At the Retail Summit organized by Assocham Mr. Atul Joshi, Senior President, Subhiksha threw light on the intricacies of food retail business in India, excerpts from his presentation.
indiaretailing.com was the Official Online Media Partner of this summit.
The range of food retail business in India is very restricted. This segment is dominated by three major players, who account for over 90 per cent market share in the country. For example, the world has over 50 brands and types of cheese, but in India we still have only a few.
There are a lot of problems that food retailing industry in India faces. Firstly, the issue of MRP that is applicable only in India, though there is RRP in some countries, needs to be looked at seriously by the government. All the taxes are calculated on MRP, which squeezes the profits. Secondly, Indian consumer is obsessed with the concept of ‘Fresh’. So giving the consumer what they want and ‘Fresh’ is of utmost importance and can be a challenge at times.
Due to all these constraints, maintaining a low cost structure in this business is the trick, which everyone will have to employ. To battle it out with the local Kirana store, it becomes pertinent to have huge presence, yet maintain a low cost structure or low asset value. This industry will remain a low margin industry in India.
The big global players who are entering India will find the going tough. Consumer goods business as mentioned earlier is a very low margin business. To survive in this business they have to follow the basics of this business, which they don’t seem to, at this point in time.
Rolling out huge outlets and providing world class experience to the consumer will not fetch them the returns that they are looking for. If they want to underestimate the influence of local kiranas, they can do so at their own peril.
