Food chains learn fast

Sayantani Kar, Business Standard
Mumbai, April 30, 2014

"Those who have tasted it loved it. But we are also enjoying the buzz created by those who have just heard about it," says Sanjiv Razdan, general manager – Pizza Hut & Restaurant Excellence, at Yum! Restaurants India (Yum) about the chain’s latest product, the Birizza. The combination of Indian-style rice with a bread crust and gravy on the side has triggered varying reactions among consumers, ranging from bemused, incredulous to curious, especially on social media. After rolling out tandoori pizzas, it is offering a take on the Indian tawa pulao/biryani. Detractors have underlined how the concept is at odds with the chain’s branding, a concern that Razdan says is laid to rest when one samples the product.

While quick service restaurants (QSRs) had entered the food scene with Indianised menus, the market has also had a lot of products withdrawn since then. After the initial success, is it now a case of more misses than hits in new menu-items for these QSRs?

Why fix what ain’t broke

Devangshu Dutta, CEO, Third Eyesight, says QSRs have a set of core items that define the branding of a chain. "Beyond these, other products will come and go."

For Pizza Hut, the contribution of its core product – pizza – is around 60 per cent, according to Razdan. Senior officials at McDonald’s say that for the burger chain the core mid-range menu of burgers, wraps and fries comprises around 40 per cent, while the premium range which is seeing the most product innovations contributes around 23 per cent, the entry-level ‘happy price’ menu 23 per cent and beverages 14 per cent – categories that also see the chain revising its line-up often.

Why do the QSR brands, then, look to expand beyond their core? Dutta says, "New items bring in additional footfalls, drive up price-points and ticket sizes, adding to margins in these times of low consumer spending." Fast-food chains sure need the help with the three major companies – Jubilant Foodworks, Yum and Westlife Development (owns Hardcastle restaurants which is the franchisee of McDonald’s in the west and south) – seeing a decline in growth ranging between 2.6 and 9.8 per cent in the December quarter.

The chains’ reasons

For Birizza, Razdan says, "We wanted to get new users for not just our brand but for the category as well, ie. who don’t like pizzas. It was time to take a big leap rather than incremental innovation such as a variant of a pizza." He informs that the birizza would be a permanent fixture as rice is a preferred staple in most of India.

Pizza Hut’s sister brand, KFC, owned by Yum, had already experimented with a flavoured rice meal with gravy. Razdan says Pizza Hut Sri Lanka too had recently set a precedent with rice. "We had to introduce something with Pizza Hut’s twist and hence, the crust," says Razdan.

President and COO of Dunkin’ Donuts India, Dev Amritesh, says they have to keep in mind the palate of the Indian audience in picking flavours, spices and herbs. The doughnut chain managed by Jubilant FoodWorks that also handles Dominos, is set to enter its second metro city, Mumbai, in May and has recently launched wraps and a bagel bun-burger. Amritesh says, "New product development keeps the brand promise of being an adult QSR brand in mind. It is not for the first-time QSR customer, but an evolved one. So the menu would have some complexity with a story behind the items and a western vocabulary." Dunkin’ is currently tailoring its new products such as the Tough Guy burger, which has a bagel bun instead of the usual bun, to make customers get their ‘mojo’ back.

For McDonald’s, it is about premiumising its menu. After its chunky McSpicy range, it is now pushing the Royale range that is its most expensive.

The strategy would increase the ticket size and serve the customer at different meal-times too.

Lessons from the misses

But what about the products which lost their spot on the limited menus, typical of fast-food chains? The lessons are being ploughed back in product innovations. "We have learnt that we can’t get new customers by just bringing in more of our international flavours. So, even with a pasta range abroad, more pastas in India would not mean more customers in our fold," says Razdan. Pricing, especially in this climate of low consumer spending, is another lesson. "With both our new big pizza and Birizza, we are mindful of the prices. Now, we have pizzas which are on an average 23 per cent more than the regular size of competition without a price hike."

Senior director, marketing, corporate communication and menu management at McDonalds, Rameet Arora, says, "We have learnt to launch products that preserve the credibility of the brand. To keep interest levels up, we have always had limited edition products such as chicken popcorn, cheesy fries and a Mexican spice festival range."

Dutta says that chains often don’t mention the trade-offs: "A low-margin product could become the default order, and it may not be profitable, requiring a trade-off between footfalls and profitability. For example, the McAloo tikki burger has been made unavailable in some markets and certain outlets of McDonald’s." Abheek Singhi, partner and director at The Boston Consulting Group, says "Eighty per cent of the time, new flavours and food products don’t work. Often they are not meant to garner volumes but generate excitement."

(Sourced from Business Standard.)

Can the Tobacco-based DS Group Diversify Like ITC Did?

Prince Mathews Thomas, Forbes India
New Delhi, April 29, 2014

The Company: DS Group, led by brothers Ravinder and Rajiv Kumar
The Ambition: Want to make the transition from being a tobacco company to a diversified conglomerate

The Challenge: Right now pan masala brand Rajnigandha brings in about 40 percent revenue. Need to develop more brands in FMCG. Huge competition in each of the segments.

Their Strategy: Broadening Rajnigandha brand into other products. Creating new FMCG brands and being patient in getting results.

The new corporate headquarters of the Rs 4,800-crore DS Group—a 6 lakh square feet and mostly marble office space—is swanky, glitzy and modern. Yes, it’s all that. But for Rajiv Kumar, the group’s vice chairman, and his family, the new office is also a symbol of how far they have come and where they want to go—beyond the tobacco brands that presently define them. “We want to be a conglomerate…the tobacco business is just 25 percent of our revenue today,” says Rajiv Kumar, adding that the traditional business will become even smaller in the coming years.

Undoubtedly, they have come far—philosophically, strategically and geographically. From a small corner shop in Delhi’s old and ­­walled neighbourhood of Chandni Chowk to seven-star type premises in Noida, it has been quite a journey for the Kumars from purani Dilli. Their business was founded in 1929 when Lala Dharampal (the D in DS) set up a perfumery shop in Chandni Chowk, and later diversified into chewing tobacco. His son Satyapal (the S) would take the business to new heights by introducing chewing tobacco brands such as Baba and Tulsi as well as pan masala (a betel nut product) brand Rajnigandha.

Though the company began diversifying into non-tobacco businesses in 1987, the push became a drive from 2006 onwards. In the last eight years, Satyapal’s sons—Rajiv Kumar and elder son Ravinder Kumar, chairman of the DS Group—have set up seven new businesses ranging from hospitality to dairy. They are also firming up plans to invest in the power, steel and cement sectors. “The FMCG business [which includes confectionery, spices and beverages] will drive growth,” says Ritesh Kumar, Ravinder’s son and a director in the group.

The transformation impetus is understandable. According to Euromonitor’s October 2013 study on the smokeless tobacco industry, volumes have been reducing for the last two years, tanking by 26 percent in 2012. The slide came after governments of 26 states and five union territories in India banned the sale of gutka (a granular stimulant mainly containing tobacco). Euromonitor estimates that the segment will see a further decline of 76 percent in volumes from 2012 to 2017.

Inevitably, during the course of the interview with Forbes India, Rajiv repeatedly assured that DS’s tobacco brands have the best standards of quality control and are in the premium segment of the industry. Apart from an experiment “years ago” to enter the gutka segment, a foray that was discontinued, DS brands Tulsi and Baba are zarda products, containing only tobacco. Though their market shares have been increasing (the two put together make DS the second largest manufacturer behind Dhariwal Industries’s RMD Gutkha in the smokeless tobacco industry), Kumar realises that doing business in such an environment will remain difficult. As Devangshu Dutta of consulting firm Third Eyesight points out, “Anything to do with tobacco is seen as part of the sin economy.”

But what pains Rajiv more is the overhang of this “perception” on his leading brand Rajnigandha. “Gutka has damaged the perception of Rajnigandha,” he says. The pan masala, which Kumar brackets under mouth freshener, is expected to gross Rs 2,000 crore in revenue in FY2014, accounting for more than 40 percent of the company’s revenue. But its soaring sales aren’t indicative of an altered image with most mistaking it for a tobacco-based product.

In this context, it is not surprising that the last four major initiatives from the DS stable have been in the FMCG segment. This, Rajiv hopes, will help achieve what, as Dutta of Third Eyesight points out, ITC has tried to do over the last few decades: Reposition itself.


The first diversification for ITC (earlier known as India Tobacco Company) came way back in the 1970s when it entered the hospitality business. From 2000 onwards, ITC forayed into greeting cards, information technology, fashion retail and even agarbattis, or incense sticks. Its most successful venture has been in the foods industry. Today ITC is the largest seller of branded foods in India with a turnover of Rs 4,600 crore in FY2013. “ITC also struggled… while not all its ventures have been equally successful, the company has been able to scale up its FMCG business,” says Dutta.

Interestingly, its tobacco business is still the biggest generator of cash, that too by a large margin. ITC earned Rs 27,136 crore from its cigarettes business, working out to 56 percent of its top line; it also contributes 82 percent to profit with Rs 8,694 crore. This has made it even tougher for the giant to entirely overturn its “tobacco” perception but people now know the company as much for its cigarette business as for its hotel and FMCG operations. And investors typically like the company stock with its market capitalisation at Rs 2,74,132 crore as on April 4, 2014, the highest among its peers and driven by the best-in-industry operating profit margin and return on equity.

The success of the Rs 45,000-crore ITC’s diversification is rooted in “a great lineage of professionally run management and an efficient structure,” says Dutta. “The company could leverage on these strengths to launch businesses.” Does the DS Group have the organisational strength and manpower bandwidth to persist with these efforts over the next few decades?

It helps that the family is not completely new to diversification. Its first non-tobacco venture was set up 27 years ago with the launch of Catch, packaged free-flowing salt and pepper. The brand was later expanded to include silver foil and bottled spring water. Leveraging on its strength in developing fragrances, the family launched PASS PASS, a now popular mouth freshener.

Similar to ITC, the Kumar brothers increased their diversification drive from 2000, launching hospitality projects, packaging, agro forestry and latex rubber thread businesses. Meanwhile, Catch made its entry into the spices and beverage segments. In 2011, the brothers bought a dairy unit in Rajasthan, including an institutional brand called Dairy Max. Expanding the FMCG basket, they entered the confectionery business with Chingles chewing gum last year.

To the family’s credit, a few of these brands have gained scale and are profitable. Catch grossed Rs 350 crore in FY2013 and is considered the second-largest in the North Indian spice market after MDH. The mouth freshener brand PASS PASS broke even after seven years. “We are not in a hurry. We understand that it takes time to create a brand,” says Rohan Kumar, Rajiv Kumar’s son and vice president, business development. His father adds that the family took seven years to master the hospitality business through its first property in Nainital. “We now have a resort in Jim Corbett National Park and have four upcoming projects in Jaipur, Guwahati, and Kolkata,” says Rajiv.

This success sets the Kumar family apart from their peers in the tobacco business, including the Dhariwals, who own RMD Gutkha. Though RM Dhariwal—chairman of Manikchand Group—also diversified into mouth fresheners, bottled water and flexible packaging, his line-up doesn’t include prominent brands such as Catch or PASS PASS.

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The Kumars (now in their fourth generation) have also succeeded in keeping their flock together, unlike the Kotharis of Kanpur, who own the Pan Parag pan masala brand. The family split in 1999 divided the pan masala and writing pen businesses between the two sons of patriarch MM Kothari. It should be noted that Pan Parag is no longer the biggest business for the family. More than half of the BSE-listed Kothari Products’s 2013 revenue of Rs 5,043 crore came from international trading.


Financially, DS has had a good run since 2010, growing from Rs 1,400 crore to Rs 3,362 crore in 2013, and net profits of Rs 291 crore. It expects to gross Rs 4,800 crore in FY2014. Personally, though, the family is more enthused by the success of its FMCG brands Catch and PASS PASS. “We want to be No. 1 not in numbers but in quality,” says Rajiv.

His strategy is two-pronged in the coming years. One is to keep up the marketing blitz on Rajnigandha to improve its brand positioning. Extending the brand’s spread, Kumar launched Rajnigandha Pearls last year, a cardamom-based mouth freshener and roped in Bollywood star Priyanka Chopra as its brand ambassador. Like earlier campaigns, the latest one is also handled by McCann Worldgroup India. Its India head and creative director Prasoon Joshi says that Rajnigandha is a “cultural product” that needs to evolve and become contemporary and aspirational as times change. “Pan and betel nuts are steeped in Indian culture. So is hair oil but it needed to evolve with competition from shampoo,” says Joshi.

The second part of the strategy is to push the FMCG business. And that is where the real challenge for Kumar lies as he diversifies into other segments, says Arvind Singhal, chairman of consultancy firm Technopak. “The customer doesn’t care about perception [of the tobacco legacy]…but as it enters new businesses, does it have the bandwidth to create a new marketing strategy, new distribution and new branding? Even if everything comes under the FMCG umbrella, products are fundamentally different. For instance, SUVs and two-wheelers are from the auto industry. But they are not the same… it takes a long time to make the transition,” says Singhal.

Currently, Kumar’s biggest investment, for instance, is in dairy. After spending Rs 50 crore in modernising and expanding the unit in Rajasthan, Kumar has earmarked another Rs 150 crore to develop the business. Apart from institutional brand Dairy Max, a retail cousin, Ksheer, was recently introduced. “Right now we are focusing on the Rajasthan market [where the unit is located],” says Anshu Dewan, head of the dairy business. With a product basket that covers the whole dairy range, including paneer (cottage cheese), yoghurt and flavoured milk, the plan is to take the brand across the country. But in Rajasthan itself the new brand faces tough competition in the form of government-owned Saras.

The scenario will be similar in every other FMCG segment too, where well-entrenched players hold on to their turf closely.

But Rajiv is up for the challenge. He says he recalled stocks of Chingles a couple of months after it was introduced in the market when a colleague said the chewing gum might have a “stickiness” problem.

“I had to do it to ensure that the brand is accepted,” he says. The chewing gum market in India is growing at a healthy 25 percent every year with players like Perfetti and Wrigley’s dominating.

The competitive landscape might be even tougher in other categories, especially in the food and beverage ones—a natural progress from here. Aware of that, Rajiv is expanding the organisation’s width of operations; DS’s retail reach has increased from 5.5 lakh outlets in 2010 to 8.5 lakh in 2013. In the mouth freshener business alone, says the business head CK Sharma, the sales force has grown from 2,070 in 2010 to 3,780 in 2013. The top team is also trying to increase know-how, including getting the marketing strategy right with help from Tata Strategic Management Group.

But it is also the rustic wisdom that has been passed down through the generations that will hold the family in good stead. And they have even institutionalised some of that inherent knowledge by creating an in-house design studio department. This, of course, will be housed in the new corporate headquarters. The symbolism continues.

(Sourced from Forbes India.)

Seminar on Emerging Trends in Fashion and Retail Industry Held by NITRA

Textiles Update

New Delhi, April 22, 2014

NITRA Technical Campus, the academic wing of NITRA, organized a seminar on Emerging Trends in Fashion and Retail Industry on 5th April’14 at India International Centre, New Delhi. Keeping in view the strong desire of today’s youth to work in fashion and retail sectors and to familiarize them with the emerging trends in these sectors, the seminar was specifically designed for the students of textile and fashion colleges pursuing UG and PG level programs.

Mr. Sanjay Jain, Vice-chairman, NITRA and MD, TT Group, graced the occasion as session chairman. The seminar was enriched by the presence of well renowned and seasoned speakers from fashion and retail industry from India and UK.

About 200 students and faculty members from leading institutes of Northern India attended the seminar.

In his address, Dr. Arindam Basu, Director General, NITRA, welcomed the speakers and delegates and spoke on the present scenario of Indian fashion and retail industry and the future prospects of these sectors.

Sh. Sanjay Jain, while conducting the session, emphasized on the growing prominence and potential of home-brands in India’s fashion-retail market. He also acknowledged its valuable contribution to build and strengthen ‘Brand India’ in the global perspective and thereby opening job opportunities in the country.

The presentation session was breathtaking. Tarang G. Saxena, senior engagement leader with Third Eyesight deliberated on global fashion brands in Indian retail, followed by well-known productivity & lean management consultant Pooja Makhija, who opened up the nuances of new-age merchandising for fashion industry. Victoria Markham, senior lecturer with MMU, UK demystified merchandising both as an art and science. Following these, Vivek Agarwal, Asst. Director & Dean – Management, NITRA presented the activities of NITRA and NTC with special focus on its flagship management program PGDM in Fashion-Retail Management.

He also spoke about this program’s tie-up with Manchester Metropolitan University, UK and the lucrative career that students are likely to embrace on completion of this program. Finally, the CEO of Luxury Connect, Abhay Gupta provided a lively presentation on potential of luxury retailing in India . An interactive panel discussion and Q&A with professionals of tomorrow in the audience ensured that the seminar was of immense benefit to the young students.

(Sourced from Textiles Update.)

Online grocery stores gaining popularity in India

Prashant Mahesh, The Economic Times

New Delhi, April 17, 2014

Online grocery stores are gaining currency among shoppers in big cities.

Many young office-going couples, especially those hard-pressed for time, find it very convenient to order from these sites because of the hassle-free shopping experience they provide.

It also helps them to avoid the neighbourhood shopkeeper who takes his own time to deliver goods, and the time travelling to the shopping mall and fretting about traffic snarls on weekends.

Simply put, these people simply love the idea of getting everything delivered at their doorstep at a particular time. The icing on the cake is the extra discount offered by these stores.

The shopper also has the choice to pay by debit or credit card or cash on delivery. "Online grocery shopping is catching up in cities like Mumbai, Delhi and Bangalore as you save time and get the delivery at your doorstep.

There are 50 odd online grocers across the country and the business is growing by 45-50% every year," says Chandni Sahgal, founder and management consultant, D’Essence Consulting, a Mumbai-based consultant. However, there is no official data available on the annual turn over these online stores, and most of them have been around hardly for year or two at the most, say experts.

Largely confined to big cities, some of these sites have captured the imagination of office-goers. For example, many DINKs (double income no kids) order their groceries regularly from Localbanya, Ekstop, and Bigbasket in Mumbai. Similarly, grosseryhub, mangoshoppers, in Delhi, bigbasket, zopnow, atmydoorsteps in Banglaore and several others, cater to the online grocery shoppers.

"Online shopping helps individuals to save time and transportation cost and offers a large collection of products under one roof. Added to it, you get competitive prices and discounts," says Rashi Choudhary, COO and co-founder,

What Do You Gain?

According to experts, grocery shopping is a regular chore, which needs to be carried out once every week. The biggest saving while shopping online is time — travelling, shopping for things and waiting for billing. You also save on transportation and parking cost. It also saves you the trouble of mall hopping for things. For example, your neighbourhood store may not stock fruits or vegetables or have a limited stock of dairy products. As compared to this, online stores offer all products under one roof.

"Online stores are open 24*7, for you to shop or place orders. You have the option to choose a delivery slot, which suits you the best," says Anandan Pillai, senior manager (social media), Zenith Optimedia India, which helps companies improve effectiveness of their marketing spend.

Another great draw is discounts offered by these online stores. For example, (operating in Mumbai, Bangalore, and Hyderabad) offers a 10% off on the first order if placed in April. There are also discounts on individual products. Some stores also offer reward points that can be accumulated and used on subsequent shopping. Delivery in most cases is free if the bill is above Rs 1,000. Anominal fee of Rs 30 is charged for delivery if the bill is below Rs 1,000.

Perils of Shopping Online

It is very difficult to choose an online store because most of them have a track record of only a year or two and many are present only in a single city.

"A store should have predictability of service, have enough inventory of the products you buy and a customer friendly redressal mechanism," says Devangshu Dutta, managing director, Third Eyesight, a retail consultant.

Many e-commerce experts ask shoppers to do a few trial runs before placing large orders. "You should opt for cash on delivery for the first few orders," suggests Dutta. This will give you a better idea about the quality of goods, understand how the system works and whether they deliver on time.

(Sourced from The Economic Times.)

Nilgiri’s to boost Future grocery plans

Raghavendra Kamath, Business Standard

Mumbai, April 14, 2014

Kishore Biyani has the south India-based supermarket brand, Nilgiri’s in the cross hairs, according to media reports. If he follows through with the acquisition, the brand is expected to boost his growth prospects in the food and grocery segment.

While Biyani, group CEO, Future Group, has flagship Big Bazaar as his largest retail chain brand, he has more number of grocery chain brands such as Food Bazaar, KB’s Fair Price, Big Apple and Aadhaar.

The obvious benefits Nilgiri’s, which clocked Rs 700 crore in sales, would bring post Biyani’s likely move is expand Future Group’s footprint in the south. Though it runs around 230 Big Bazaar and Food Bazaar stores in the country, south India houses only a fifth of the count. Nilgiris has around 140 stores, mostly franchisees.

"It (buying Nilgiris) will definitely help Future grow stronger in south. It will help them access new markets and intellectual ssets of Nilgiri’s," says Susil Dungarwal, founder at Beyond Squarefeet, a mall management firm. Dungarwal likens the move with Aditya Birla Retail buying Thrinetra in south in 2006.

A chief executive of a retail firm says that not only is the contribution of the southern states to Future’s food and grocery revenues the least, in states such as Andra Pradesh, Kerala and Tamil Nadu, the group’s presence is feeble. "Buying a chain in the south will plug that gap," the executive adds.

He says Nilgiris stocks 6,000 products, nearly 50 per cent more the number of products stocked by other retailers but its sales per sq-feet is 25 to 30 per cent higher than the industry.

"Since Nilgiris has its own manufacturing in dairy and bakery products, and 26 to 27 per cent of its revenues come from private labels, any buyer is buying a very profitable venture," he says.

Faster rate

Many in the industry believe acquiring a chain of small format stores will make Future’s grocery business grow faster.

"When you want to penetrate deeper, you need smaller formats. If you want to build from scratch, it takes time. Hence, strong regional players in this segment become good acquisition targets," says Devangshu Dutta, chief executive of retail consultancy Third Eyesight. "Big Apple (which Future bought earlier) was strong in the NCR. Nilgiris has a good brand image, strong operations, making it a good acquisition target," Dutta says.

A senior executive of a Chennai-based retail chain says that Future is likely to buy Nilgiri’s for almost half the valuation expected by Actis, the private equity firm which invested in Nilgiri’s in 2006. "Actis was expecting Rs 600 crore but they had approached many people in the last two years. But finally, Future managed to get it half the valuation," says the executive.

Stir in the neighburhood

A source in the group and the CEO quoted earlier believe that Biyani would rebrand Nilgiris into KB’s Fair Price stores eventually. "Since the group is looking to grow KB’s Fair Price through the franchisee model in a big way, Nilgiris is an ideal option, given that they also follow the same route," says the source within the group.

KB’s Fairprice focuses on a small, neighbourhood format to sell food and grocery. Future group wants to take its count from 170 to over 1,000 in the next two years.

The CEO of the retail firm says the low supply chain costs, robust franchisee model and in-house manufacturing of Nilgiri’s only adds to the brand’s appeal for a buyer.

"Nilgiris is the only decent franchisee model in food and grocery which is working in the country and Future is yet to get its model right with KB’s Fair Price," he adds.

A strong brand’s hurdles

But some say it will be difficult for Future to rebrand the Nilgiris due to its strong brand recall. Dutta says in a post-acquisition scenario, any buyer can rebrand stores or not change it, depending on the perception.

(Sourced from Business Standard.)

Will BJP soften its stand on multi-brand retail?

Bindu D. Menon, The Hindu Businessline
Mumbai, April 7, 2014

When it comes to retail trade, there seems to be room for negotiation in BJP’s 2014 manifesto.

From being “open” to retail trade in 2004’s vision document to a total blanket ban to FDI in retail in 2009; the party’s latest poll manifesto states that it is “open to FDI in job creating sectors but against FDI in multi-brand retail trade”.

Trade watchers point out that the manifesto should be seen as a political document rather than an economic one and with the party being largely seen as pro-business, it is likely to bring changes in the current FDI policy particularly in retail once voted to power.

Barring multi-brand retail sector, FDI will be allowed in sectors that allow job creation, says the manifesto. The party also said it would make the functioning of the Foreign Investment Promotion Board (FIPB) “more efficient and investor-friendly”.

However, industry sources said the party may soften its stance and allow FDI in retail but with riders. They pointed that an indication of this softening can be seen in a speech by BJP’s Prime Ministerial candidate Narendra Modi given in February where he made strong pitch for use of technology in retail sector.

Arvind Singhal, Chairman, Technopak, a retail consulting firm, said, “The manifesto is a document of political convenience. Almost all parties want to woo voters and the BJP is no exception. Having said that, once the party comes to power it is unlikely to remain silent on the subject. BJP Government in its past avatar has been highly liberal with business. We see room for negotiation in retail as well”.

A Deloitte report notes that emerging markets enjoy strong demand and retailers based in India, Brazil and Russia continued to see strong consumer demand.

“Economically, India appears to be on a low growth trajectory largely due to the astronomical growth turning out to be unsustainable, leading to bottlenecks that created inflation. However, as an emerging market, India promises a positive long-term outlook for global as well as Indian retailers. Many reforms pertaining to the retail sector of the country are likely to take a speedy implementation route post the upcoming elections,” Gaurav Gupta, Senior Director, Deloitte Touche Tohmatsu India, had said in a report.

Our Mumbai Bureau adds: Devangshu Dutta, retail consultant, said that the “explicit” declaration is not only a major disappointment for international multi-brand retailers that are looking to invest in India, but also for large Indian multi-brand businesses that might be looking at attracting equity.

However, experts are also of the opinion that this single agenda would not impact the party’s chances, because there are several other issues that make for perhaps bigger and more immediate concerns for the electorate in this election.

(Sourced from The Hindu Businessline.)

All That Fizz In Store ….

Fairy Dharawat, Point of Purchase Online Network
Mumbai, April 5, 2014

Retail consultants and shopper marketing experts share their take on the retail trends in the Indian beverages market and where it’s headed.

"The growth in the beverage market, both in-home and out-of-home consumption, is being driven by rising incomes as well as lifestyles changes. Packaged drinks in bottles or tetrapacks are boosted by the consumers’ desire to ensure hygiene and partly by convenience. The tipping point in consumption happens when these drinks become part of the lifestyle, as has happened for tea and coffee, and that is what most beverage companies aim to do, both by deepening penetration and availability and by way of their marketing campaigns." – Devangshu Dutta, Chief Executive, Third Eyesight

"The nutritional drinks are occupying far greater share of shelf now and the retail off-take ratio has also grown significantly even in non-pharma stores. It would be rewarding for the marketers, however, to expand the target segment definition to sustain the momentum. The current focus is primarily on young health conscious males." – Kamaljit Anand, MD, KiE Square Consulting Pvt Ltd

"The industry is seeing a transition as there is shift in the consumers’ preference for non-carbonated fruit beverages, thanks to obesity and other health related issues. There is huge potential and scope in the industry resulting in a lot of investment and growth at the point of purchase." – Harsh Nayak, Regional Director Posterscope Asia Pacific

"With the temperatures rising, the heat on branding and brand promotions has begun in the beverages category. We are seeing price wars, introduction of new SKUs and surely expect new variants. The shopper has multiple options to choose from, right from powdered, to concentrated, to non-fizz to fizz drinks and the list can go on. It would be interesting to see how the shopper behaves and how beverage players will woo the shoppers." – Bharat Virmani, Director, Saatchi & Saatchi X

(Sourced from Point of Purchase Online Network.)

Chasing profits, Future Group shut 40% of Food Bazaar stores in 2013

Vaishnavi Bala, Financial Express
Mumbai, April 5, 2014

Last year, Kishore Biyani’s Future Group closed about 40% of its food and grocery chain of Food Bazaar stores that were not performing well, even as it continues to undergo restructuring in neighbourhood stores, KB’s FairPrice and the home-furnishing chain, HomeTown, apart from Food Bazaar.

While Future Retail (FRL) shut down 18 supermarkets, it opened only one store last year. At the end of December, the company had 26 stores. With a cut in consumption spends resulting in slowing same store sales growth — at 3.3% in the three months to December — and rising cost of operations, FRL is revamping the food and grocery space now.

The company is currently renovating existing stores in terms of design and product mix by exiting slow-moving categories, going in for visual appeal. The format is also allocating space for categories that have higher margins, for example in-house bakery.

“With the company laying more emphasis on Big Bazaar Direct, there is a sort of reorganisation that is taking place. Big Bazaar Direct will have lower operational costs than running Food Bazaar. So they are clear to keep only those Food Bazaar stores that are operationally profitable,” says Prashant Agarwal, joint managing director, Wazir Advisors. Big Bazaar Direct is a franchisee-based model where franchisees personally visit consumers and take orders for products.

At the end of December, Future Retail had a total debt of R5,065 crore. The company raked in revenue of R2,200 crore, with a net profit of R20 crore in the December quarter. These numbers are not comparable. Future Retail did not respond to an email seeking details on its format.

Food and grocery retailing, which forms the largest chunk of organised retail, is a tough business to be in. Food and grocery typically has a gross margin of 10-15%, compared to 40-50% for apparels. “Supermarket chains are struggling to create a profitable model. At the store level, it can take 12-18 months to break-even but is taking much longer now,” says Devangshu Dutta, chief executive of retail consultancy Third Eyesight.

With many challenges at hand, retail baron Biyani has been equally ruthless with his other food and grocery chain — KB’s Fairprice — closing about 35 stores of the neighbourhood grocery store format last year. Most of these stores are from the Big Apple chain of food and grocery stores in New Delhi that the group acquired in 2012. The company closed these stores as they were not profitable and were located in more expensive locations, thereby increasing rental costs. At present, the company has a total of 175 Fairprice stores.

According to Fairprice CEO K Radhakrishnan, “The company is now repositioning itself for the lower-middle class segment. We are not keen on serving the same customer who also goes to a supermarket or a hypermarket. We want to go one level lower to the lower-lower middle class.”

“We are making some changes in our new stores that will have a self-service option, with better visual appeal and systematic stacking of products,” he said.

Apart from these two food and grocery formats, the company is also revamping the HomeTown format by streamlining its supply chain management and exiting categories like heavy furnishing. “The format will be in a position to be profitable at the Ebitda level next year," according to Future Group president (retail strategy) Rajan Malhotra. This comes after FRL managed to turnaround its eZone format last year that turned Ebitda positive in the April-June 2013 quarter.

The rejig in the formats follow a big-bang round of restructuring where Biyani sold Pantaloons to Aditya Birla Nuvo in 2012, divested a 53% stake in consumer finance company Future Capital Holdings and signed term sheets to exit both the insurance businesses of Future Generali India Life Insurance and Future Generali India General Insurance.

(Sourced from Financial Express .)

Gap and Myntra may partner for e-commerce biz in India

April 3, 2014

After starting delivery services to Indian patrons through its global site, American lifestyle clothing retailer Gap is now inching closer to them by partnering with ecommerce portal Myntra. As per reports, talks are on to finalize a deal with Myntra to launch its online store in India.

It may be recalled that the largest casual wear retailer in the US is also said to be in talks with Arvind Lifestyle Brands to open brick-and-mortar stores in the country.

According to a Third Eyesight survey, eight US department stores and brands are currently shipping their products to India. Experts feel that this strategy being adopted by most foreign brands and retailers indicate their strategy to test the market before making a formal entry.

If the Gap’s deal gets through, Myntra may handle the operations of San Francisco-based Gap’s online store. Both offline and online stores may be launched simultaneously early next year. After securing funding from PE investors recently, Myntra is racing ahead to be the leader of India’s ecommerce store amid tough competition from rivals like Flipkart and Jabong. Sources say the fashion e-tailer, which is projecting sales (gross merchandise value) of around Rs 2,000 crores this fiscal, may also partner with the Dutch clothing brand Scotch & Soda.

The e-tailer, currently at half the sales figure of Shoppers Stop and Lifestyle, aims to match their figures in another 15 months. While on one hand, the portal is looking at becoming India’s largest retailer, on the other, it would utilize the raised amount to increase mobile-led services, while focusing on expansion of in-house fashion brands. The company aims to reach a turnover of Rs 1,500 crores in fiscal 2015 and grow to Rs 10,000 crores in the next three to four years.

(Sourced from Fashionunited.)