News and views about the Retail sector in India

Weekly news updates on trends and happenings in the Indian Retail Industry

Farmers have it good now with MNCs slugging it out to buy the best quality. So do real estate developers and owners in Sector 17 at Chandigarh. While Wal-Mart signed two agreements with Bharti, Starbucks pulled out, at least for 2 years.

- Chillibreeze Business Research Team

General trends and information
Big Players – plans and investments
Regional News
Sector Specific
International
Support industries

General trends and information

Wheat rush: Retail war reaches farm lands

When elephants fight, the grass grows — sometimes. Kellogg’s is slugging it out with Reliance Retail to procure wheat at the fag end of the wheat procurement season. And the clear winner is the farmer.

While Reliance Retail has already initiated a price war in direct sourcing of wheat from farmers in Madhya Pradesh, it is expected to start the process in 2-3 more states later this month. Haryana and Uttar Pradesh are reported to be on its radar for wheat.

Though the price being offered by the company could not be confirmed, sources say that to counter Reliance’s bid, Kellogg’s has doubled the offer to farmers to an incredible Rs 2,700 per quintal in Madhya Pradesh. This is more than three times the official minimum support price of Rs 850 per quintal.

While competition among organised retail players and food processing companies for high quality grain from farmers is bound to push up farmers’ realisations, wheat prices in the range of Rs 3,000 per quintal are likely to be stray events towards the end of the wheat procurement season, according to an expert in commodities trading.

Western Madhya Pradesh is a major producer of wheat, especially the areas around Sehore district. Kellogg’s had a clear first-mover advantage in the area, as it has been purchasing more than 95% of the wheat produced in the area. While 3-4% has been going to the Agriculture Produce Marketing Committee (APMC) mandi, the rest is acquired by local buyers. Farmers preferred Kellogg’s as it paid a significant 35-40% above the mandi rates.

However, this season, it is learnt, Reliance Retail was able to make a significant dent in Kellogg’s sourcing abilities by offering about 50% more than the MNC. Sources say though Kellogg’s was able to protect its bastion towards the end of the season, it had to shell out a much higher price of about Rs 2,700 per quintal from the Rs 1,400-1,500 it used to pay earlier.

Aug 6, 2007
Source: Hindu Businessline

Big Players – plans and investments

Wal-Mart is in; partnership pact signed with Bharti

Wal-Mart today formally marked its entry into India by signing two agreements with Bharti Enterprises. The first is a franchisee arrangement between the two companies. Bharti will handle the front end, while Wal-Mart will take care of the back-end supply chain management and logistics, under the Indian firm’s wholly owned subsidiary, Bharti Retail Ltd.

The second is a 50:50 joint venture agreement for the wholesale cash-and-carry business and back-end supply chain management, under the newly formed Bharti Wal-Mart Pvt Ltd.

The cash-and-carry operation is a business-to-business proposition that will service small retailers, kirana stores, small restaurants, hotels, farmers, artisans and craftsmen.

The first cash-and-carry outlet will be set up by the end of 2008. In Tier-II and Tier-III cities, a total of 15 stores each with area of 50,000-2,00,000 sq ft will be rolled out over 5-7 years, initially in the northern part of the country. A total of 5,000 people will be employed by the venture.

On plans for sourcing from India, Mr Raj Jain, Indian CEO of Wal-Mart, said: “We currently source $600 million worth of goods from small manufacturers and craftsmen in the country. Now our sourcing will increase by several multiples.” The plan not only includes sourcing from small-scale manufacturers but also use these manufacturers to export products to other geographies through the Wal-Mart route. The firm also intends to help small manufacturers with technical support to upgrade the quality of produced goods.

While goods such as fruits, vegetables, groceries and staples, footwear, clothing and stationery will be sourced from India, the retailer plans to source certain consumer durables and electronic items from countries like China.

Emphasising that the partnership would bring “inclusive growth to the country,” Mr Mittal said that they would not hesitate to approach the Government if the need arises for any clearances. On Wal-Mart’s possible entry into single-brand retail at a later date, Mr Mittal said: “As and when the laws of the land permit, it will only be a natural choice.”

Aug 7, 2007
Source: Hindu Businessline

Wal-Mart keen to enter front-end retailing if allowed in India

World's largest retailer Wal-Mart, which on Monday entered into a joint venture with Bharti Enterprises for wholesale business, said it would like to enter front-end retailing if India's policy allowed.

India is the second country after Brazil where Wal-Mart has a cash and carry business. In Brazil, it runs the 'Maxxi' wholesale stores, besides its normal format outlets like the Supercentres.

Currently, India allows 51 per cent FDI in single brand retail business. Foreign firms are prohibited in multi-brand formats, although they are allowed to hold 100 per cent equity in wholesale cash and carry business.

Aug 6, 2007
Source: Press Trust of India

Fitness and retail industry

This is a first-of-it’s kind initiative in the fitness and retail industry. The Future Group in partnership with Talwalkars, the leading chain of health centers has launched ‘Talwalkars Fit & Active’, which offers health, fitness and gym services within shopping malls and consumption centers.

It boasts of state-of-the-art gymnasiums, weight-loss centers and health spa along with personalised counselling services of dieticians, nutritionists, physiotherapists, weight-loss trainers and personal fitness trainers. Along with these facilities, Talwalkars Fit & Active will retail best-in-class fitness equipment and accessories to its customers.

The first center has been launched at Future Group’s Orchid City Center mall in Central Mumbai and has received a good response from customers. On an average, a thousand customers have been accessing the facility for the past two months.

The joint venture company, Talwalkars Pantaloon Fitness Private Limited, now plans to launch 50 such centres over the next three years in shopping malls alone across the country. The company plans to spend around Rs 2 crore as initial investment in each of these centers.

The company plans to launch Health Clubs that will have gyms, spas, swimming pools and offer customers with a complete range of options in the areas of health, wellness and beauty.

The joint venture company, Talwalkars Pantaloon Fitness Pvt Ltd, is set to play a leading role in Future Group’s presence in the Health & Wellness business division.

August 3, 2007
Source: The Economic Times

India may delay opening up retail sector – paper

India could delay moves to ease restrictions on foreign retailers such as Wal-Mart even though a study showed organized retailing was not hurting small shopkeepers, the Business Standard reported on Friday, citing government sources.

The paper said a study commissioned by the commerce ministry had shown organized retail was not a threat to small shopkeepers and farmers, but the ministry had asked for the sample size of the survey to be expanded and then resubmitted. This indicated that plans to open up the retail sector would be delayed, the newspaper quoted government sources as saying.

Western firms like Tesco and Carrefour are keen to enter the retail market in India, where local firms including Reliance Industries and the Tata Group are rapidly expanding their operations.

Indian shopkeepers, threatened by the entry of large companies, and left-wing parties that support the federal coalition are strongly opposed to moves to open up the sector.

In May, street vendors armed with iron rods and sticks attacked three stores owned by Reliance Industries in eastern India and damaged vehicles of customers.

Next week, an organisation of traders, hawkers, farmers and trade unions has called for protests against what it calls the "corporate hijack of retail and backdoor entry of Wal-Mart".

August 3, 2007
Source: Reuters

Reliance Mart set to open this month

Reliance Mart, the company’s first hypermarket, and what could be the country’s largest single store, sprawling over 1.65 lakh sq ft over three floors, is all set to open its doors by the middle of this month in Ahmedabad’s S.G. Highway locality, according to sources in the company.

The hypermarket, with 80,000 stock keeping units across a variety of goods ranging from fruits and vegetables, grocery, apparel, durables and even scooters, stationery, toys and music, would well be the “mother of all stores” in the country.

The hypermarket would have large sections for apparel, stocking a range of private labels as well as mid-priced brands. There would also be a large section devoted to consumer durables and IT products. However, the mart will not stock the more expensive brands of men’s apparel as the hypermarket is modelled on a discount format.

The official pointed out that once the hypermarket is up and running, the roll out of other such stores is expected to be rapid and Reliance would have 25 hypers by December. The petroleum and retail giant has sewed up properties in sizes of 40,000 to 50,000 sq ft in the cities of Delhi and Bangalore and in States such as Punjab and Gujarat.

August 3, 2007
Source: Hindu Businessline

Regional News

Big Bazaar outlet in Udupi

Pantaloon Retail (India) Ltd launched its hypermarket store – Big Bazaar – in Udupi on Friday. A press release said here that Big Bazaar now has 10 stores in Karnataka with this launch.

In Karnataka, Big Bazaar has presence in Bangalore, Mangalore, Hubli and Udupi. Pantaloon Retail (India) Ltd has a total of 64 Big Bazaar and 94 Food Bazaar stores across the country. Spread over an area of 35,000 sq.ft, Big Bazaar is located near Taluk Office in Udupi.

August 3, 2007
Source: Hindu Businessline

World of Titan now in Surat

With a focus on expanding its retail reach across the country, Titan Industries inaugurated its third exclusive World of Titan showroom in the city, the 216th showroom in the country located at 125, Iscon Mall, Opp. Rajhans Cinema, Surat-Dumas Road, Piplod.

This new World of Titan showroom also has an attached Service Boutique, making it the 136th Service Boutique in the country. The new store also introduced the all-new Raga Shimmer Collection - a range of studded watches specially designed for the woman who likes to dress for the occasion.

The World of Titan showrooms chain comprises of 215 exclusive showrooms spread across 110 cities, attracting more than 12 lakh customers every year.

Like other World of Titan showrooms, this showroom will also offer many innovative value added services like gift vouchers, special gift packaging and extended maintenance guarantee. Customers can also enroll for the highly popular and rewarding Signet loyalty programme offered exclusively by the World of Titan chain.

August 1, 2007
Source: fibre2fashion.com

Sector Specific

Food & Grocery

UK-based Veetee plans health food biz foray

UK-based firm Veetee Fine Foods today said it is planning to make a foray into the health food segment in India with plans to launch ready-to-eat whole grains and soups.

"We are planning to position whole grains as health food and will launch brown rice garnished with European herbs like parsley, organo and thyme," said Rachita Mittal, marketing manager, Veetee Fine Foods (India).

Already, the company has launched Vetee gold brown basmati rice with zero cholesterol and low glycemic index, which is meant for diabetics. It is retailing the product through leading pharmacies like Apollo Pharmacy, Fortis Healthworld, Guardian Pharmacy and 98.4 degrees.

Mittal said the company will also introduce six to seven new dishes every month to its already existing ready-to-eat (RTE) portfolio. Packed in microwavable pouches, the current range comprises 18 Indian curries such as aloo choley, dal makhani and three rice-based dishes (vegetable biriyani, cumin rice and pulao). These dishes have also been exported to countries such as the UK, Switzerland, US, Australia and Germany.

Veetee Fine Foods has already invested three million dollar in machinery and infrastructure. It has a manufacturing unit in Haryana with a capacity of two million pouches in RTE segment.

August 7, 2007
Source: Business Standard

International

Starbucks may take 2 yrs to enter India

Coffee lovers in India may have to wait up to two years to savour the Starbucks brand, with the Nasdaq-listed world's biggest coffee retail chain revising its plan to open its first store in the country.

Starbucks, which was earlier eyeing its India foray by the end of 2007, withdrew its application on July 19 to operate single brand retail stores and said it was postponing its India plans without giving a time-frame for future plans. However, the company's COO and international business head Martin Coles said Starbucks now planned to open its India stores in "the next year or two".

"We recently withdrew our application to enter India as we refocus our efforts in Asia Pacific, which is a key region for our company, but we remain excited about the potential of this country (India) and plan to open that market in the next year or two," Coles said.

Starbucks has 4,000 stores overseas, still very far from the long-term target of at least 20,000 stores outside US, he said. After withdrawing its application last month, Starbucks said it was reviewing all options and evaluating how it will foray into one of the fastest growing economies in the world.

August 3, 2007
Source: The Times of India

Hamleys set for India foray

Hamleys, one of the world’s largest toy shops owned by Iceland-based investment company the Baugur Group, plans to set up its first store in India over the next 12-18 months.

According to sources, the company plans a 50:50 joint venture with an Indian partner and plans to have its first store in Delhi.

Hamleys plans to invest nearly Rs 500 crore in India, the source added. “Hamleys is looking at overseas expansion as a key business growth driver. The company plans a joint venture to set up their first store in India,” an industry analyst said on condition of anonymity.

According to the source, the company is in talks with “big Indian companies” including the Wadia Group. However, he could not confirm if the deal was already through. Officials of Wadia Group were not available for comment. Hamleys is also looking at other countries including China, Kuwait, Dubai and Saudi Arabia.

August 3, 2007
Source: Hindu Businessline

Wal-Mart plans dairy processing in India

Wal-Mart plans to set up a dairy processing unit in India. A representative of the company recently held talks with officials in the ministry of food processing to explore various possibilities in the dairy sector.

“We have been told that the company plans to start sourcing milk directly from farmers in some north Indian states at a price significantly higher than what is being offered to them by existing channels. Once the sourcing mechanism is in place, it would work towards setting up a dairy processing unit,” an official in the food processing ministry told ET.

Up to 100% FDI is allowed in food processing. Therefore, regulatory issues should not be a problem as far as Wal-Mart’s plans are concerned. Alternatively, it is learnt, the company is also looking at direct sourcing of processed dairy products.

In recent times, the dairy sector in India has attracted interest of many multinational as well as domestic companies.

India’s largest corporate house, Reliance Industries, has signed a deal with the Punjab government to source about 7 lakh litres of milk everyday from farmers in the state. The company is now looking at similar arrangements in Bihar and UP.

Companies such as Nestle and Mother Dairy have diversified into a new product portfolio in the dairy sector, Probiotic Dahi. This will also see significant increase in sourcing of milk in India.

August 3, 2007
Source: The Economic Times

Support industries

Concor to buy 12,000 t apples for retail supply

Container Corporation of India (Concor) plans to procure 12,000 tonnes of apple from Himachal Pradesh in the current financial year, through its cold chain subsidiary Fresh and Healthy.

It would supply these apples, branded by Fresh and Healthy Enterprises, to retailers such as Reliance Fresh, Bharti-Walmart, ITC, Big Apple and Mother Diary. “Last fiscal, we had acquired and sold about 1,200 tonnes of apples and some cherries on a pilot basis. This year, we plan to procure 12,000 tonnes of apples,” said Mr R.K. Mehrotra, Managing Director, Concor.

He added that Concor is also in talks with Jammu and Kashmir and Uttaranchal Governments to procure fruits including pears, mangoes and cherries.

Fresh and Healthy Enterprises Ltdis a wholly owned subsidiary of Concor set up with an aim to have controlled atmosphere stores and provide facilities and services for cold supply chain operations. It would procure, import, transport, handle, store, grade and pack including branding, distribution, marketing, export and selling of fresh fruits, vegetables, and frozen foods.

“We are in talks with Reliance Fresh, Bharti-Walmart, ITC, Big Apple and Mother Dairy for the pricing of the produce. We are trying to work out a method linking the price to not just the mandi (local wholesale market) prices, but the prices at which these retailers get imported apples as well,” Mr Mehrotra said.

August 3, 2007
Source: Hindu Businessline

Sky is the limit for rent in Sector 17

What was wishful thinking just six years ago is becoming a reality for commercial property owners of the city today. With retail scene hotting up across the country and cities like Chandigarh emerging as investment options, commercial property is fetching rents one could only dream of earlier. A retailing brand would be expected to shell out rents that can now vary from Rs 300 to Rs 500 per square feet (depending on who takes it) in the commercial hub of the city, Sector 17.

Esprit, brought to India by Arvind Mills, went for above Rs 500 per square feet, say the property consultants, Manohar Singh and Sons, who clinched the deal for the UK brand. The most recent retail major to open shop here is the Lee-Dockers combine, marketed by Sports Station, which is paying about Rs 24.8 lakh as monthly rental for a four-floor store, say sources. This is three to five times more than what other commercial hubs of the city could dream of.

Many property owners in Sector 17 are rumoured to be keeping their buildings idle expecting a further leap in the rentals. But this is the best that the sector will see, is what most showroom owners feel. They believe that the upcoming malls would scale down Sector 17 rentals.

As of now all the three upcoming malls of the city, DLF, City Emporio and Centra Mall, are vying for the best names in retail, though the per square feet rental in them is said to be a deterrent for many not-so-big brands willing to occupy their retail space.

As for the high rentals of the grand-old Sector 17, no one is complaining. The companies are cash-rich and the owners of property have no qualms in milking them.

August 1, 2007
Source: cities.expressindia.com