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BRANDED FOOD RETAIL IN INDIA
INDEX
CONTENTS PAGE NO
1) Executive Summary. 1
2) About Indian Food Retail. 2-19
3) FDI in Retail 20-21
4) About Spencer’s Food Retail. 22-49
5) Conclusion. 50
6) Bibliography 51
Summary
An overview of branded food retail chain in India has been an attempt made to see the success of food industry in the future for the countries population which includes the urban middle class population and for other aspirants ,particularly for the new entrant such as rural and semirural customers.
Food retail chain has become an important sector for the people who are mostly in the working class categories who are spending maximum time at their work and can get all the food items under one roof.
Food retail chain includes “ the Spencer” food retail chain. It is an outlet of RPG group. It is one of the leading brand in the food retail chain in india. It has its various outlet all over Mumbai as well as some parts of Maharashtra. There has been an extreme growth and expansion in the food retail chain and that is why it has become a boo for the society.
FOOD RETAIL
INTRODUCTION.
It is being hailed as India’s industry of the future, incited by the country’s huge urban middle class population. Food and grocery is the second- largest segment of the retail industry and the potential for new entrants in this segment is enormous, particularly in untapped markets like rural and semi-rural areas. Growing at the rate of 30%, the Indian food retail is going to be the major driving force for the retail industry. The paper on “FOOD RETAIL –AN EMERGING FACET” maps out
the Background of food retailing as well as current scenario catching up the retail front, Up- and-coming multiple formats of food retail.
The food industry is on a roller coaster ride as Indians continue to have feast. Fuelled by– large disposable incomes – the food sector is witnessing a remarkable change in consumption patterns, especially in terms of food. Food retailing has come of age -- from a period when food items were sold in small road side grocer shops & mandis, haats and bazzars by vendors to a stage when food products (processed and groceries) are retailed through supermarket stores where consumers can inspect, select and pick up the products they like in a comfortable ambience and still pay a fair price for the product and the merchandise and sometimes even pay less than the price they would have paid at the nearest food stores. Shopping for groceries is no longer a strenuous and uncomfortable affair.
Instead, it is a pleasurable experience. From simple trading activity, food retailing is now heading to the status of an industry. Imagine yourself walking through the air conditioned lanes smelling fresh food and groceries, enjoying light music, experiencing five star ambiences and above all buying food products (vegetables, spices and beverages) without bargaining with the vendors. Food retail has surpassed the dominating apparel and accessories sector. "Contrary to the belief that fashion is the largest segment of organised retail in India, food & beverages is the major segment, worth Rs 8,97,000 crore," said Arvind
Singhal, Chairman, Technopak, at the Indian Retail Forum held in Mumbai. There is an old industry saying that “ customer is king” Food retailers today will update that saying to “customers is the dictator” because of fierce competition, new technology and business practices the market power of customer is strong and growing stronger.
THE FOOD RETAIL TALE:
Traditionally, Indians were used to buying their sugar, wheat, pulses, rice etc. from their neighborhood baniya. The majority of food and food products were and still are retailed through neighborhood kirana (baniya) stores. A typical kirana store has a retail area of 200 sq ft and sells 500 to 800 stock keeping units (SKUs). The kirana stores focus on dry food products because the infrastructure for cold storage is lacking.
The majority of fresh produce is sold from the carts of traveling vendors. Such produce is deemed to be of low product quality, variety and hygiene. This concept is still popular in B-class and II Tier cities of India and giving employment to thousands of its inhabitants.
Initially the food retail format was seen in A-class cities like Mumbai, Delhi, Chennai which had co-operative stores like "Apna Bazaar" in Mumbai and "Kendriya Bhandar" in Delhi. Both were very successful and are operating many outlets in all strategic localities in the city. Escorts group in the late eighties diversified into non-auto sectors by getting into agri business or food business. It came out with first "Nanz" store at South Extension in Delhi in 1990.
The first visible sign of the change in food retailing was seen in mid-eighties. Around that time a few new food stores were set up in all metro cities in India. Calcutta was the only exception where it started a little later. At that time couple of leading food stores started operating such as "Morning Stores" and "Modern Stores" in Delhi, "Nilgiri" in Bangalore, and “Food Land" in Mumbai "Spencers Food Stores" in Chennai. Spencers were the first to tie up with a Singapore based large retail chain -- "Dairyland" and had set up the food stores in Chennai. This was a technology tie up. In Mumbai, Garware group during the late eighties had set up a large food store, which is now reported to have been closed down.
Until the late 1990s, food retailing has been concentrated in the south of the country. Southern India has been witnessing revolutionized activity in food retailing. It has thoroughly experienced the food retailing in various formats such as the supermarkets, hypermarkets and neighbourhood stores. These include Food World, Subhiksha, Nilgiris, Margin Free, and Big Bazaar. The reason being that most entrepreneurs who started organised retail came from southern India and the cost of real estate in the southern region was less than other regions (particularly
north and west). Since then, however, organised food retailing has emerged across the country, inspired by the presence of high potential markets in the north, west and east as well as the success of some non-food retailers and food services companies in these regions.
FOOD RETAILING IN INDIA: CHALLENGES & TRENDS
Unlike in the past, the debate today is no longer whether food and grocery retail in India would grow but rather how fast can it grow and what challenges need to be overcome. Demand Side
Penchant for fresh/home-made and value consciousnessThe Indian consumer, unlike his western counterpart, has a penchant for freshly cooked food over packaged food. This is a result of dietary patterns, poor electricity supply, low penetration of refrigerators and a family structure where one of the primary roles of the housewife is feeding the family. The Indian consumer is extremely value conscious.
Diversity of tastes and preferences
Multiple cultures, languages and religions have a huge bearing on the tastes and preferences of the Indian consumer. This will pose a challenge for players aspiring to develop a pan Indian presence.
Willingness to travelGiven the current density of retail outlets in India, retailers will have to motivate the consumer to trade convenience with price, range and ambience.
Supply Side
Sourcing base and efficiencyThe fragmented agriculture supply base coupled with an inadequate legal framework make it difficult for retailers and food processors to procure quality produce at competitive costs directly from farmers. The small size of the food processing industry further limits the supply options.
Real estate availability and costRentals account for 7-7.5% of the total costs for organized retail in India against global benchmarks of less than 3%. Real estate availability and costs will continue to remain a challenge in the
retail industry with factors like adequate parking, ambience and proximity being the key drivers of footfalls.
Manpower availabilityAs organized retail expands, there is expected to be a dearth of skilled manpower. The lack of institutions and courses for different aspects of retail management will have an impact on the overall supply of quality manpower.
STRATEGIC MANAGEMENT GROUP
Emerging trends in food retailing
Big becoming biggerGlobally, retailers have realized that size drives profitability, not just through economies of scale in operations but also through higher bargaining power leading to better margins. While many players are entering the retail space in India currently, the growth stage will be characterized by rapid expansion and consolidation among these players.
Rise of organic foods and health and wellness segmentConsumer attitudes and preferences are undergoing a shift owing to factors like increased disposable incomes, changes in lifestyle
patterns, shift in age structure, increased number of working women and multi cultural exposure. These would lead to increasing health consciousness in the future. Organic foods and wellness products would be emerging opportunities in the years to come.
Increasing focus on private labelsAs competition in the organized retail market increases, discounts and promotions are expected to play a critical part in generating footfalls. To counter the impact on profitability, organized players will find it more attractive to promote private labels or store brands given their higher margins. The consumer too would benefit from lower prices.
SCOPE OF INNOVATION IN RETAIL
As the organized food retail market matures in India, there would be an increased need for players to differentiate through innovation. Innovations would largely come under two heads:
Innovation on Retail format – Players can innovate on formats in different ways :
o by targeting specific customer segments and serving their needs better e.g. working women, single office goers.
o by changing the product mix e.g. entirely private label stores, exclusively fresh produce stores
o by offering new forms of convenience and wider range to the customer e.g. tele retail and internet retail
Technological Innovations - Employing cutting edge technology in retail could prove to be the source of competitive advantage for retailers.
o Self-scan checkouts have the potential of both reducing check-out time manpower cost for the retailer
o Using RFID tags can help track and reduce in-store inventory management costs and give retailers better insights into customer in-store movement patterns
o Web-enabled POS systems, e-SCM systems, e-Procurement systems and warehouse management systems will enable food retailers in integrating the entire agriculture value chain leading to efficient procurement and supply chain management.
o Use of cutting edge analytics can bring insights into customer buying behavior with implications on store layout, pricing and promotions.FOOD RETAILING – THE BUZZ WORD:
Indian retail food industry has revolutionized shopping experience of Indian customers. Growing at the rate of 30%, the Indian food retail is going to be and no doubt is the major driving force for the retail industry. Food accounts for the largest share of consumer spending. Food and food products account for about 50% of the value of final private consumption. This share is significantly higher compared to developed economies, where food and food products account for about
20% of consumer spending. Ireena Vittal, principal, McKinsey & Co in Food Forum 2008, said, "At US$ 175 billion today the food industry is likely to grow to US$ 400 billion by 2025. The percentage of income spent in households will drive growth in the food market. Indian consumers are happy with store goods than branded goods and are very conservative on packaged goods. There are 10 million street vendors in India, of which 6 million only sell food. Currently, the retail food sector is US$ 70 billion and is expected to rise to US$ 150 billion by 2025. Food has the largest consumption in the Indian economy and will remain the single largest category."
Modern state of the food retailing is not a demand led but the supply led one. Major spending on food and increasing usage of out of home food consumption represent a significant opportunity for food retailers and food service companies. Speaking in Food Forum India 2008, on the government's role in the food retailing development, Dave said, "The retail stores need to empower its stakeholders and deliver what the consumer wants. The vision for 2020 should be appropriate extension network, implementation of appropriate practice at farmers' level and infrastructure in the country."
There are various factors paving the way to revolutionizing food retailing in India. Among them few are:
Changing life styles and tastes
Growing need for convenience
Increasing disposable income
Increasing numbers of working women
Change in consumption patterns
Higher aspirations among youth
Impact of western lifestyle
Plastic Revolution – Increased use of credit cards and debit cards
UP-AND-COMING FOOD RETAIL FORMATS:
With the changing food consumption patterns, consumers need for convenience, choice and value for money the set-up of retail format is changing. The Indian consumers do visit about eight to ten outlets to purchase various food products, which make up the daily consumption basket. These outlets include neighbourhood kirana stores, bakeries, fruit and vegetable outlets, dairy booths and chakkies (small flour mills), which is very time-consuming and unproductive way of shopping for food. With changing lifestyle there is growing scarcity of time, and convenience in food shopping is emerging as an important driver of growth of one-stop retail formats that can offer consumer 'value for time' in addition to 'value for money'. These are giving an opportunity to various other retail formats:
A. Neighbourhood Stores
In India about 90% of food purchases are made within a distance of 1.5km from the customer's home. This means that an organised retailer would need to have a 'neighbourhood store' close to customers in order to capture the share of wallet that is spent on food. These stores would cater to the consumer's daily and weekly needs. The outlets closest to a neighbourhood store in India are 'Safal' outlets operated by Mother Dairy in Delhi, Margin Free in Kerala and Subhiksha.
B. Supermarkets
This format caters to the consumers' need for choice and variety. These needs translate into 'more width' and 'more depth' in each category. These stores cater to the consumers in a catchment area with a radius of 3 to 4 km and therefore need to be destination stores. A supermarket can cater to the consumers' weekly, monthly and occasional needs.Examples of supermarkets already in India are Food World, Trinetra and Nilgiri's.
C. Hypermarkets
Hypermarkets are essentially destination stores catering to the consumers' bulk shopping needs in both food and non-food categories.The key added values for the customer are 'choice' and 'value for money' because products are sold at a discounted price. The hypermarkets model of food retailing is new to India. Spencers (RPG), Big Bazaar (Pantaloons), Star India Bazaar.
D. Cash & Carry (C & C) Stores
These stores sell their products to their members only. The members are typically retailers and institutions. The key added value is a wide range of products under one roof, available at wholesale prices. Metro has started the first C & C store in India in Bangalore. The typical area of a C & C store is 70,000 to 100,000 sq. ft. and both food and non-food products are stocked.
KEY DEVELOPMENTS IN FOOD RETAIL:
The major development in food retail is consideration of Foreign Direct Investment (FDI) with a limitation that all companies would have to meet mandated export obligations. Food processing minister Subodh KantSahay told ET that “We are considering a proposal to allow FDI in food retail. It should be in such a way that it would boost our agriculture. Our farmers must also get benefits of economic liberalization”.
The government is also considering the opening up of the $330-billion retail market with adequate provisions to protect neighborhood stores.
In every retail format food trade is growing. More and more corporate houses such as HLL, ITC, Godrej and Reliance are already working into food retail. Huge increase is expected from the corporate players, which will help grow the entire food retail sector. Dabur’s Amit Burman has also forayed into food retailing. According to Amit "Food and beverages retailing is a very attractive segment and with Lite Bite Concepts we are targeting Rs 1,000 crore sales in a couple of years with around 200 outlets," Well-established players such as Subhiksha, Food Bazaar and Spencer's Daily are also tapping into backward linkages, while trying to match their expanding geographies with retail formats. Also, most food retail players have been region-specific as far as geographical presence is concerned. Take the RPG Group's FoodWorld, Nilgiris, Margin Free, Giant, Varkey's, all of which are more or less spread in the Southern
region; Sabka Bazaar, Big Apple has a presence only in and around Delhi; names such as Haiko and Radhakrishna Foodland are Mumbai-centric; while Adani is Ahmedabad-centric.
Retailers' entrance in the unbranded food space
Modern food formats like Food Bazaar and Spencer's have their eye on the unbranded part of the consumer's shopping basket. This constitutes as much as 60% of the total purchases and growing sharply, says AC Nielsen estimates. Retailers are offering a package of convenience and freshness, and have an edge over manufacturers that focus mainly on packaged conveniences.
Food retailers are offering 'live kitchen' formats, which offer on-the-spot home-style gravies, dal, cooked rice and kneaded dough with options like grinding coffee fresh at store, idli batter, paneer, curd and cut vegetables.
INDIAN FOOD RETAIL REVOLUTION: BOOM OR BANE
Indian economy after the economic reforms of the 90s, revitalized it self in to a next big global phenomenon exhibiting immense potential in all the sectors especially manufacturing, IT and steel. The new thing every body is talking now is the organized food retail. India is not only a country of biggest middle class population but a country of shops and unique shopping experience. In India for every 25 families there is a shop-no matter big or small or pan shop or grocery store. There is some kind of human touch in the neighborhood shopping experience. But this is not going to be the same thing in coming years because in India big corporations like Reliance, Bharati-walmart, Tesco etc are setting shops and intended to replace the petty shops and neighborhood grocery stores. This has already creating some kind of storm in the minds of small time shopkeepers and farmers alike. On the positive side the food retail revolution may transform Indian agriculture and public health to the greater extent by replacing the dirty sabzimandis and preventing adulterations. It can also replace the crooked middlemen by introducing
the contract farming system. In India there are some NGOs who are working with farmers and raising fears about the negative side of the retail giants that they force farmers after some time to sell their products at the price quoted by these companies thus pushing them to bankruptcy and suicide trap. These NGOs some of them are political entities and frauds. They are created by politicians to stress their political ideology for political mileage and some simply want Indian farmers to remain poor so that they can receive funds in the name of development. The government is also not doing enough for this cursed sector of the economy which contributes to the GDP to the tune of 22%.
The retail revolution can help not only farmers but the general public also. The farmers may get good prices for their produce and learn the importance of clean cultivation. Most of the Indian shops need tremendous face-lifting because they are dirty, source of many adulterations and thus threat for public health. The neighborhood shop keeper may give you credit but he earn handsome margin by selling above the MRPs. He also exploits the farmer by not giving the right price for the produce. The shopkeeper always interested in the expanding his margin of profit by giving less to the farmer. The farmer by selling at lesser prices obviously surrenders to the death because the middlemen or wholesaler not let him go away with the loan given to him. Even though the economy is growing the agriculture sector is not getting the deserved attention of the politicians, most of them are corrupt and criminals.
There is a immediate need for all the policy makers to look in to the agriculture with fresh point of view and balance the food retail and subsistence nature of farming community. We should not look the companies with suspicion and need not to establish this sector like the
way west did. Food retail need to be localized and India specific where sourcing and selling is based at India. The farmers need to be educated about their rights and should be given freedom to sell on their wish. The agriculture organizations like SAUs, NGOs should help farmers to grow more healthy food free of chemicals and of better quality. They should stop for gods sake projecting this ancient glorious country as poor
FOOD
Food Ingredients (472)
Baby food (102)
Frozen food (490)
Condiments - Sauces - Spices (120)
Snack - Confectionery (777)
Bakery - Pastry (299)
Cooked food (276)
Meat - Poultry (692)
Pet food (318)
Dairy products (847)
Breakfast - Cereals (234)
Canned food (253)
Vitamins - Supplements (131)
Pasta - Noodles - Rice (134)
Food processing (198)
Gourmet food (10)
Fish - Seafood (222)
Fruits - Vegetables (282)
Groceries - dry products (327)
Health food (125)
Organic food (35)
Fresh food (43)
FOOD RETAIL AND ITS STEPPING STONES:
The opportunities in food retail sector are as follows: Rising Investment: There are strong opportunities in food retail as a result of encouraging changes in consumer purchasing patterns, the availability of real estate and supply chain development. Organised food retail presents a unique investment opportunity for corporates looking to diversify. A good understanding of consumer, access to the right locations and the ability to manage the supply chain efficiently will be critical success factors for the new entrant.
FDI Policy for Retail: Gates have been opened up for single brand retailers. In February 2006, the door was opened to some extent when the government allowed 51% FDI by single brand companies subject to government approvals.
Emergence Of Logistic Providers: The present lack of logistic support exposes the need for an integrated logistic provider. As retail activity
gathers momentum and large quantities of perishables are sold in modern formats, the logistic service providers would have a crucial role to play in bridging the supply gap. Retail players would also benefit from an efficient supply chain inventory management.
FDI In RETAIL
Foreign Direct Investment(FDI) in RETAIL
The government is considering a proposal to allow foreign direct investment (FDI) in food retail albeit with a caveat that all companies
would have to meet mandated export obligations. The Ratan Tata-led Investment Commission has favoured permitting FDI in food retail, especially fresh and processed fruit and vegetables, with export commitments.“We are considering a proposal to allow FDI in food retail. It should be in such a way that it would boost our agriculture. Our farmers must also get benefits of economic liberalisation,” food processing minister Subodh Kant Sahay told ET.
Suggesting that FDI in food retail be allowed, an Investment Commission report said, “Foreign food retailers could help in the transmission and adoption of better practices throughout the supply chain and could also facilitate access to export markets.”
The commission, set up by the prime minister in 2004 to boost investments, makes recommendations to the government on both policies and procedures to facilitate greater FDI inflows.
Agreeing with the panel’s suggestion, Mr Sahay said there was a need to bring market discipline in procuring agro products from farms. “FDI in food retail is the need of the hour. It would mean use of latest technology in the sector, more yield per hectare and optimum usage of arable land. Allowing FDI will create demand across all levels, from raw material to finished products, and, at the same time, maintaining every level of quality and standards,” he said.
He agreed the move could be politically sensitive, but economic growth can’t ignore farm sector. “Anti-retail lobby has to believe that FDI would mean inclusive growth in the sector, contrary to the prevailing fear of price war between big retail and local kirana stores,” he added.
After permitting 51% FDI in single-brand retailing, allowing FDI in select food items, fresh and processed fruit and vegetables is the next step. It would include retailing of farm and dairy produce, marine and
poultry products, besides fruit and vegetables. While 100% FDI is allowed in food processing, investment is restricted in retailing.
Today, barely 6% of fruit and vegetables produced in the country are processed. The country has targeted 20% processing within the next few years and is keen on enhancing export of these items from less than 1% to 3%.
The government is considering opening up the $330-billion retail market with adequate provisions to protect neighbourhood stores. The commerce department is waiting for the report being prepared by ICRIER on the impact of retail on local kirana outlets. The study was commissioned to the Delhi-based think-tank after Congress supremo Sonia Gandhi voiced her concerns over effects of FDI in retail on unorganised sector.
SPENCER’S
With the retail dust settling down, companies have realized to look at their bottom line. RPG Group's Spencer's retail format is all set to consolidate 5 of its brands - Spencer's Hyper (30,000 to 75,000 sq ft) Spencer's Super (8,000-15,000 sq ft), Spencer's Daily (4,000-7,000 sq ft), Spencer's Express (1,000-1,500 sq ft) and Spencer's Fresh (1,200- 2,000 sq ft) into just two - Spencer's Hyper and Spencers (3,000 to15,000sq ft) The company is refurbishing its existing 373 stores which will fall under the new brand identity - Spencers and 27 large formats under Spencers Hyper. One of the main reason for brand consolidation was the confusion it created amongst customers. These two brands will have uniform service level, look and feel. RPG also plans to consolidate its supply chain for both the formats under one common business unit.
Spencer’s Retail Limited is one of India’s largest and fastest growing multi-format retailer with 400 stores, including 32 large format stores across 66 cities in India. Spencer’s focusses on verticals like food and grocery, fruit and vegetables, electrical and electronics, home and office essentials, garments and fashion accessories, toys, food and personal care, music and books. Established in 1996, Spencer’s has become a popular destination for shoppers in India with hypermarkets and convenient stores catering to various shopping needs of its large consumer base.
Operations
Spencer’s has retail footage of over 2 million square feet and over 400 Spencer’s stores in 66 cities. The company operates through the following formats:
The Spencer's Hyper stores are destination stores, of more than 15,000 sq. ft in size. They offer everything under one roof. The merchandise ranges from fruits & vegetables, processed foods (Ready to Eat, Ready to Cook, FMCG products),specialty foods including international, sugar free, organic foods, etc…..groceries, meat, chicken, fish, bakery, chilled and frozen foods, garments, consumer electronics & electrical products, home care, home décor & home needs, office stationeries, soft toys. Besides, the stores also comprise book & music retailing, electronic gadgets and IT accessories. On an average, a Spencer’s hyper stocks 70,000 SKUs across 35,000 items.
The Spencer's convenio stores are neighborhood stores ranging from 1500 less than 15000 sq. ft. These stores stock the necessary range and assortment in fruit and vegetables, fmcg food and non-food, staples and frozen foods and cater to the daily and weekly top-up shopping needs of the consumer. Some of these stores which have floor area of more than 10,000 sq ft sometimes offer home care products; personal care products, bakery, chilled and frozen food; baby care, basics in garments and limited range of electronics and electrical.
SHOP:
Spencer's Retail Limited 2nd Floor, Block ‘F’
Gillander House 8 Netaji Subhas Road
Kolkata- 700 001 Tel: +91 33 6625 7402
Email: [email protected] Customer Feedback for Spencers: [email protected]
Career Related: [email protected] ; [email protected]
Spencer’s to reign retail business; close formats, relocate stores, expand network and seek partnerships.
Spencer’s Retail, a wholly owned subsidiary of CESC and retailing arm of over $4 billion RPG Enterprises, which currently operates 400 plus stores, 32 of which are large format Spencer’s Hyper store, is going in for a massive restructuring of its retail business. According to media reports and announcements made at CESC AGM, Spencer’s is taking a number of major initiatives:
The first of the many changes envisaged by the company is to leverage on the falling real estate prices by increasing the size of stores. As the prices are expected to decline by as much as 40%, the company will merge its three small supermarket stores into one. It will prune two of its small formats “Spencer’s Daily” and “Spencer’s Express” and rename the same to “Spencer’s.” With this change, Spencer’s Retail will have only two formats to be called: “Spencer’s” and “Spencer’s Hyper.”Of the two, the first format will be a supermarket format, while the second format as the name suggests will be a Hypermarket format. The supermarket format stores are expected to occupy between 2,000 and 10,000 sqft of retail space, while the hypermarket format stores are expected to occupy 40,000 or more sqft of retail space.Currently, the Kolkata-based company is operating 368 plus Supermarkets and 32 Hypermarkets. The company has already prepared a blueprint to increase the number of its hypermarket stores from 32 to 75, by March, 2010. Overall, the company expects to have 300 new stores in the next one year. Immediately on the anvil are two hypermarket stores at Thane and Vasai in Greater Mumbai.
Spencer’s Retail has also decided close down around 40 of its unprofitable stores. The move comes in the wake of these stores making losses. The losses are mainly on account of very high rents, bad hinterland and poor sales. These stores will be to shifted to viable locations. The company has already begun relocating some of these
unviable stores to new viable locations in Kolkata, Hyderabad and Kerala. The process will continued in other parts of the country as well.
Spencer’s has also been active in changing its product offerings with a view to increse its profitability. It has begun focusing on fashion retailing as it wants to change the ratio of business in favour this category.
Spencer’s is also stitching up partnerships with MNC speciality retailers by using the single brand retail route in FDI to bring in MNC brands, mostly in the non-food space. It has already formed joint ventures are made franchisee arrangement with world famous retail brands like the UK-based Woolworth’s for sale of ‘Chad Valley’ Toys and the US-based ‘Au Bon Pain.’
Spencer’s has also increased its attention on offering private labels. It is expected to increase their number from around 5,000 to 10,000. This will help the retail to increase the share of its private label business from 15% to 25%. Apart from building customer loyalty for these brands, Spencer’s will be able to further improve profitability as private labels offer higher margins than branded products.
Spencer’s is also executing innovative ideas with a view to increase customer inflow in its stores. Among others, it had recently organized successful theme-based food festivals across the country for Thai and Brazilian foods.
Realising the increasing need for home like food, and to contain inflation, Spencer’s will soon be introducing Home Meal Replacements (HMR) at its hypermarket stores.
Among other new initiatives to bring in more customers, Spencer’s will launch contact programmes for women and school children
TECHNOLOGY IN RETAIL: The ERP Initiative at Spencer's Retail Ltd.
Over the years, during the turn of twentieth century as the consumer demand increased and the retailers geared up to meet this increase world over, technology evolved rapidly to support this growth. The hardware and software tools that have now become almost essential for retailing can be classified into
3 broad categories:
Customer Interfacing Systems
Bar Coding and Scanners
Point of Sale (POS) systems use scanners and bar coding to identify an item, use pre-stored data to calculate the cost and generate the total bill for a client.
Payment
Payment through credit cards has become quite widespread and this
enables a fast and easy payment process. Electronic cheque conversion, a recent development in this area, processes a cheque electronically by transmitting transaction information to the retailer and consumer's bank.
Internet
Internet is also rapidly evolving as a customer interface, removing the need of a customer physically visiting the store
Operation Support Systems
ERP System
Various Enterprise Resource Planning (ERP) vendors have developed retail-specific systems which help in integrating all the functions from warehousing to distribution, front and back office store systems and merchandising. An integrated supply chain helps the retailer in maintaining his stocks, getting his supplies on time, preventing stock-outs and thus reducing his costs, while servicing the customer better.
CRM Systems
The rise of loyalty programs, mail order and the Internet has provided retailers with real access to consumer data. Data warehousing and mining technologies offers retailers the tools they need to make sense of their consumer data and apply it to business.
Advanced Planning and Scheduling Systems
APS systems can provide improved control across the supply chain, all the way from raw material suppliers, right through to the retail shelf.
They enable consolidation of activities such as long term budgeting, monthly forecasting, weekly factory scheduling and daily distribution scheduling into one overall planning process using a single set of data.
Strategic Decision Support Systems
Store Site Location
Demographics and buying patterns of residents of an area can be used to compare various possible sites for opening new stores. Today, software packages are helping retailers not only in their locational decisions but in decisions regarding store sizing and floor-spaces as well.
Visual Merchandising
The decision on how to place and stack items in a store is no more taken on the gut feel of the store manager. A larger number of visual merchandising tools are available to him to evaluate the impact of his stacking options
Based in Kolkata, India, Spencer's Retail is one of the country's fastest-growing retail companies with approximately 2 million square feet of retail space and more than 400 stores in 65 cities. Their products include food, apparel, electronics, lifestyle products, music, and books.
Spencer's Retail is a division of RPG Enterprise, a business group with more than 20 companies in industries such as power, technology, retail, and entertainment. Established in 1979, RPG Enterprises has annual revenue of $3.25 billion.
To manage this kind of growth, it was necessary to move out of legacy systems, as they didn't provide the scalability that was needed. Plus, some of its stores are currently working on as many as four different legacy systems, managing which was very difficult. It needed a solution to manage everything under one umbrella. So it engaged a team of experts to evaluate various solutions in the market. Spencer's found that SAP came closest to fulfilling its needs. Project Shakti has been operating for the last two years out of Chennai and it has already gone live in seven States – Andhra Pradesh (Vizag since 17 November 2006), Haryana (Gurgaon, since March 08, 2007), Maharashtra, Gujarat, West Bengal, Jharkhand, and Karnataka (Bangalore, since 1ST July 2008). Spencer's Retail has rolled out its SAP solution to approximately 207 stores and expects to complete deployment to more than 350 stores by October 2008. While 53% stores run on SAP, 28% stores run on Oracle and 18% stores run on FoxPro.They are using the latest MySAP ERP IS Retail ECC 6.0 for their operations in Books & Beyond, and are gradually migrating the rest to SAP.
At RPG, the businesses are divided into three entities (Spencer's, Music World and Books & Beyond). Spencer's business is basically procurement of articles from respective distribution centres (DC) and selling to customers. The DCs in turn would be procuring articles based on the site's need from different vendors. The business processes covered under this are purchase, sales, inventory controlling along with financial accounting. The challenges faced during the implementation are managing the different pricing procedures which change very rapidly, managing the promotions; automation of the POS information, high volume of information to be processed, GMROI (Gross Margin Return on Investment) etc.
They have followed SAP Methodology during the course of this implementation. The Project leader from SAP India gathered the necessary KPI's, Dimensions and reports from the functional consultants. Based on these inputs he prepared a Data Model and the Blue Print. Taking this Blue print as input the team at RPG was responsible in preparing the technical specs and also realize/develop the objects.
With ERP, high-availability is a challenge as the network over which the data travels from, say, a datacenter to the store is not within its control and belongs to an external agency. Spencer's ERP datacenter is based out of Kolkata along with the business warehousing servers. For data processing, they have 'staging servers'. These are intermediary servers to store data temporarily before moving it to the SAP Production server.
Eventually, all stores and warehouses across all locations will be integrated with its datacenter and shall be working on a real-time basis, except for the PoS billing system. At the end of each working day, the data is sent to the parent datacenter for processing and analytics.In its legacy systems, they have deployed solutions like SAS and SAPZone. They use them to do bill-value and time analysis. They are also using MySAP Business Warehousing BW 7.0 for analytics. While their aggregated sales data goes to the SAP production server, the non- aggregated data goes to the business warehousing server for analytics at Kolkata. The latter helps them analyze customer buying patterns. The former data helps them manage inventory, stock keeping, etc. While some basic infrastructure is in place already, they are gradually implementing business intelligence into their system in due course.
An important pillar of retail business is ERP, which has three elements People, Process and Technology. The People part is most difficult to manage as it needs to recruit, train and motivate people constantly,generate awareness and do change management. This makes the task more challenging, as it needs to manage deployments in such a dynamic environment keeping pace with the company's exponential growth plans
According to the American Chamber of Commerce in India retail, food processing and real estate were the emerging sectors in India that can attract American small and medium enterprises into the country.
The chamber is working toward encouraging American SMEs to expand their relationship with India.
The chamber is keen to have the participation of cost-effective SMEs in India as it believes that they are the driving force behind a large number
of innovations and contribute to the growth of economy
Our endless choice in food is what makes shopping so special at Spencer’s. An ideal spread of fresh, frozen and processed food promise to fulfill every eclectic need in your shopping list. Farm fresh fruits and vegetables, extensive fish and meat counters, grocery and processed food items are all available under one roof. International brands share shelf space with almost all national and regional brands that you can think of. Added to this is a wide range of diet food and exotic ingredients for your international and specialty cuisines, giving you a perfect reason to indulge your taste buds at Spencer’s. And if you are tired and hungry checking out the myriad options in our stores, we have an extensive food and refreshment area where a wide assortment satisfies your hunger pangs. We value our consumer’s time and hence, we have come up with our own brands of quick-serve and ready-to-eat products which we call Home Meal Replacement. And to give you a still broader choice in prices .and products, we have developed Spencer’s sauces, jams, cookies, pickles, etc
GIFT VOUCHERS
Gift Vouchers are an extremely popular and appreciated gift item that entitles the bearer to exchange it for products up to the face value of the voucher. Choosing the right gift is an extremely complicated process involving a lot of unnecessary deliberation. And most of the times, in spite of our best efforts, we end up choosing a gift that is not really to the recipient’s taste . Gift Vouchers are the best way of giving somebody the freedom of choosing his/her own gift.
Why do Corporates buy Gift Vouchers?
Incentives to employees and channel partners. Gifting clients. Sales/Marketing promotions. Personal occasions like birthdays and anniversaries. Pass on benefit of tax exemption to employees. Avail discount on bulk purchase of gift vouchers. Benefits of Gift Vouchers to Employees: Benefit of tax exemption Freedom of choice Enjoy the shopping experience at Spencer’s. Easy loans
EASY LOANS
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INSTORE ADVERTISMENTS
In-store Advertising solutions:
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ABOUT RPG
RPG Cellucom India, which currently runs over 100 stores across the country showcasing a variety of products including phones, notebooks
and other accessories, will open 400 new stores by December next year targeting Rs 2,500 crore turnover by March 2009.
Of the new stores, “150 will come up by this year end”, RPG Cellucom Chief Executive Sunil Bhagat said at the launch of the 101st store here. He said the company will have over 50 stores in the National Capital Region by March 2008.
Earmarking an investment of over Rs 500 crore, it is also planning to close the current financial year with 600 Spencer’s Daily stores. Currently, it has 320 outlets, out of which 14 are hyper markets. It will roll out 280 stores in the next few months, including four hyper markets — one each in Vijayawada, Kozhikode and two in Kolkata. “One of the stores in Kolkata will be 65,000 sq.ft. store, which will be our largest,” said Mr Menon.
According to him, the company intends to enlarge plans for its food and grocery supermarket chain, “Spencer’s Daily” network at 50 to 55 stores a month. “We have already tied up for real estate for the next 10 months,” he said.
Chennai-based Sri Krishna Sweets, which has a chain of 53 outlets across the country, Dubai and the US, is joining hands with Spencer’s Retail to have a separate counter at Spencer’s Daily outlets in Chennai. It will soon expand to Bangalore, Coimbatore and Hyderabad stores as well.
In the coming three months, all Spencer’s Daily stores will sport a new look following the push given to their renovation and modernisation
RPG Enterprises is not only one of the biggest, but also of the most respected names in the industry. A US $ 3.25 billion dollars business conglomerate, RPG is one of the powerhouses that drive Indian industry. With more than twenty companies, it spans six business sectors - Power, Tyres, Transmission, Technology, Retail and Entertainment. With such a diverse portfolio, RPG Enterprises has had unrivalled success which speaks very highly of the efficiency and vision with which the group is run. Over the years, RPG Enterprises has built a huge reservoir of trust and goodwill among the people of India. We at Spencer's, are truly proud to be a part of the RPG family.
For more information on RPG Enterprises, please visit www.rpggroup.com
JOINT VENTURES:
Spencer's Retail Ltd, a unit of power utility firm CESC Ltd, will announce two joint ventures with international fashion brands over the next two months, an official said on Thursday. The joint ventures, one to
be announced in August and the next in September, will help expand Spencer's higher-margin non-food offerings in its hypermarkets, Samar Sheikhawat, vice president, marketing, told reporters.
"It will augment our fashion business model and going ahead the thrust on fashion is a big piece for us because of topline and margin possibilities," he said. "One is from the UK and one from the U.S," he said about the joint venture partners.
About 65 percent of Spencer's hypermarket sales is from food and groceries and the rest from non-food items like consumer durables, but this will be equalised into food and non-food over the next 18-24 months to boost profits, Sheikhawat said. "Food gets in the traffic, it gets the topline, the revenues, it doesn't get the bottomline. Fashion and home get you the bottomline so you need to sell a whole lot of food but you also need to sell a whole lot of fashion and home," he said.
Earlier this week, the retailer announced a tie-up with U.S. bakery cafe chain, Au Bon Pain. The venture, in which Spencer's holds 90 per cent, will set up 100 cafes over the next 18 months in India. The cafes will also be located in the retail unit's hypermarkets, he said. In June, Spencer's Retail also tied up with UK's Woolworths Group PLC to distribute toy brand Chad Valley in India. The toys are now available in two of its hypermarkets, Sheikhawat said. In the year to March 2008, Spencer's Retail, which also runs speciality retail formats for music, books and mobile phones, posted a net loss of 1.5 bn rupees and revenue of 8.2 bn rupees, he said. It has outlayed 25 bn rupees from internal accruals to help grow floor space over the next two years to 4 mn square feet from 1.5 mn square feet now, he said. Family-controlled RPG group also owns a stake in Phillips Carbon Black, and tyre maker Ceat Ltd. It also owns technology firms Zensar Technologies, RPG Life Sciences and RPG Cables
MORE DINING OPTIONS.
Spencer's Retail plans more dining options
Nivedita Bhadury / Kolkata September 26, 2008, 0:26 IST
The food and bakeries section of the flagship food and grocery retail chain Spencer's, a part of the RPG enterprises, is looking at expanding its number of restaurants in exclusive tie ups with food chain outlets.
Within the next two to three months the retail player, in a tie up with eatery outlets, will expand in its food and bakery business.
Spencer's in partnership with Sankalp, specialising in Gujrati thali food, Rajdhani specialising in Indian authentic cuisine, Yo China, another fast food outlet specialising in Chinese cuisine and Singapore based Bread Talk will set up such a chain of outlets.
Sources close to the company said, that the outlets will follow a pattern like the one used in the recently opened eatery in Kolkata, under the brand name Orientum.
The outlets will be opened in Bangalore, Chandigarh and Baroda. All the outlets will be of a large sized format spread across an area of approximately 2500-5000 sq feet requiring an investment of Rs 1 crore by the partner, while the flooring, basic infrastructure and decoration is to be provided by Spencer's, as a part of the tie up.
The retail major is also in talks with McDonalds, Kentucky Fried Chicken (KFC) and Mainland China for opening such large format restaurants and as soon as the space required for setting up the outlet was selected, work would start.
With the expansion of the sub leased business, the company is eyeing a turnover of Rs 50 crore this year from the bakery and food services segment of Spencer's.
Food Courts which are a part of all Spencer's hyper outlets delivering a very high and good margin to its business, is expected to contribute about 35 per cent to the company's total turnover this year.
Spencer's currently has 160 shop in shop bakeries and food courts in the country.
EXPANSION OF SPENCER’S
Spencer’s Retail, owned by the RPG group, plans to aggressively grow its food and grocery supermarket chain, Spencer’s Daily even as it is launching a range of new formats for selling consumer electronics, cellular phones and books, music and stationery items.
Like Tatas (Croma), Ambanis (Reliance ‘Digital’), Biyanis (e-Zones), and Dhoots (Next), it is going ahead with the rollout of an independent multi-brand chain for electronic products.
To be christened “Spencer’s Electronics”, the first outlet of the proposed chain will be opened in Hyderabad in the first week of November, “may be on November 5”. “To start with, we are planning to open five stores in the South after which we will decide on our national roll-out,” said Mr Ramesh Menon, Senior Vice-President (Operations), Spencer’s Retail Ltd. The stores will have a minimum floor space of 4,000 sq.ft. and will stock consumer electronics goods from various brands.
It is also planning to take its books and stationery store, “Books and Beyond” to other geographies in the country. It currently has one outlet in Delhi. The store sells, apart from books, stationeries, music and movie CDs, cassettes and DVDs.
Spencer’s Retail plans to expand it’s retail telecom business, “RPG Cellucom”. RPG Group will invest Rs 1,000 crore in the next one year to expand its mobile and laptop retail chain, “RPG Cellucom” - a master-franchisee of Dubai-based Cellucom.
Spencer on expansion binge; GSA business highest revenue earner
Our Corporate Bureau
Kolkata, Jan 18: RPG Enterprises-owned retail chain Spencer & Co Ltd is aggressively expanding its network by setting up one outlet every 10 days for its three divisions - Music World, Food World and Health & Glow.However, the main chunk of the revenue still comes from the airline ticket sales business.
Its business as a general sales agent (GSA) for various airlines like Cathay Pacific, KLM, North West Airlines, Sri Lankan Airlines and Air Maldives, is the main money-spinner. The revenue from the division was Rs 229 crore out of a total sales of Rs 311.94 crore for the year to March 31, 2000.
In fact, the revenue from the GSA business clocked a 41 per cent growth as against the industry average growth rate of nine per cent. Spencer Travels, along with its subsidiary Anusha Air Travels, has 26 marketing and customer service offices. The company's sales from three specialty divisions of music, food and healthcare recorded a high of Rs 26 crore in December last year, of which Music World alone accounted for about Rs 20 crore. According to a spokesman for RPG Enterprises, the group has been aggressively expanding the network of outlets. He noted that the company plans to open one store every ten days, which will mean adding around 36 stores annually for each of the three sections - Food World, Music World and Health & Glow. Music World with 25 stores in India spread across all major cities, expects to report Rs 50 crore sales in the current fiscal 2000-01.In fact, the Music World division reported a turnover of Rs 19 crore in 1999-2000 from Rs 7 crore in the previous year. The Music World store at Kolkata is the second highest revenue earner in the chain reporting a Rs 80 lakh sales in December last year, second to that of Bangalore. The other retail chain on food products - Food World - a 51:49 joint venture between RPG group's Spencer and
retain chain major Dairy Farm International, is expected to expand its network of outlets to 100 by fiscal 2001-02.
BRANDING STRAGEY
As part of its new branding strategy, RPG Group-owned Spencer's is working on trimming down the number of its current retail formats,
while focusing on retailing food items.
Spencer's currently has 290 stores covering four retail formats, Hyper, Super, Daily and Express spread across six lakh square feet of area, which will get reduced to three formats eventually.
"We are merging two formats which are similar, to reduce the number to only three formats with one big box, small box and a range of stores in the middle range," Spencer's Retail Limited Vice-President (North) Satyaki Ghosh told media.
Without divulging which two formats would be merged, he said the company was working on new brand names and the stores between the big box and the small box formats will remain the key bread earners.
The company would invest up to Rs 2,500 crore on its retail expansion till March 2009 to cover an area of around 20-25 lakh square feet by September 2008. The total area across the formats will be close to 17 lakh by this year end.
"We are already present in 32 cities across India and as expansion
continues, we are aiming top 119 cities of the country," Ghosh said.
"Our aim is to fight different needs of people by redoing our formats," Ghosh addded. "Women are the target customer for the company. we are also devising a strategy to meet their needs by providing them value for money, better ambiance for shopping and other value added services like kids play area etc," Gosh said.
The small format stores would focus on food offering international cuisines along with Indian preparations in ready-to-eat, semi-cooked and Prue-cooked forms. There would also be cafes inside every store.
"We want to be known as a food first retailer and the small stores will be basically food stores," he added.
Spencer's Retail is one of India's fastest growing retail stores with multiple formats, retailing food, apparel, fashion, electronics, lifestyle products and books
SPENCER’S THE FUTURE BIZ.
Spencer’s to add non-food categories to improve margins; two JVs to be announced soon
“Food gets in the traffic, it gets the topline, the revenues, it doesn’t get the bottomline. Fashion and home get you the bottomline so you need to sell a whole lot of food but you also need to sell a whole lot of fashion and home.” — Samar Sheikhawat, Vice President, Marketing, Spencer’s Retail.
Spencer’s, the flagship food & grocery retail chain of Spencer’s Retail, a part of the RPG group, is in a hurry to strike partnerships with global fashion (apparel, accessories, etc) and other brands to widen its range of products being offered at its hypermarket format stores. These will help increase the proportion of non-food business for the chain and, thus, add to it margins as these categories would offer better margins than food category.
While, two joint ventures have already been announced by the group, two more are expected to be announced in August and September, this year.
“It will augment our fashion business model and going ahead the thrust on fashion is a big piece for us because of topline and margin
possibilities,” said Sheikhawat. “One is from the UK and one from the U.S,” added Sheikhawat while talking about the joint venture partners.
While, Spencer’s is currently garnering two-thirds of its revenues from low margin food category, with its new non-food initiatives, it expects to change the ratio to 50:50 between the two categories, within a period of 18-24 months. This, according to a Reuters report, will help boost company’s profits.
Spencer’s has earlier announced its joint ventures with the UK’s Woolworths Group PLC to distribute Chad Valley brand of toys in India and with the U.S.-based bakery cafe chain, Au Bon Pain. While, Chad Valley toys have begun appearing in its hypermarket format, it plans to set up around 100 Au Bon Pain cafes over the next 18 months, many of which will be located in the group’s hypermarket stores.
Spencer’s, a part of the $3.4 billion industrial conglomerate with interests in power, tyres, cables, and technology, among others, is currently operating over 400 stores across 65 cities covering a retail trading area of 2 million sq ft. and is servicing the needs of over a lakh of customers every day. Spencer’s chain operates four formats, namely, Express, Daily, Super, and Hyper. Apart from flagship Spencer’s, the group is also operating retail chains in the verticals of books (Books & Beyond), Music (Music World), and Telecom (RPG Cellucom).
In 2007-08, retail business of RPG group incurred a loss of Rs 150 crore against revenue of Rs 820 crore. It is investing over Rs 2,500 crore to more than double its retail space to four million sq ft within a couple of years
Spencer’s to expand retail chain in 2 years to 1,000 stores; invest 2,500 crore in two phases
CONCLUSION:
The past 4-5 years have seen increasing activity in food retailing. Various business houses have already planned for few investments in the coming 2-3 years. Though the retailers will have to face increasingly demanding customers and intensely competitive rivals, more investments will keep flowing in and the share of organized food sector will grow rapidly.
Organized food retailing in India is surely poised for a takeoff and will provide many opportunities both to existing players as well as new entrants.
Also, most food retail players have been region-specific as far as geographical presence is concerned. Take the RPG Group's FoodWorld, Nilgiris, Margin Free, Giant, Varkey's and Subhiksha, all of which are more or less spread in the Southern region; Sabka Bazaar has a presence only in and around Delhi; names such as Haiko and Radhakrishna Foodland are Mumbai-centric; while Adani is Ahmedabad-centric.
The unbranded part of the consumer's shopping basket, which constitutes as much as 60% of the total purchases and growing sharply, say AC Nielsen estimates. Retailers are offering a package of convenience and freshness, and have an edge over manufacturers that focus mainly on packaged conveniences.
Food retailers are offering 'live kitchen' formats, which offer on-the-spot home-style gravies, dals, cooked rice and kneaded dough with options like grinding coffee fresh at store, idli batter, paneer, curd and cut vegetables
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