved in creating the “wow” experience, which cannot be standardised and needs to be tailored to the consumer’s personal needs. Also, delivering this unique experience becomes a huge challenge as chains expand across various geographies and cultural zones in India. Finally, what value a consumer needs today from a brand or a product could change tomorrow.

There is a basic hygiene factor that every food chain business needs to deliver on. This is ensuring that the service or product promised to the consumer is delivered exceedingly well. This is the core of the brand experience and no matter what other frills you add to your services, brands cannot compromise on this value proposition.

The periphery includes the store layout, lighting, colours, product quality, timely delivery, and hot, fresh food. The wow factor is, however, harder to deliver since it needs to focus on the human touch aspect of the consumer experience. These need to be delivered by the fast food service brands through their customer touchpoints, engagement programmes, and by offering unique product and service experiences. Pizza Hut delivers this by singing rap birthday songs, encouraging consumers to “ring the bell” when they are delighted with the experience, and by providing handcrafted balloon figures to young patrons. These are memorable experiences and etch themselves in the consumer’s mind, thereby making the brand unique and lovable.

Developing and sustaining this exceptional consumer experience is where brands face their biggest challenge since this experience needs to be delivered by their employees. Brands are increasingly becoming aware of the need to go beyond standard operating procedures and monotonous customer service. Dunkin’ Donuts and Pizza Hut are trying to move away from the top down approach, and are instead encouraging their employees in a co-creation process. Also, instead of a thousand different metrics being used, companies such as Burgs that offer gourmet burgers are now focussing on two to three metrics which will ensure the “moment of truth” like Domino’s does with its “30-minute delivery” promise.

There are some major trends prevailing in the industry. Consumers are increasingly making pre-purchase choices and using websites such as Zomato to validate their dining options. People are also becoming less patient and have less time to tolerate any mistakes, and so brands like Subway are training their employees to focus on customer engagement to provide a lasting relationship with the consumer. Many consumers are dissatisfied with the status quo of fast food offerings and their needs are becoming extremely complex. Dunkin’ Donuts is experimenting with its tough burger option to address such needs. Finally, all brands are interacting with the customers online and through social media to create brand loyalty and to continue delivering the wow factor.

Supply Chain – Who’s Job Is to Fix It ?

Amit Dingorkar, Pankaj Sahu, and Neeresh Jain, PGPX, IIMA’14

The supply chain capability of a retailer is a good indicator of modernity, that is, up-to-date, novel, and efficient. Supply chain capability may be achieved through functional integration and development of advantages in lowering costs, increasing revenue, improving quality of service levels, and building consumer loyalty. Many supply chain programmes have reached a varied degree of success in Indian food retail industry, but they are well short of excellence achieved by modern retail the world over.

In this session, industry experts discussed how retailers should collaborate with food and grocery companies and vendors; how they should take their vendors’ help in managing the inventory; whether direct delivery to stores is a good idea and feasible; which vendors qualify to get visibility of demand and point of sales data; and how should the data be analysed for faster filling of shelves. Also, why are we not able to make the cold chain cost effective, and lastly, who will fix these problems?

The panel comprised heads of supply chain from leading brands in the food industry, and the session was moderated by Sanjay Sethi, CEO, Export Trading Group. It was unanimously felt that basic Infrastructure, Automation and Information Flow is key to an effective Supply Chain.

As regards the best practices being followed internationally, Rajdeep Datta, Director, E Business and Supply Chain, Carrefour WC&C India, said that B2C is core competency, operating in B2B space in India with bar coding and seamless check-out at POS. Carrefour globally manages tagging at pallet and carton levels and it does continuous tracking of a product to ensure integrated customer experience. Carrefour has integration with supply chain and it ensures traceability across the chain. He further added that the retailer should have products with enough shelf life to be able to sell. This integration is not seamless at the moment. He also stated that the company is trying to put together a framework that will enable integration of RFID, Cloud, etc, and initiatives have also been taken by manufacturers down the line. In a nutshell, their store is a warehouse today.

But to what extent is it possible to bring best practices to India? Chandramohan Gupta, Director, Supply Chain, Coca-Cola, said that his understanding of what consumer wants is very basic: Availability of brands we love in right pack; Product safety – traceability; Freshness of product; and Pricing. He said that they are putting a lot of emphasis on the pricing aspect and ignoring the other aspects of supply chain such as the common metrics for freshness of product, quality, and efficiency.

Stated VPS Malik, VP Sales, Modern Retail & Institution, Parag Milk Foods, “The supply that we give to stores is much more efficient in terms of temperature and freshness and more organised than those coming from the distribution channel of the retailer. We have to manage the supply as per the time given to us by the retailer. Basic infrastructure in the supply chain is still evolving. We can control our own manpower, stock, and shipping, but cannot control that of the retailers. Let us all get the basics right in terms of SCM before we go for modernisation, etc.”

Software technology was discussed as a solution to address the issues in SCM. Ravi Mandayam, Founder, Director, Frontal Rain Technologies, said that the major problem is the information. “There is something required by the retailer to know what, when, and where he wants in order to fulfill consumer demand. So there is a need for a collaborative platform to share the information across all the players – manufacturer, distributor, and retailer. There has to be awareness about what is required by whom, when and where. Cloud-based software makes the model economical.”

Rustom B Irani, CEO, Promethean Spenta Technologies, expressed that cold supply chain is a huge problem in the industry. Most part of India has acute power problem, and since diesel prices were going up, maintaining cold storage has become extremely difficult. He added that technology by their company decouples Refrigeration from Electricity. They have patented a breakthrough Thermal Battery that stores thermal energy and can be used whenever needed. They store power at night, when it is cheaper, in the thermal battery and use it for cooling when required. This solves social and nutritional issues in form of milk storage, and addresses the issue of Peak Power. The company has launched a Thermal Milk Chiller at the village level, which can bring the temperature of milk from 30 degree Centigrade to 4 degree centigrade, thereby increasing the shelf life of milk. This would help the farmers in creating value added products from milk, and thus increasing their income levels. He also said that his company is working in the area of Solar Hybrid systems, again at the village level, and added, “In India, we have a peak power problem and not a power problem; at night, the country has surplus power and we are trying to address this area.”

According to Srinivasa Ramanujam, Business Head, Adani AgriFresh, the problem of modern retail is that all retailers are trying to compete on the price front rather than quality. In modern retail, the number of skus is too many and different skills are needed to handle different skus, but the price points are low. Therefore, retailers are bleeding; for example, handling an apple is different from handling a soap. He also said that for Fresh Produce, modern retail is not even a competition when compared to the guy selling on the roadside, as the latter bring fresh produce very early in the morning compared to the modern retailer. He added that the problem in modern retail is that there is no concept of collection centres. If there is a single store operation, it works properly. Additionally, according to him, whole lot of education needs to be done so that retailers start competing on quality rather than price.

Balaji V, COO, Future Supply Chain Solutions, added that in store education and automation is needed. There are several problems that exist in a store, including inventory mismatch, MRP mismatch, and low infill rate, SKUs mismatch, e.g., ordered 100 items but received only 80 and that too of different types, etc. He felt the solution to the problem was automation. Use automated technologies Warehouse Management Solutions (WMS) and various processes to ensure 100 percent accuracy. Automation also reasonably brings down the operations cost, he further added.

Forum of Indian Food Importers (Fifi) Conclave

By Neeresh Jain & Debsona Sinha Roy, PGPX, IIMA’14

The Imported food segment is growing and becoming more popular not only in the metros but also in smaller towns and cities. Traditional and Modern Trade are playing an important role in the growth category. A growing young working population, coupled with their willingness to experiment with new cuisines and pay more for higher quality ingredients, will drive the growth.

In this session, FIFI members in conversation with Modern Trade heads and Traditional Retailers discussed ways to chart a new way forward to tap the potential in the imported food category, how to overcome hurdles and challenges, devise synergies and partnerships to develop this category, create consumer awareness of these foods, run promotional activities so that more and more people develop a taste for this category and ultimately increase consumption.

Moderator Sumit Saran, Director, SCS Group, welcomed the panel that represented some of the best minds in the imported food business in India. He stated that the food and grocery industry was witnessing several things: “Indian consumers are becoming younger, and they really represent a young country as 70 percent of India’s 1 billion population is under the age of 35. India has all possible kinds of divides; still there are some things that bind us, such as Bollywood, cricket, and aspirations which cut across all societies. This ambition for a better tomorrow and aspirations for a better lifestyle are getting ingrained in the youth of India. Industries such as watches, apparel and cars have sensed this trend, but the food manufacturing industry still needs to sense and act on changing demand and aspirations.”

Co-Moderator of the session, Amit Lohani, Max Foods & Convenor FIFI, talked about the journey of FIFI in the last five years and the synergy it is creating among the three pillars of food business, viz. Mom-and-Pop stores, Modern Trade and Importers. Ajay Parashar of Arjit Foods, which deals in imported meat products, commented that most of the growth is happening in smaller cities. “Growth of Indian consumers is phenomenal. They are very educated now and want right products. However, importers face several challenges that include cold supply chain infrastructure. It is a challenge to ensure that the product reaches the end consumer in right shape and right quality,” he said.

Laxmichand Gada of Society Stores expressed his views, “First of all, we need to educate the staff. Many a times customer buys a product but is not sure what is needed to properly use the same; the educated staff comes handy here.” He also said that retailers need to ensure that product display is aligned. A customer buying pasta may not know what spices would be needed with it, but an educated staff can help the customer in such a situation. Also, displaying pasta add-ons and ingredients along with pasta helps the consumer.

Jehangir Lawyer of Fortune Gourmet said that he sees basic movement happening from “necessity to lifestyle.” In his opinion, defining as city tier I, II or III is a hard thing to do since even a bigger city will have slums. “Every city has got the potential and inclination towards indulgence,” he said. On educating customers, he added that half the battle has been won because of TV channels that broadcast many foodshows everyday. However, he stressed on the need for creating availability, cold chain infrastructure to ensure food quality, and educating retailers on how to store products the right way. “Overall, the future is bright for imported food business,” he said.

Sanjay Bajoria of Bajoria Foods said that Indian tastebuds are ready for international foods even in tier II cities, which was not the case a couple of years back. He cited examples of some of the tier II cities where significant growth is happening. However, he stressed that “to make a success in tier II cities, importers have to go to the cities themselves. We cannot expect customers to come to bigger cities like Mumbai and buy the products.” He also commented that QSRs are fueling the growth of imported products and importers should be able to leverage on that.

Lohani cited the examples of evolving consumer’s appetite for imported foods. Consumers in cities such as Anand and Pokhran are consuming imported foods. Thus, the concept of imported foods market being restricted to only mega and tier I cities is no longer valid. Kirit Maganlal of Magsons also emphasised the fallacy of treating tier I and II markets as not-yet ready for imported foods. Magsons operates 10 convenience stores in Goa and gets 30 percent of its revenue from sale of imported category. This establishes that there are pockets of evolved markets and the traditional classification of tier I, tier II no longer holds good for imported foods. Maganlal also spoke about the innovation in retailing services that helped them establish connect and loyalty with their customers. They regularly organise sessions to educate customers in selecting ingredients for preparing international cuisines. Customers see the value that the retailer is adding to their lifestyle and hence reciprocate with loyalty purchases.

Prakash Sanghvi from Delta Nutritive Foods said that “reach” is the responsibility of importers and retailers. If products can be made available to customers in lower tier cities, they will start consuming those products. He gave the example of chocolates that have seen steady growth of consumption in imported categories across cities and towns. “The question is not how, what and where; it is rather why not?”

The QSR market is growing by leaps and bounds. A report from CRISIL states that the current market size is Rs 3,400 crore and expected to grow to Rs 7,000 crore in three years. This presents tremendous opportunities to service the changing appetite of Indian customers. Puroshattam Narang of The Gourmet Store said that he has built a strong customer base by simply responding to their requirements. From a 400-sqft store, The Gourmet Store sells milk at Rs 275 per liter. This demonstrates that customers want quality and premium products and retailers have to find innovative ways to plug the demand-supply gap.

The discussion shifted to the role of supply chain. Saran raised the question: “Who is responsible for the supply chain aspects of the business?” The current context puts the stake on importers as their money is on stake, still the products are sold to consumers. But is it really under the scope of importers or should retailers also play a big role? Perhaps this presents an exciting opportunity for 3PL players to invest in supply chain infrastructure and earn a proportion of revenue coming from the value chain.

The session concluded with an evaluation of the risk of foreign brands whose products were imported before, with local production and distribution subsequently being established, following their success. However, importers do not see this as a threat and asserted that a foreign brand should evaluate the market size carefully before taking a decision to localise their product offerings. The panel agreed that because of price point pressures, foreign brands are not able to maintain the same quality as they offer in other markets, and hence the relevance of imported products to customers would always exist.

Other panelists at the session included Newton Perry Azavedol, Newton Super Market; Saikat Sarkar, Head Speciality Foods, Spencer’s; Pramod Agarwal, Balaji Grand Bazaar; Rahul Kulkarni, Fine Foods; Rakesh Banga, Banyan Foods; Sandeep Gulati, Empire Store; Puneet Gupta, L-Comps Impex; and Uday Chugh, Vriddhi Specialty.

Growing the Health Foods Market: Health and Wellness on Consumer Minds

By Nikhil Paruchuri, PGPX, IIMA’14

The discussion of this panel was not a debate between eating fresh food versus packaged/processed food. Instead the panelists provided a holistic view of the need to be physically active, eat fresh alive food, and to be conscious of the food one buys in grocery outlets and the labels used by FMCG companies.

Panelists included Aditya Bagri, Head, Marketing and Strategy, Bagrry’s; Naaznin Husein, Founder and Director, Freedom Lifestyle & Wellness Centre, Secretary Indian Dietetic Association, Mumbai Chapter; Mickey Mehta, India’s leading Holistic Health Guru; Kajal Bhatia, Founder Nutritionist, My Green Place; and V N Dalmia, Chairman, Dalmia Continental, and President, Indian Olive Association. Mohit Khattar, MD, Godrej Nature’s Basket moderated the session.

There is growing awareness amongst the Indian consumers, however nascent it might be, of the need to take care of themselves and their families’ health. This realisation has become stronger as we see sports people on television, as we move into highly sedentary lives, and incidences of associated diseases become extremely high, making India the world capital of coronary and diabetic diseases.

While a few businesses like Baggry’s have entered into this market early on, others are slowly realising the need to tap into a growing segment of customers who are becoming extremely conscious of what they buy. By some estimates, the health segment in Indian food and grocery category is only about 7 percent compared to 25-28 percent in the West, providing a huge opportunity for growth if right efforts are made in marketing and education.

The panelists felt that the health food market was a high growth segment but consumers are still not well educated on what constitutes healthy and what doesn’t. Oats or cornflakes that have been heavily processed are pretty much just pure starch and don’t have many nutrients left by the time they reach our stomachs. So is the case of oatmeal cookies or wheat noodles which are often promoted as a healthy snack, but whose main ingredients remain processed flour and triglyceride oils which consumers would typically like to avoid. Similar lack of awareness exists regarding cooking oils. Vegetable processed oils that are often promoted as low cholesterol options to coconut oil or ghee are often unsuitable to Indian cooking, because they break down at high temperatures into transfats (think antioxidants). In the recent years, olive oil or castor oil has been recommended as better alternatives. The former is often promoted using studies of positive effect of the Mediterranean diet, ignoring that Mediterranean diet also includes red wine! While some tout the benefits of castor oil because of its low concentration of polyunsaturated and saturated fats, consumers need to be cognizant of the fact that it was originally a genetically modified version of rapeseed oil.

It’s ironic that 40-50 years ago, Indians had access to healthy food options, but with changing lifestyles, we are becoming more reliant on importing health food options from the West. An example is when we prefer to imitate Western habits rather than choose our own version of quinoa, which are bajra and jowar. Mehta made a profound statement when he said, “We don’t die of the foods we eat, but of what we don’t eat!” Like everything in life, balance is critical to a healthy lifestyle.

The more we focus on food that is fresh, alive and appeals to us through its colour, texture, freshness and taste, the better lifestyles we can maintain.

Winning and Retaining Customers

By Pankaj Sahu & Neeresh Jain, PGPX, IIMA’14

Loyalty programmes are an important part of a retailer’s marketing strategy. Creating a successful loyalty scheme means delivering real relevance and perceived benefit to customers. But how do you differentiate and do loyalty programmes always work? The workshop provided first-hand insights into the most successful schemes and software being utilised and how customer behaviour can be influenced over time to deliver a bottom line contribution to retailer profits.

Speaker Zulfi Tyebjee, MD India, ValuAccess, started with a deep dive on how to influence customers to change their habits, and asked some thought-provoking questions on what customers want to purchase and what time they are coming in to purchase. He shared a framework to identify this, look for insights, use influence tools and change habits. Top influence tools that can be used are Ratings, E-coupons, and Bonus Value.

He said that tools should be used to incentivise changing consumer habits. “Surprise and Delight are the two wonderful tools for loyalty,” He also prescribed a phased approach. Phase 1 is acquisition, the key is “not to over communicate and overburden the customer.” Process has to be simple. Phase 2 is drive revenue by finding customer attitudinal data. Loyalty reward should be relevant, invest in customer service and staff. Don’t make redemption too difficult, and don’t charge people to participate in the programme.

He said that appropriately defining a loyalty programme is highly important. However, it is also important to understand that “no loyalty programme is perfect on day one.” It evolves over time. A good loyalty design programme involves data capture, programme architecture and device, and channels to communicate with customers. Customer data needs to be captured from different angles, which include interaction, transactional and personal data. Architecture involves rating rules and rewards, target groups and features besides other things. Organisation needs to decide on the type of rewards: whether they want to offer points based, cash value, bonus or e-coupons.

In general, he observed that the world seems to be moving away from the points-based system; however, in different retail categories, points-based system works. Perceived value in points is more. There are several permutations and combinations possible in terms of real time or batch-based system, routine or campaign, what is to be included and what is to be excluded, etc.

In terms of devices, there are various options possible such as Mobile plus Pin based system, Mobile Apps, manual entry, mag-stripe and
bar codes. Device is the media used for “earning and burning” of  the rewards.

He further added that communication with customers is the key to success. Communication can be in many forms such as e-mail, SMS, Whats App, Facebook and mobile apps. It can be categorised as routine that can be automated, promotions that are more targeted communication and so on. Other significant aspects of the loyalty programme include membership management and reporting. Retailers also need to ensure that programme management is in place to handle various aspects of the programme which include Fraud Management, Performance Management and Campaign Management.

Semi Urbs – The New Consumpton Hubs (Fifi) Conclave

By Nikhil Paruchuri, PGPX, IIMA’14

The early 2000s witnessed development in a lot of tier II cities. Rapidly growing economic activity in these cities led to increased urbanisation, higher disposable income, and increased aspirational levels of the consumers. In view of these factors, brands see these cities and their huge untapped population as a lucrative opportunity. As per a survey, acceptability of newer products is faster in smaller cities where people have more time to visit malls. These new consumption hubs are emerging with economic growth percolating to smaller cities. By 2020, there will be around 200 cities in India with a population of more than 0.5 million. Some of these so-called “small towns” are buzzing with action and displaying signs of growing consumerism. In this session, food brands, retailers and experts discussed how they are leveraging this huge opportunity, and it was moderated by Sadashiv Nayak, CEO, Future Value Retail.

There are about 80 million people in the top 100 Indian cities (excluding tier I). Consumers in these cities have similar aspirations to those of their urban counterparts, but are an underserved segment. While modern food retail has expanded to about 20-30 percent penetration in tier I cities, retail chains have only recently started focussing on tier II towns/semi-urban regions, garnering a penetration in single digits.

At the session, CEOs from top FMCG and retail chains assembled to debate on the opportunity available in these semi-urban areas and find possible solutions to address this segment. The starting questions of the session was to figure out if Madurai will ever become a Chennai or a Kohlapur a Kolkata. The audience and the panelists argued that the top line in a tier II town will probably always be lower than a tier I city. Sumit Chandna, Chief Merchandising Officer, Aditya Birla Retail, suggested that the comparison should be on metrics like sales per square feet, or the average spend per customer. He elaborated on the example of a store they have in Bheemavaram (Andhra Pradesh) which has very high sales density that is as good as the top stores in Hyderabad.

Aseem Soni, Director, Consumer Sales, Cargill Foods, and Amit Singhal, Head Direct Trade, Colgate Palmolive, opined that every tier II city has its share of SEC A, B category consumers who are equally aspirational and have dreams similar to the urban consumer. They are heavily influenced by mass media where they are exposed to the lifestyles of soap stars, sportspersons, and Bollywood actors. A look at the graduates of many management schools indicates a larger predominance of students who grew up in tier II towns. Another noticeable trend as per Chandna was the shift of story lines in serials and soaps from a metro to a semi-urban setting. All these forces and observations indicate a consumer in tier II town who has very high aspirations and who is already educated. The question is how to serve this segment.

Large organised retail chains and FMCG companies feel constrained with the smaller scale, the lack of infrastructure, and hence the higher associated costs of working with tier II towns and cities. HUL has famously overcome this for a few of its products with the sachets concept. Another perceived issue is that consumers in tier II towns are much more price conscious, which is a debatable point. The semi-urban consumer is primarily looking for assortment and availability for which they currently need to travel to the larger cities. So they are less likely to worry about price differences if a similar retail experience is offered in their local community, which is convenient and saves their time. As Manish Behl, Business Head Foods, Sahara Q Shop, and A S Chadha, Vice President Sales, Organized Trade, Nestle, pointed out, the opportunity available for organised retail is based on providing a larger assortment and variety of quality products. The chief challenge would be to address the logistics and supply chain issues. Q Shop is indirectly offsetting the higher costs associated with an inefficient supply chain, by managing the entire chain on its own. Nestle is doing this by partnering with other chains like Vishal Retail Mart, which already has a strong logistics structure in some of the semi-urban areas.

The debate reminded one of the Walmart’s growth stories. Most of us know Walmart as the retail behemoth of more than $400 bn that is present across United States. Its beginnings were however humble. Sam Walton realised the need to set up larger-format retail chains in small towns which were typically 3-4 hours away from the metropolitans. It was only a decade later that Walmart entered the larger cities and competed head on with well-established players like K-mart. Maybe, the Indian story too will play out similarly as retail chains figure out how they cater to both the Urban and Semi-Urban markets.

Dubai: A Land of Immense Opportunities and Solutions for Indian Businesses

By Neeresh Jain, PGPX, IIMA’14

Dubai Exports is keen on exploring various key sectors and growing its business in partnership with Indian entrepreneurs. The vast range of manufacturing and production facilities in Dubai, coupled with excellent logistics infrastructure, forms a lucrative opportunity to expand and export from India, including Food and Beverage sourcing.

Dr Ashraf Mahate (Head Export Market Intelligence, Dubai Export Development Corp and Vice Chair Economic Policy Comm., Dubai Department of Economic Development) talked about the advantages Dubai offers in terms of sourcing and re-exports from Dubai. He said that UAE is not only a tourist destination or oil producing country but also an important business destination for a host of other things, and offers a whole range of products which are non-oil. Dubai’s Food Processing sector is of tremendous importance.

Dubai is the third largest export centre in the world and has many major trading partners which include India (36%), Switzerland (15%), Iran (4%), Saudi Arabia (4%), Turkey (3%), Singapore (3%) and others (36%). In the next four years, he expects exports to significantly grow in Asia, South America and Africa driven by good connectivity of Dubai to these continents. He also expects exports from UAE to grow by 9.4 percent and imports by 10 percent in the next three years.

As regards top export destinations of Dubai, as per 2011 ranking, Japan and India stand at number 1 and 2, respectively, while China stands at number 5. By 2030, he expects India to be the number 1 export destination followed by Turkey, China and Japan. UAE has a significant Food and Beverage manufacturing sector which includes varieties of Fish and Prawns exports supported by a private fish farming industry in Dubai. Dubai is one of the biggest exporters of Fish and Prawns to USA. Other food items include Eggs (Wash, Cut and Pasteurized and supplied to various industries such as Bakeries) and Meats (imports meat form various countries, does value addition in terms of processing and exports it).

Because of Food Security concerns in the country, there is greater investment in the agriculture sector, however, only in the environment-friendly crops. Further, Dubai also exports ready-to-eat Doughnuts to several countries including six containers daily to Saudi Arabia. Other products include Vegetable Oil exports and Pasta to all the segments covering from bulk to niche segments. Foodservice is again a growth area where Middle East-based restaurant chains are going global and setting up chains in other countries. Dubai also offers several unique confectionary items, for example, camel milk-based chocolates which help in digestion and are low in calories.

He added that Dubai has several support industries in the Food and Beverage sector which include Food Packaging and Food Marketing companies. He stressed on the emergence of Dubai as a trusted source in Halal Meat. They are not only targeting the 120 million Muslim population in India, but the whole Indian meat market. The Dubai government provides support in terms of certification and branding of Halal Meat.

He discussed challenges in India in terms of sourcing. It is extremely difficult to locate SMEs in India as 60 percent of the SMEs don’t have a website, while 95.5 percent of the businesses in India are SMEs. To overcome the challenge, Dubai Exports has recently set up its second office in Mumbai besides the first one in Delhi to locate suitable sourcing partners in India.

He informed that Dubai exports help businesses in all possible ways which include B2B match making, creating visibility, help in visa processing for staying in Dubai, certification, documentation, providing dedicated meeting rooms in Dubai, connecting with the Government, and offers its services free both for importers and exporters.

He stated that Dubai is a strategic choice in terms of re-exports because of various reasons:

  • Excellent meeting place for people from different countries
  • Ease of doing business. Easy to register your business and help from Dubai FDI in setting up the business
  • Supply chain efficiency. Excellent infrastructure
  • Excellent connectivity to major parts of the world e.g. 79 daily flights to African continent
  • No Direct Taxes on corporate profits or personal income
  • Free Trade agreement with GCC countries and Singapore. There are bilateral agreements with many other countries.
  • Custom duties for re-exports are 0 percent in most of the cases. Real import duty is only on three products which are Pork (100%) and purely from health reasons on Alcohol (50%) and Tobacco (50%).

The company’s strategy includes encouraging firms in India to source from India and also to encourage them to re-export from UAE. The strategy has three aspects: Creating Awareness, Conversion, and the Actual Implementation. Long-term strategies include creating the right infrastructure to facilitate trade.

Developing the Indian Food Palate to International Standards

By Nikhil Paruchuri, PGPX, IIMA’14

With each new generation of customers that enters the market comes a new set of expectations with new tastes and new food habits. Consumers today like to experiment with new recipes, food fusions and world cuisines. The new generation chefs are able to fulfill this because of their creativity and innovation.

In this session food connoisseurs, master chefs and restaurateurs shared innovations in trends. Panelist included Sandeep Pande, Executive Chef, Renaissance Convention Centre, Gauri Devidayal, Director, The Table, Kedar Bobde, Executive Chef, Hyatt Regency Mumbai, Chef Sudhir Pai, Executive Chef, Holiday Inn Mumbai International Airport, and was moderatod by Riyaaz Amlani, MD, Smoke House Grill and Mocha Cafe. What emerged was an insightful discussion on trends.

Mumbai has always had access to a large number of hotels and restaurants that have offered international cuisines. However, in the past 10 years, there has been a huge explosion due to the influx of the exposure through media, a greater number of local consumers who have travelled abroad and appreciate authentic international cuisines.

Indians are no strangers to international food; after all we love “Chinese food” at the local street corner. However, there has been a perceptible change in the Indian consumer palate. While our palate continues to be influenced by heavy and rich flavours, which is probably why we have taken Mediterranean food in droves, we are also developing a taste for the subtleness provided by Californian or Japanese cuisine.

Gauri Devidayal, Co-Founder of The Table, has encouraged patrons to not infuse their steaks with heavy sauces and instead enjoy the subtle taste of rare prime cuts. While consumers still ask for hot tobasco sauce for their pasta or chili flakes for their sushi, there is a growing set of educated consumers who prefer to have authentic food, similar to what they had during their holiday/business trip in Bangkok or Florence.

The big challenge that chefs constantly face is ensuring consistency and quality of products used. Unlike in the West, where local ingredients are highly encouraged and are often a differentiating factor for a restaurant, such is not the case in India. This is one of the reasons why restaurants prefer to source from international or large national vendors and not use local vendors, since local sources tend to be inconsistent and often seasonal. Smaller, stand-alone restaurants can choose to buy from the daily fresh market or develop their own local farms to ensure freshness of ingredients.

On the question of authenticity versus experimentation, it really depends on the clientele that visits the hotel. Larger five-star hotels often have a huge set of international guests (often over 60%) and so are forced to offer a menu that matches the standard expectations of a particular dish. Smaller restaurants that are stand-alone can, however, choose to experiment and offer a very eclectic menu. While such a menu may not be for everyone, they do tend to find a share of consumers who are loyal to either the chef or the idea of experiencing new tastes and enhancing their palate.

The general consensus amongst the panelists was on the need to provide high-quality food that is healthy and nutritious. Instead of Indianising Chinese food to match Indian palates, chefs now have an opportunity to internationalise the Indian dishes and offer consumers much more variety, which goes beyond the regular Punjabi food that is regularly served up.

FSSAI & FIFI – Partners in Progress

By Pankaj Sahu, PGPX, IIMA’14

FIFI has played a pivotal role in increasing awareness on compliance on various Food Safety norms and regulations. The forum has emphasised on bridging the gap between FSSAI and Trade by conducting various interactions through seminars and consultations on rationalising the law. The ever evolving laws in the country have created various stalemates in Modern Trade impacting the entire industry. FIFI has been able to get various reliefs from FSSAI, and Legal Metrology to simplify the laws and bring major compliances in the Trade. The overall scenario has impacted Trade Commissions, Embassies, Importers and Modern Trade in a big way. The session discussed how all the affected constituents of Modern Trade could take a future course to bring in more compliances and get laws further simplified. The common goal was collaborative growth of imported food retail and serving the best to Indian consumers.

Amit Lohani, Convenor FIFI, who moderated the session, started by giving a presentation on FIFI that highlighted its role in creating awareness on issues with respect to importing, sending inbound and outbound delegations, fair trade practices, generating awareness of compliances, trade laws, consolidation of importers database, and more. He gave insights into growing market segments like Olive oil, Pasta, Seafood & Meats, and Confectionery and discussed why low sodium and fat free foods are gaining popularity. He stated that FIFI has achieved a lot such as the abolishment of submission of annual return of food importers to FSSAI authorities, rectification of the triangle logo, etc.

David Williams, Head – Agriculture Office, US Consulate, Mumbai, mentioned that in his second trip to India in 20 years he has been amazed by the growth and feels that there is a lot of scope for growth in double digits. He also mentioned an issue faced by importers in terms of different packaging standards and feels that demand side of economy should also be considered.

Saikat Sarkar, FB Specialist at Spencer’s, highlighted issues in supply chain created by new food safety norms and emphasised on the need to train employees and involving legal teams. Sumit Saran, Director, SCS Group, felt that focus on food safety should be widened. Foreign exporters disillusionment with Indian importers is actually taking the sheen out of the Indian Import industry, and there was need to focus on food safety for primary food as well and standardize laws.

Kathleen Donahue, Trade Commissioner, Canadian High Commission, said that it’s in everybody’s interest to support safe and fair trade. Canada is positioning itself as India’s trusted partner. Legit product, and respected products are a global issue. Regulators need to ensure transparency and open communication and dialogue benefits all. Ashwin Badri, FSSAI and Complaince Expert and Head-Business Relations at Equinox, opined that a good change is required as importers are trying to get out of business due to stringent laws. Focus should not be on cosmetic changes but on actual parameters. The audience raised questions on issues on quality of testing, lack of awareness of laws, onus on manufacturers to comply, and lack of standards.

Multi-Channel Retailing for Maximum Outreach   
Growing Share of Modern Retail in Food and Grocery

By Debsona Sinha Roy, PGPX, IIMA’14

Retailers are focussing on multichannel retailing as an opportunity to grow business, increase consumption, and reach out to more consumers as this gives ample scope to grab more eyeballs and saves them from high rental costs. A grocer must build his business from a customer-centric perspective, which must include serving customers via many channels (internet, telephone, home delivery, mobile vans, catalogues, kiosks).

Customers too are continuously adapting to multiple channels and moving across various mediums to make an informed purchase. In such a scenario, grocers must leverage many retail channels into their business to ensure that they are omnipresent . No doubt, technology, social media, blogs, etc, will form a very important part of their growth strategy. Retailers need to be well versed with all these facts and apply them to their business model in order to stay ahead of competition. To be the most preferred shopping channel, they need to innovate and renovate continuously.

Moderator of the siession Sreejith Mohan, GM & Head, Buying and Category Management, Godrej Nature’s Basket, started the session with an audience poll asking how many among the audience have shopped online and how many have done that for grocery products. While 85 percent of the audience said they have shopped online, only a handful raised their hands for online grocery shopping. This set the context for the discussion: do customers buy grocery online? What are the incentives and deterrents for consumers to shop for grocery online?

Karan Mehrotra, MD, Localbanya.com, a strong proponent of online grocery retailing, said, “Retailers are ready to go online because consumers are ready to buy online. Conventional physical retail does not fulfill all of customer demands and hence they come online for their regular grocery purchase. The key for any online business is the mobile space; with the growth of mobile internet, online retailers will see traction and growth.”

Shaurya Mehta from Ekstop.com said that one of the winning customer value propositions for any online retailer has to be convenience through mile delivery. Ekstop is working directly with manufacturers to make their products available to consumers. Price is a factor but it is not the determining factor. More important is the seamless experience from the point an order is placed to the point it is delivered.

The entry barrier for online retail is low. The challenges come with scale especially when there are infrastructural problems. So, as and when an online retailer starts scaling up, the business should focus on the backend infrastructure. The most important value proposition – the last mile connectivity has to be supported by infrastructure. Localbanya is doing lot of research on solar rechargeable mobile refrigerators in order to give the same delivery experience to customers irrespective of their physical location. The first order placed by a customer is most critical and hence key focus is on customer service and maintaining the same service level day in and out.

Mehrotra claimed that every aspect of his business is customer focussed and customer oriented. Amazon is the greatest proponent of customer centricity philosophy. This has helped Amazon to establish their brand and build a loyal customer base. Perhaps by following this strategy, online grocery retailers in India would also gain customer loyalty.

The question then shifted to how an online grocery retailer can be profitable. Mehrotra and Shaurya shared interesting perspectives on this. Both of them believe that their businesses have to be lean and nimble. Localbanya uses a mixed model of leveraging existing backend facilities of retailers for general orders and using their own inventory for fast fulfillment orders. They use a just in time model to procure products and deliver it to customers within six hours. Using this process, Localbaniya does a business six times of their monthly inventory. Of 13,000 active skus, it retails, only 800 are held in their own inventory. This speaks of the innovation that these e-commerce companies are bringing in to reduce cost and pass on the benefits to customers. Technology is the biggest enabler in this process. The technology platform helps these retailers to expand their product line without adding cost.

Darshana Shah, Sr VP, Marketing and Visual Merchandising, HyperCity, said that there are still a whole lot of shoppers for whom shopping is an activity. Online cannot give the visual and sensory feelings, the sampling excitement and other experience that shopping in a brick and mortar can. But, at the same time, online presents enormous opportunities to complement brick and mortar business of hypermarkets. A brick and mortar retailer can leverage its own supply chain for online fulfillment. The brand loyalty of the retailer pulls customers online and then it’s just a question of making products available online. HyperCity is already doing home delivery for high-end brands. The chain is now piloting online retailing for F&V category. The objective is to keep customer service levels high and delight customers every time they shop irrespective of the channel they use.

Shah also said that their loyalty programme is playing a big role to make relevant offers available to customer and no wonder it is contributing 50 percent to sales.

Manoj Satia, MD, Direct2U Retail, represented the aspiring physical retailer who wants to get into online to leverage the lower cost model. He believes that staples is going to be a substantial mix of the product and would be a significant proportion of online grocery sales. He believes that one of the reasons more and more brick and mortar retailers would get into online retail is to address margin pressure in traditional retail, especially when such retailers have an existing backend infrastructure.

On the other hand, Pradipta Kumar Sahoo, Business Head, Safal, Mother Dairy, does not see a lot of promise in F&V category because of big challenges in the entire F&V e-retailing value chain. He said, “People are now looking at F&V from a health perspective. F&V brings footfall to stores. But retailers are using the category to pull customers at the expense of margins. This is a disservice to the category.” He also talked about major learnings from Safal’s mobile experience. Safal has a strong and compelling proposition for customer – freshness, food safety and value for money. This, he claims, is the basis for success in food retailing.

Back in 2003, there was a prediction that online food and grocery retail would grow from 0.5 to 10 percent of retail in five years. The actual growth was between 0.7 and 1 percent. Clearly, the growth of online food and grocery retail has been sluggish and there is enough data from developed markets to say that the next five years are not going to witness substantial growth levels. This poses a challenge for online food and grocery retailers in India to develop business models founded on low operating costs and superior services to customers. Only time will tell whether these companies are able to turn the global trend and gain a sustainable competitive advantage over their brick and mortar peers.

Private Labels: Learnings from Past and the Future

By Debsona Sinha Roy, PGPX, IIMA’14

In the West, private label had an FMCG background. In India, as companies and FMCG brands are coming into their own, retail brands and private labels are evolving too. However, most of the categories in India are under-penetrated. Within this context, moderator Devendra Chawla, CEO, Food Bazaar , Future Group, asked the panelists, “Are private labels developing the market or is it just a price game that they are playing?”

Murali Krishnan, CEO, Nilgiris, said that this company has been in business for over 100 years. For Nilgiris, private brands came first and retail later; retail started in 1978. It is the only big food and grocery chain that operates a franchisee model. During the expansion phase of Nilgiris, the management found that the amount of time spent on private label was only 5 percent as operational management of stores consumed the lion’s share of management efforts. By shifting to a franchisee model, the management could bring focus back on private labels and expand into sub-categories like misti doi, frozen yoghurt, and bakery.

Krishnan informed that Nilgiris private label products command a premium over the national brands by virtue of their premium positioning. The strength of the brand is to give fresh products. An evolved supply chain has helped ensure availability across the retail stores. Entire packaging has shifted to far superior standard to stand out on the shelf vis a vis national brands. Krishnan said that in case of private labels, the feedback mechanism is immediate, consumer’s insight is taken, and the product re-launched, if needed. He added, “The brand has to be seen as a brand; all elements have to be looked at in order to build a strong footfall driver.”

Every brand has a role to play and thus private labels can easily find their space in most of the categories. If there is enough clutter in the space then Nilgiris does not participate in that space. The retailer scouts for gaps in category ranges. As soon as it spots a gap, it enters that category. Through their private labels, Nilgiris helps specialised manufacturers find a market. Krishnan concluded by saying that his first two years as a retailer were a failure as he used the FMCG company learning to operate Nilgiris. His experience has taught him that the FMCG approach to product development and marketing is not needed in case of private labels as the scale is much less. He wrapped up by saying, “Nilgiris is a food brand. As long as one is able to give value to consumers, it will work.”

Sunil Sanklecha, Founder and Managing Partner, Nuts n Spices, said that for his company, from the very first, the concept was to have only private labels in selected categories. In fact, certain categories have only their label, which generate one-third of the sales from their private label. They have developed 30 private label skus in the tea range, of which 8 have started going to other supermarkets. Thus, private labels for retailers work like business within a business, generating greater identity and more opportunities.

He believes that what FMCG is giving is not enough in terms of range. There is an opportunity to enter any category. The focus should be how one can give something better than what already exists in the market. For example, snacks is something that a retailer can get into as volumes are high. He cautioned retailers with private labels not to adopt practices of FMCG companies to market their products. An FMCG company’s target market is vast compared to a private label, and hence, FMCG marketing methods might not be best suited for private labels.

Darshana Shah, Senior VP, Marketing and Visual Merchandising, HyperCity, talked about their private label brand Everyday, which is present across all categories. HyperCity uses an endorser brand strategy on their private labels as it helps establish trust in the minds of customers. Since quality is most important to customers, by using the HyperCity brand as an endorser on their private labels, the company is able to provide quality assurance to customers. To align their private label to the target customer segments, HyperCity is looking at niche categories to expand their private label footprint. The big challenge in this process is vendor quality. The retailer is focussing on international technology and great packaging. It employs the Good, Better, Best strategy to allow their private labels to cater to different sub-segments within the target segment. It also offers exclusive points to customers who are picking up their private labels to push private label products into the customer’s basket.

Shah said that at HyperCity, they are constantly looking at ways to launch categories to match the evolving lifestyle. A part of the process would be to pluck the low-hanging fruits – where customer is not looking at the brand and only needs something hygienic, of good quality and price. Bakery is one such range. She said that it is tough to penetrate the personal care category as it is emotional. She believes that private label is the way forward to establish customer stickiness. The challenge for private label is to make the transition from functional stickiness to emotional stickiness.

Ambrish Chheda, Chairman and MD, MasterClass Training & Consulting LLP, offered his solution for private labels: “Spot gaps, offer it by differentiation. If functional differentiation is not possible; offer a compelling price proposition and in the process gain margins.” He believes that in the current private label game, the bigger picture is missed out – the job of a retailer is for spotting the need gaps from its direct connect with consumers and FMCG companies. There exists good opportunity to cater to local tastes and preferences through private labels.

He strongly believes that for private labels, a retailer needs to look at it not as a retailer but as an FMCG company, and suggested that retailers aspiring to develop private labels should go through the entire strategy formulation – segmentation, targeting, positioning, product development, packaging, pricing, and excitement generation. He concluded by saying, “Look at private label as a company within a company.”

German retailers Aldi and Lidl get 90 percent of their revenue of $120 bn from private labels. They have demonstrated that there exists enormous opportunities to develop and succeed in the private label game. The question boils down to a long-term strategy and the necessary support that retailers need to lend to their private label brands. Are Indian retailers who are struggling with working capital management and net margins ready to penetrate the market with private labels, or would they just focus on retailing branded products? The answer seems obvious. Indian retailers can no longer ignore private label and have to formulate their own strategies to win in the private label space.

Nielsen estimates the spend on private labels in the country to grow five times to reach $500 mn, or about Rs 3,000 crore, by 2015. Private brands already account for close to 5 percent of modern trade FMCG sales in India. The food category alone accounts for 76 percent of the total sales in private label, and within this, some areas are making bigger waves than others. Packaged grocery, for example, has a particularly dominant position, as it pulls in a whopping 53 percent of total sales. Private labels will continue to be an important constituent of any retailer’s business as some products are doing much better than the national brands. So, while India’s retail industry continues to scale new heights each year, the private-label arena has also shown incredible consistency and potential.

F&B – The Hallmark of a Hotel

By Pankaj Sahu, PGPX, IIMA’14

The restaurant business acts as a catalyst to business in the hospitality sector. Not only does it generate additional revenue but it drives in more traffic, and creates brand positioning in the market. Bukhara restaurant at ITC Maurya Sheraton, Delhi, is a known name and is the dining destination point of famous people, state heads, celebrities and global presidents.

The session, moderated by Chef Saby, Fabrica by Chef Saby, discussed how a restaurant can enhance the overall brand prestige of the property it is located in, and by itself become a brand of its own. Panelists also discussed how focus on food and beverage provides greater opportunities to enhance a property’s overall performance, which ultimately adds value to the asset as well as the real estate. So the food and beverage segment in the overall hospitality sector is of prime importance in building brand equity, attracting footfalls and driving sales.

Saby asked the panelists whether F&B is actually the hallmark of the hotel industry. Madhulika Dash, Food Writer and Freelance Journalist, highlighted the emotional purchasing behaviour of customer when dining out. She gave an example of a Chinese restaurant that only caters to one particular emotion and has a long waitlist of eager customers. She also stated the importance of ambience in the overall dining experience of the consumer, and maintained that the mainstay of F&B industry is going to remain good food and service, giving the example of a restaurant where people go for its great service.

Vikram Kamat, Executive Director, Kamat Group, stated that stand-alone restaurants in malls have started a new trend. Branding and food are important; location does not matter. The star hotel is still an aspirational destination, as people are fast becoming brand conscious. Aditi Kapur, Founder, DeliveryChef.in, commented on the difference in dining out and eating at home experiences. According to her, fast delivery of food helps and that’s what customers are looking for. In her view, the West and East are somewhat different; in the West hotels bring in brands, now the trend is coming into India as well.

Ravi Wazir, Principal Consultant, Phoenix Hospitality Solutions, gave the example of a hotel in Khar, Mumbai, which was completely turned around by its sheer positioning and careful selection of patrons. He also brought in the aspect of focus on mood instead of food, which can be a revenue generator. According to him conflict of interest between brands and hotel are always there as stand-alone hotels allow easy access to customers. Saby’s closing remark was that F&B is the hallmark of the hotel industry and the way forward.