News and views about the Retail sector in India

This week, we focus on the food retail sector of India, which is growing at a fast pace thanks to the growing aspirational class, which has an increased disposable income, and targets food stores before any other segment. Will India’s reforms, consumers and traders be able to keep up with what food retailers will have to offer?

Chillibreeze Business Research Team

General Plans and Information

Malls become inventive at attracting customers

Malls across the country are becoming inventive at attracting customers to the malls. Special endeavors such as getting taxis and buses to get customers, adding utility stores such as banks, drug stores, dry cleaners, cobblers, gyms etc, creating morning walk and breakfast destinations in the mall and starting mall loyalty programs are some of the ways that malls are pulling in new customers.

According to Munish K Baldev, retail head for Unitech, “Every mall is trying to find a differentiator. Our aim is to offer things that bring more convenience and a wider range of products and services to customers.” Unitech plans to start a bus service in January to ferry customers to the mall.

Parsavnath developers will be ensuring its malls have all the basic utility stores that its customers are looking for when they go out shopping, including telecom service stores, bill payment centers, health clinics and insurance outlets. Ambience Mall in Gurgaon, plans to offer to reimburse customers the toll charges they have paid to come to the mall.

Date: Wednesday, November 28, 2007
Source: The Economic Times

Food retail set to double by 2020

Food retail is one of the fastest growing segments of the Indian retail sector and is expected to reach $482 billion by the year 2020, a significant increase from $236 billion in 2006. Some of the factors that are leading to its fast growth are the rising disposable incomes, a growing exposure to global lifestyles, increasing aspirations of consumers, convenience factors and health consciousness.

According to food industry experts at a CII seminar “Foodpro 2007” in Chennai, more than 80 million Indian consumers have an income of more than $5,000 and these consumers are the growth drivers of the sector. The consumer class of India is growing rapidly and with each year, more people enter the segment.

Rajesh Srivastav, managing director of Rabo India Finance, stated that "Following the US, China and Japan, India is the fourth largest economy in terms of purchasing power parity. The consumer base is growing with the households of annual income of over $5,000 expected to increase from the current 81 million to 147 million by 2015."

With 9 million consumers in India with an annual income of more than $25,000, a number that will increase to 20 million by the year 2015-15, India’s consumer class is one of the most dynamic and will ensure that the food sector growth continues at a fast pace.

Date: Thursday, November 29, 2007
Source: The Financial Express

LDF asks Kerala govt to introduce laws to block organized retail

The Left Democratic Front (LDF) has asked the Kerala government to introduce laws that will block retailers from entering their state. According to Vaikom Viswom, LDF convener, "We have asked the government to see if suitable legislation could be made to block the retail giants in the state because they have already started to cause havoc among thousands of small traders." He added that there still existed several loopholes through which large retail companies could enter the state and these issues must be addressed.

Date: Thursday, November 29, 2007
Source: The Economic Times

Big players - plans and investments

ITC to open 20,000 e-Choupals

ITC will be increasing the number of e-Choupals from nine to 20,000 by the year 2010, in an effort to reach 10 million farmers. At present, the e-Choupal network is operational in six states with its 6,400 kiosks covering 400,000 farmers in 40,000 villages. Once the network is expanded, it will cover 100,000 villages in 15 states across India.

According to Srinavasa Rao, head of new initiatives at ITC, “Currently, 40-50 per cent of our procurement of certain commodities comes from our Choupal network, and we are looking at taking it higher.” In addition, the company will also be expanding its Choupal Sagar network and has also tied up with 140 companies to sell products at their outlets.

The company is expanding its Choupal Fresh operations in current locations such as Hyderabad, Pune and Chandigarh, and working to expand its e-Choupal network in Andhra Pradesh, Karnataka, Punjab and Haryana.

Date: Wednesday, November 28, 2007
Source: Business Standard

Parsavnath in talks with Bharti Retail

Real estate developer Parsavnath is holding talks with Bharti Retail to provide retail space for its retail venture. According to Pradeep Jain, Chairman of Parsavnath, the company is looking to provide retail space in around 100 locations to Bharti Retail, which will be both on sale or lease basis. Parsavnath has around 14 million sq ft of space located in 50 cities across the country.

The company is looking to make its foray in several other fields as well, such as airport infrastructure, for which it has formed an agreement with IL&FS, a Turkey based company to bid for airport projects in Amritsar, Udaipur and Greater Noida. The company is also keen on entering the telecom sector and is looking forward to getting its license soon.

Date: Wednesday, November 28, 2007
Source: The Economic Times

Reliance Retail’s dilemma

Reliance Retail is not sure of what to do about opening retail outlets in states where it faced vigorous protests and has also put its Rs. 1,200 crore investment plan in Uttrakhand’s agriculture sector. The company had earlier decided to close outlets in Uttar Pradesh and is undecided about its plans for Uttrakhand.

The company was expecting the Uttrakhand government to sign the Agriculture Produce Marketing Committee (APMC) Act, which would give Reliance access to the vegetable mandis. Traders in Uttrakhand have submitted a memorandum to the Chief Minister asking for a ban on organized retail in the state.

Date: Friday, November 30, 2007
Source: Business Standard

NTC and Pantaloon in joint venture

The National Textile Corporation (NTC) and Pantaloon Retail, which is owned by the Future Group, have formed a joint venture. NTC has been selling surplus land in many states and is now planning to separate its retail business into a new company. NTC will have a majority stake in the company at 51%, management will be from the private sector partner company.

NTC has 113 retail stores across India, in prime retail locations in Delhi, Mumbai, Kolkata and Chennai and are all worth enormous sums of money for their value of land alone. Other companies that NTC has formed joint ventures with are Alok Industries and Bhaskar Industries.

Date: Saturday, December 1, 2007
Source: The Economic Times

Reliance Retail stresses importance of info sharing

At an interaction with students of the Indian School of Business, Bijay Sahoo President and Chief People Officer of Reliance Retail, stressed the importance of sharing information on organized retail in the country is vital, and is the main reason that its stores have faced protests in several states. He stated that people did not understand the concept and fear the unknown. He also stressed the importance of identifying with the local community.

Date: Sunday, December 2, 2007
Source: The Hindu Business Line

Reliance Retail likely to shift to specialty stores

Reliance Retail is likely its closed Reliance Fresh stores in West Bengal into specialty stores for items such as footwear, apparel, jewelry, books etc. The company had to shut down its stores in the state of West Bengal after widespread protests organized by political groups and trader organizations against their low prices.

The company has already given notices for about 150 of its leases that it had taken for its grocery stores. According to Bijou Kurien, president and chief executive officer of the lifestyle division of Reliance Retail, "West Bengal will see only speciality stores, like exclusive jewellery, footwear, wellness and apparel stores, instead of the hyper or fresh formats."

At present, Reliance Retail has seven specialty formats and will be unveiling some new formats in the coming two weeks. The company will be launching its first books, music and film outlet in December, as well as add another footwear outlet in the NCR are before the end of the year.

On the subject of lost jobs in locations where the stores have been shut down, Kurien said that "Employees' security is not solely our responsibility, the government must take the responsibility of locations where stores could be opened and sustained. If there are no stores, there would be no jobs."

Date: Monday, December 03, 2007
Source: Business Standard

AV Birla requires 55,000 employees

The Aditya Birla Group is looking to increase its employee strength to 55,000 for its retail business, a significant increase from the 8,000 employees that it currently has. According to Santrupt B Misra, director of HR and IT for Aditya Birla Group, "We have 300 stores right now and are constantly looking at expansion. We are therefore looking at employee strength of 55,000, from close to 8,000 right now."

The company faces an attrition rate of around 9%, which they hope to address and reduce in the future. The company will be outsourcing all its major HR functions such as employee grievance handling, payroll structure, basic training etc. The company is keen to find employees from outside the country, especially in areas where local employees lack, such as merchandising and store management.

Date: Monday, December 03, 2007
Source: Business Standard

Metro to open stores in Mumbai and Kolkata

Germany’s Metro Cash & Carry announced that it would be investing $40-45 million to set up new wholesale marts in Kolkata and Mumbai, both of which will become operational by the first quarter of next year. Metro currently has a total of three stores, two in Bangalore and one in Hyderabad.

The company sells fruits and vegetables at its Hyderabad store, it cannot sell these items in Bangalore as it is not permitted under the Agriculture Produce Marketing Committee (APMC) Act, which restricts private companies to buy produce directly from the farmers. Construction has already begun for its stores in both cities, which will have a total area of 75,000 sq ft of space. Metro is also keen on expanding to Punjab, which it feels will offer it a good opportunity to source as well as sell products.

While Wal-Mart will be entering this format in the coming year with its tie up with Bharti Retail, Metro is quite a way ahead of them and has been running cash and carry businesses in 29 countries. Metro reiterated that it would not be interested in entering the front-end retail business at all.

Date: Tuesday, December 04, 2007
Source: Business Standard

International

Developer Parsavnath holds talks with Carrefour, Casino

Parvsavnath Developers Ltd, a noted real estate development company has announced its intentions to open hypermarket format stores and is reportedly in talks with French retailers Carrefour and Groupe Casino for potential ventures. Sources suggest, that the company is in advanced stage of talks with the retailers. Both companies declined to comment on the question of ongoing talks, but have shown their interest in the country’s retail market.

Date: Wednesday, November 28, 2007
Source: The Economic Times

DFS wins Mumbai airport duty-free deal

The Mumbai International Airport (MIAL) has ended its contract for setting up duty-free retail stores with IPCL-Aldeasa. The new contract has been awarded to DFS, one of the largest airport retailers in the world and is a LVMH group company. DFS secured the deal by paying the minimum guarantee of Rs. 260 crore and also has a revenue sharing deal with MIAL.

Operations are set to begin from January 2008 under the new agreement. The duty free shopping area will be located in terminal 2C and will cover 24, 541 sq ft of space, with 14,585 sq ft on the departure level and 8,395 sq ft at the arrival level.

The DFS Group operates over 150 stores at some of the world’s largest airports, including Changi in Singapore, JFK airport in New York City, and the airports at Hong Kong, Sydney, Auckland, San Francisco, Los Angeles and Honolulu.

Date: Thursday, November 29, 2007
Source: The Economic Times

Tommy Hilfiger makes expansion plans

US fashion brand Tommy Hilfiger is increasing its expansion plans and expects sales from its apparel and accessories to cross Rs. 1 billion ($25 million) in the current financial year. Tommy Hilfiger stores are located in 7 cities at present and are likely to be expanded to 14-15 cities in the next three years with 50 locations. According to Shailesh Chuturvedi, CEO of Tommy Hilfiger Apparel India, "Currently, we are in the second phase of expansion. We have been in the Indian market for the last three years with eight points of sale. By this year, we will be having 22 such points."

Of the 22 new locations, 12-14 will be exclusive stores of Tommy Hilfiger that would be operated as franchises, while the balance would be in malls and department stores. The company stocks almost all of its products from its international portfolio, and will be increasing its product lines to fill the gaps.

Date: Thursday, November 29, 2007
Source: Asia Pulse

DLF to purchase Ferragamo franchise

India’s largest real estate firm, DLF is keen to buy the franchise rights in India for luxury Italian brand Salvatore Ferragamo, whose original franchise partner Sports Station India will be leaving the business. According to sources, the franchise rights for Ferragamo were valued at approximately $3 million.

There is only one Ferragamo store in India at present, which opened its doors in March 2006 and is located in Mumbai. DLF had made its plans clear earlier on when its chairman KP Singh stated that the company was looking for a partner for global luxury brands.

Date: Friday, November 30, 2007
Source: Business Standard

Apparel & Footwear

Arvind Mills considers bringing its businesses under Megamart label

Arvind Mills is considering bringing its retail businesses under the Megamart label and spinning them off into a new entity, which could attract outside investor participation. The company is also considering separating its retail operations and retail brands into two separate entities instead of a single one. Most likely, the company will create a retail company under its Megamart brand. A final decision will be taking place in the coming months.

Megamart has been growing at a fast pace in the past four years and the company is looking to achieve a target of Rs. 2,000 crore by 2011 end. Megamart is a value retail chain and the company is likely to extend its reach to the luxury retail format. The company’s turnover at present is around Rs. 130/150 crore, and a spin off would likely happen once it doubles its turnover in the next 12-18 months.

Date: Wednesday, November 28, 2007
Source: The Economic Times

Hakoba plans Rs. 250 crore expansion

Hakoba Lifestyle announced that it would be making an investment of Rs. 250 crore to solidify its position as a lifestyle brand. The company will also be introducing a lingerie label as well as enter the home furnishings segment in the coming year. Hakoba Lifestyle is the retail division of Pioneer Embroideries, which is one of the only embroidery companies that is making headway in the retail sector.

Hakoba’s products which are well known for their sarees and dress materials, has launched the Rocky S Club with clothing designed by noted designer Rocky S and will be introducing a range of bridal wear by designer Archana Kochar. According to Madhup Dokania, CEO of Hakoba Lifestyle, “The tie-up with fashion designers will enable us to offer value-added products and reach to the high-end customers. The company intends to associate with another 2-3 designers who will act as consultants to introduce focused product lines.”

The company already has a menswear label under the Born Rich name, which it acquired earlier. Hakoba will be opening an estimated 400 small format stores by 2011, with an average store size of 1000 sq ft. Around 30 large format stores will be opened in a later phase, with the average store size around 40,000 sq ft in size.

Date: Thursday, November 29, 2007
Source: Business Standard

Food & Grocery

Subhiksha to treble stores by 2010

Chennai based retail chain Subhiksha announced that the company would be trebling stores by the first half of 2010, taking the total number of stores to 3,000 across the country. Subhiksha is the largest supermarket, pharmacy and telecom chain in the country at present, having grown from its base is south India to having a pan-India presence.

The company opened its 1,000th store in October is expanding rapidly ahead of its initial public offering (IPO), which will take place before the end of this financial year. Subhiksha will be investing Rs. 300 crore to open 500 additional stores by June 2008. According to R. Subramaniam, managing director of Subhiksha Trading Services, “We are growing and will continue to do so. We are planning to double the store-number in two years after we reach the 1,500 mark. For undertaking all current expansion activities, we are adequately funded and can raise money for future purposes also.”

The company will be expanding in existing markets as well as entering new markets according to its managing director. At present, company has more than 1 million sq ft of retail space and is located in five states. Most Subhiksha stores are in the 1,500 sq ft range, and offer a range of fresh fruits and vegetables, pharmaceuticals, FCMG and telecom.

Date: Wednesday, November 28, 2007
Source: Business Standard

Big Bazaar faces food adulteration, double swiping charges

The Future Group’s Pantaloon Retail India Ltd (PRIL), which runs Big Bazaar, is facing several charges of food adulteration. There are an estimated eight cases under the Prevention of Food Adulteration Act of 1954 (PFAA) and Standards of Weights and Measures according to the draft prospectus. In another area, the company is also facing charges of double swiping debit cards as well as misuse of trademarks etc.

Date: Thursday, November 29, 2007
Source: The Economic Times