THE BATTLE OF THE FOOD MARKETS
Once long ago, when I was a little girl my father observed that if one was to start a business it was the safest to start it in the food space. Everyone has to eat so people would never stop buying and probably that would be the sector least hit by modern day phenomenon like inflation and the rupee going strong because of some sub-prime lending rate problems in a far of country like America, impacting the whole world with something like a toy remote control. It reminds me of the much publicized butterfly effect. Imagine people in one country balking at their mortgage payments leading to economic upheavals in another country which they have probably never even visited in their lives.
Nowadays whenever I pick up the Economic Times or the Business Line all I see is how one retail format takes on another and companies pumping huge money to enter this burgeoning sector. Funnily retail still hasn’t got an industry status, so no really effective metrics are in place for the calculation of the ROI in the sector. Innovative metrics like returns per sq.ft have evolved bearing testimony not only to the hyperactivity in the retail scenario but also the realty business.
Interestingly it’s not the dry groceries that have made the grade as the top earners but the fresh groceries. Heightened health consciousness and economic vegetarianism among urban dwellers has led to an increase in consumption of fresh foods in comparison to meat.
Foods allowed in the main vegetarian diets
Diet Name Meat
(includes fish)Eggs Dairy Honey
Lacto-ovo vegetarianism No Yes Yes Yes
Lacto vegetarianism No No Yes Yes
Ovo- vegetarianism No Yes No Yes
Veganism No No No No
Today, Indian vegetarians, primarily lacto vegetarians, are estimated to make up more than 70% of the world's vegetarians. They make up 20–42% of the population in India, while less than 30% are regular meat-eaters.
Surveys in the U.S. have found that roughly 1–2.8% of adults eat no meat, poultry, or fish. Hence we have a huge untapped and growing segment of population interested in quality fresh foods. there is ample scope for growth of retailers in this segment more so because of the varied needs of the customers who are increasingly becoming dependent on processed and semi processed foods, convenience foods (an innovative food segment evolved due to the time crunch of working professionals).soon private labels are going to take off in a big way even in the fresh foods segments.
INDIA –A COMPARATIVE OF EXISTING FORMATS IN THE FRESH FOODS SEGMENT
ITC’s CHAUPAL FRESH-positioning strategy-FRESHNESS,WIDTH OF CHOICE AND QUALITY ,store size in sq.ft -1300 ,% for fresh foods on shelf-100%,SKU-140-150 ,Footfalls-900 ,Conversion/avg ticket value-700/Rs 200 APPROX ROI/sq.ft-107/Sq.Ft
ADITYA BIRLA’s MORE,positioning strategy -CONVENIENCE AND QUALITY ,size in sq.ft 1700-2300 ,%for fresh foods on shelf-50% ,SKU-100-110 ,footfalls -850, Conversion/avg ticket value->700/Rs 250 APPROX ,ROI/sq.ft-Rs 98/Sq.Ft
RELIANCE FRESH,positining strategy PRICE PLAYER (10-15% DISCOUNTS IN EVENING), size in sq.ft 2000, %>% for fresh foods on shelf-20% ,SKU100-110, footfalls -1000, ROI/sq.ft ->800 Rs 350-400 Rs. 87.50/Sq.Ft
The higher average bill size for Reliance Fresh is primarily due to the bulk purchases of commodities like wheat oil and sugar. on the other hand ITC is concentrating on promoting its niche segments like exotic foods like passion fruit kiwis etc.More is competing with Reliance Fresh on private labels and its wheat (atta) is priced five Rs lower than that of Reliance Fresh. Also its operating on a two tier price spectrum for its private labels much similar to Tesco’s pricing strategy. It has named them as Reliance Value and Reliance Select. ITC however has been smarting in the sourcing and logistics field. After getting a license from APMC to procure directly from the farmers it gets fresh deliveries direct from the farms twice daily ensuring smooth replenishments. The farmers too are happy with the 10% premium they get over the market rates.
What is left to be seen is if there is an imminent shake out .Which companies will fold up and why? As for now it’s a level playing field with each company trying to leverage on its scalability strengths, and the consumers spoilt for choice with more and more players diving into the market for a slice of this sumptuous cake.
Nowadays whenever I pick up the Economic Times or the Business Line all I see is how one retail format takes on another and companies pumping huge money to enter this burgeoning sector. Funnily retail still hasn’t got an industry status, so no really effective metrics are in place for the calculation of the ROI in the sector. Innovative metrics like returns per sq.ft have evolved bearing testimony not only to the hyperactivity in the retail scenario but also the realty business.
Interestingly it’s not the dry groceries that have made the grade as the top earners but the fresh groceries. Heightened health consciousness and economic vegetarianism among urban dwellers has led to an increase in consumption of fresh foods in comparison to meat.
Foods allowed in the main vegetarian diets
Diet Name Meat
(includes fish)Eggs Dairy Honey
Lacto-ovo vegetarianism No Yes Yes Yes
Lacto vegetarianism No No Yes Yes
Ovo- vegetarianism No Yes No Yes
Veganism No No No No
Today, Indian vegetarians, primarily lacto vegetarians, are estimated to make up more than 70% of the world's vegetarians. They make up 20–42% of the population in India, while less than 30% are regular meat-eaters.
Surveys in the U.S. have found that roughly 1–2.8% of adults eat no meat, poultry, or fish. Hence we have a huge untapped and growing segment of population interested in quality fresh foods. there is ample scope for growth of retailers in this segment more so because of the varied needs of the customers who are increasingly becoming dependent on processed and semi processed foods, convenience foods (an innovative food segment evolved due to the time crunch of working professionals).soon private labels are going to take off in a big way even in the fresh foods segments.
INDIA –A COMPARATIVE OF EXISTING FORMATS IN THE FRESH FOODS SEGMENT
ITC’s CHAUPAL FRESH-positioning strategy-FRESHNESS,WIDTH OF CHOICE AND QUALITY ,store size in sq.ft -1300 ,% for fresh foods on shelf-100%,SKU-140-150 ,Footfalls-900 ,Conversion/avg ticket value-700/Rs 200 APPROX ROI/sq.ft-107/Sq.Ft
ADITYA BIRLA’s MORE,positioning strategy -CONVENIENCE AND QUALITY ,size in sq.ft 1700-2300 ,%for fresh foods on shelf-50% ,SKU-100-110 ,footfalls -850, Conversion/avg ticket value->700/Rs 250 APPROX ,ROI/sq.ft-Rs 98/Sq.Ft
RELIANCE FRESH,positining strategy PRICE PLAYER (10-15% DISCOUNTS IN EVENING), size in sq.ft 2000, %>% for fresh foods on shelf-20% ,SKU100-110, footfalls -1000, ROI/sq.ft ->800 Rs 350-400 Rs. 87.50/Sq.Ft
The higher average bill size for Reliance Fresh is primarily due to the bulk purchases of commodities like wheat oil and sugar. on the other hand ITC is concentrating on promoting its niche segments like exotic foods like passion fruit kiwis etc.More is competing with Reliance Fresh on private labels and its wheat (atta) is priced five Rs lower than that of Reliance Fresh. Also its operating on a two tier price spectrum for its private labels much similar to Tesco’s pricing strategy. It has named them as Reliance Value and Reliance Select. ITC however has been smarting in the sourcing and logistics field. After getting a license from APMC to procure directly from the farmers it gets fresh deliveries direct from the farms twice daily ensuring smooth replenishments. The farmers too are happy with the 10% premium they get over the market rates.
What is left to be seen is if there is an imminent shake out .Which companies will fold up and why? As for now it’s a level playing field with each company trying to leverage on its scalability strengths, and the consumers spoilt for choice with more and more players diving into the market for a slice of this sumptuous cake.