Chicago-based Independent Grocers Alliance (IGA) sees India as one of the largest countries that it operates in within 10 years, and is seeking licensee partners across the country, informs Mark Batenic, CEO
IGA has opened a 1,500 sqft grocery store (its first in the country), at Kalkaji, New Delhi, with its licensing partner, Banaras House. It has also launched co-branded products for the first time in the country, and is seeking licensing partners who would forge retail tie-ups for the company.
Talking about its plans, Batenic says that getting the store off-the-ground is a primary objective right now. “Hopefully, we will see more independent and family owned businesses stop by to see what we are trying to offer. IGA is a business platform; it’s an entire business process that is not just selling the product, rather, it’s a philosophy as to how to do business in a community. At the end of the day, the stores that we operate, which are a part of our licensing system, around the world generate a community sense where people gather not only to buy food but also to meet neighbours and the store owners. Our business platform is built around community, entrepreneurial family ownership, and giving back to the community.” He informs that Banaras House will work towards expanding the scope of community building for IGA, for instance, it is planning sponsorship of the junior golf team.
He adds, “The hardest challenge for us in India was making the store owners and also the licensees to understand that it’s a total business process and not just selling the product. IGA stands for an alliance of retailers, licensees, distributors and vendors.”
Batenic points out that another unique aspect of IGA is that unlike other multinationals, the business profits stay in the country. “Our licensing fee is very reasonable, roughly USD 30 dollars a month. In return, store owners get complete access to all the marketing material we have. They also get access to IGA Coca Cola Institute, an online training program offering courses in seven languages. The institute teaches store personnel how to do a better job, customer service tips, and on product handling, while the upper-level courses help store directors in people management, hiring, etc.”
According to him, for store owners, the IGA business platform brings access to worldwide consumer goods from major companies like Coca-Cola, P&G, Nestle, Unilever, Colgate, Hersheys, Mondelez, and Cadbury’s which otherwise they would not have as an individual, but under the IGA brand they would get that proactively.”
We have been working on this for 1.5 years with Binay Kumar, Chairman, Banaras House. Kumar, an IGA licensee now, decided to open the first store to set an example for others to follow. India has tremendous potential; most of Indian retail falls under traditional format. Our research says traditional retail will continue to consume 80 percent and we don’t see any of this changing in the near future.”
He confirms that Kumar holds the IGA license for the northern part of the country where most of the initial expansion will happen. Adding to Batenic’s remarks, Kumar admits that even in the South, 40 stores of Nilgiris have already been roped in. IGA has also initiated talks with retailers in Lucknow, Udaipur, and Chandigarh where most of the retailers said they would like to see a model store, its operations and revenue, before joining the programme.
Stressing on the beneficial aspects of IGA, Batenic states: “IGA does not replace the name of the store owner but makes a small neighbourhood store a apart of the worldwide organisation. Shoppers told us during our survey that we would like to shop from grocers who think local but have a global focus. Since the taste and preferences change from one block to another, local grocers can respond to the needs of the people much faster.”
He also points out that the advancement of the smart phone and the access to information has had a significant impact on the way consumers shop across the world. As India has one of the highest penetration of smartphone users in the world, the shop owners need to be really smart here.
Commenting on the product portfolio, Batenic adds: “Kumar is importing some products from the U.S but we are also sourcing locally. Some of the IGA products will be developed and produced in India. The quality products made here can’t be made anywhere else in the world because they are “made for Indians,” so we are relying on our licensee Banaras House along with others to identify products that are most relevant and appeal to most of the Indians. For the first time in our history, we are also doing co-branding with a national brand from that country, which is a very popular way of introducing new products. The manufacturer will have to meet the quality standards we have in the U.S. For instance, Costco in the U.S has done a wonderful job in co-branding, and we are kind of following that model. The co-branded products have the labels of both the IGA and the local manufacturer. Two co-branded products (mixed pickle and vinegar) have already been launched at the Kalkaji outlet.” Kumar confirms that he has outsourced the manufacturing.
Batenic admits that India presents a lot of challenges. “Indian retailers want to know how much money they can make out of the IGA platform and what will be the investment, however, I think they have a bigger responsibility to the community they operate in, apart from selling quality products. We have had a hard time getting that point across, but it will work. It took us 10 years to get working in China, 12 years in Australia, and we are still working on it in the U.S, and will keep working on it everyday. After all, IGA is not just about selling the products. Logistics seems to be an enormous issue here; one of the reasons why Wal-Mart left, though they still have a cash-and-carry format, which is doing well. In India, the distribution network poses yet another challenge as distributors have a certain profit margin which they insist on.”
Since home delivery is thriving in India, Batenic has initiated home delivery at the outlet in Kalkaji. Kumar informs that IGA will be targeting 1,000 stores in the next 5 years. For the current fiscal, he plans to have 100 franchised stores. The company already has 12 franchisees selling IGA products in south Delhi for the last one year. A minimum of 1,000 sqft is required for an IGA franchisee.”
Ten years ago we had 11 stores in China, there are over 1,400. This year, China will become our largest country in terms of business as it has a strong infrastructure. About 15 years ago, Australia had 6 outlets; currently there are 1,600, and the U.S has 1,200 IGA stores. “ he concludes.