admin
February 3, 2009
By Sangita Ghosh
Progressive Grocer
February 2009
Transformation in the most popular staple food in India is slow, but definitely on
Rice, which has long held the reputation of being the food of the masses, is witnessing a silent transformation in India. Things have come a long way from the “touch and feel” approach to purchasing rice by the weight to the modern era in which the busy urban Indian consumer is beginning to place his or her trust in branded and packaged rice.
This shift, though spearheaded by the premium varieties of rice, is gradually spreading to other varieties as well, the USP being ease of purchases and quality assurance. This trend is also fueling the emergence of other processed, semi-processed and semi-cooked varieties of the grain.
The harvesting area of rice in India is the largest in the world, with the staple being cultivated in all states of the country. According to a recent research by International Rice Research Institute (IRRI), Manila, the rice production and consumption pattern in the major rice producing and consuming counties are set to change drastically. By 2015, the global rice-eating population is projected to consume over 50 million tones more than it did in 2005. Significant increases are expected in South and South-East Asia and Sub-Saharan Africa. According to IRRL, rice consumption in South Asia is expected to rise by 14.89 million tonnes by 2015. Of this, over eight million tonnes will be in Bangladesh and over a million tonnes in Pakistan. Rice consumption in India is set to soar to 92 million tonnes in 2015.
More than 65 percent of the Indian population views rice as their staple food. The packaged foods incarnation of rice has invaded the Indian consumer’s kitchens in the form of bags, packets and cartons; now, rice can also be purchased in cooked, uncooked, packed, dehydrated and frozen forms. To meet these many special requirements of packaged foods, rice undergoes varying degrees of processing, resulting in variants such as regular-milled, parboiled, precooked brown and many others.
Although the majority of the varieties are still sold under the traditional retailing system, sales through modern trade are increasing rapidly. ‘Accessibility’ is where the presence and growth of modern retail has helped the branded rice segment.
Says Puneet Mahajan, vice president, Marketing & Advertising, Kohinoor foods, “Because of higher margins on loose rice, earlier, selling a branded pack was greatly driven by the inclination of the traditional shopkeeper, but with the presence of modern retail, a consumer has greater choice. Modern retail is definitely working as a catalyst for growth of the branded packaged rice in India.”
According to Technopak Advisors, about Rs. 10,000 crores (Rs. 100 billion) worth of branded rice is sold annually, which is miniscule really, considering that the total rice market in India is reckoned to be worth around Rs. 100,000 crore (Rs. 1,000 billion). Also, only 10 percent of the rice exported from India (around Rs. 3,500 crore to Rs. 4,000 crore) is branded. But, branded rice sales have taken off in recent years and have been growing at around 15 percent in the domestic market compared to five percent for unbranded rice.
The rice retail mechanism comprises branded, packed and loose and ‘open’ selling of the product. Until recently, branding was a feature only in the premium segment, with primarily the Basmati rice variant being sold packed. Today, there is growing evidence of branding in regular consumable varieties of rice along with the premium variants. As in all other food segments, India’s growing middle class has buoyed domestic demand. Additionally, rapid evolvement of modern food retail formats has also propelled the packaged food market, facilitating the availability, visibility and accessibility of branded products.
“It is the urban affluent and the upper middle class who are gradually warming to the concept of buying branded rice as of now,” opines San¬jay Sethi, VP, Food and Agriculture at Technopak Advisors.
Devangshu Dutta, chief executive of Third Eyesight believes that from the consumer’s point of view, the two big drivers for branded packaged rice are convenience and quality, though the shift towards branding is still happening, “since Indian consumers still prefer to see and hold loose grains before they decide to buy.”
“Rice brands were always around. But the market has witnessed a rapid increase of the branded rice sale in India recently because of modern retailing and rising brand consciousness of the Indian consumers. In an)’ product category, it is a brand that can penetrate the market more than anything else. Rice is no exception,” says Dhiresh Kukreti, AGM, marketing, Daawat, one of the major players in the branded Basmati rice market.
According to Sudha Pawa, promoter of Jagat Agro, the scope for branded rice is huge in India because a major percentage of the product is still sold in loose form. “Rising awareness and the changing house-hold dynamics of consumers in recent times have led them to be apprised of the benefits of packaged rice. And modern trade helps in reducing the retail price, which should give a boost to the packaged rice market,” he comments.
As viewed by Rajnish Ohri, director, Tilda Riceland Pvt. Ltd., the advent of modern trade and the hospitality business are opening new avenues for branded rice in India. “There has been a rapid shift from non-branded loose rice to branded packaged rice; the major catalyst in this transition has been modern trade. However, this could also be attributed to inorganic growth triggered off by retail expansion from 2004 to 2007.”
Therefore, the main consuming sectors of branded rice could be the middle and upper-middle income consumers, though Basmati is still a niche sub-category in India. “It is not just the allure of higher quality or hygiene; the small, convenient and attractive pack sizes also encourage consumers to make the shift,” says Arvinder Pal Singh, MD, Lal Qilla rice.
“At HyperCity, we retail all major brands – Kohinoor, Daawat and India Gate, among others. I would say that modern trade on an average contributes 40 to 50 percent of total packaged rice sales in India,” says Ashutosh Chakradeo, head, food & grocery, Hypercity Retail (India) Ltd.
There is plenty of room to boost branded rice consumption, and innovative marketing can help in pushing the envelope, says Viney Singh, MD of max Hypermarkets. “Packaged rice consumption can be enhanced by competitive pricing compared to the open market and communicating the consistent quality, value additions of the former with effective marketing strategies and regular promotional activities.”
| Rice Production on the rise | |
| Year | Production of Rice (Million Tonnes) |
| 2002 – 03 | 71.82 |
| 2003 – 04 | 88.53 |
| 2004 – 05 | 83.13 |
| 2005 – 06 | 91.79 |
| 2006 – 07 | 92.76 |
| Source: Ministry of Agriculture | |
According to Spencer’s Retail, in India 98 percent of the total rice trade is in the non-Basmati segment. There are huge governmental controls in terms of paddy and rice prices from time to time and until now there has been no effective control by major brands over the larger market. “The trade is mainly dominated by millers who are trying to build popular regional brands, leading to a trend that sees branded packaged rice operating in some niche segments, as of now,” says Samar Singh Sheikhawat, vice president – marketing, Spencer’s Retail Ltd
Organised milling and processed rice
In India, rice is primarily consumed in the form of polished, par boiled, parched and flaked rice while the demand for branded rice – particularly Basmati – is increasing both in domestic, as well as in export markets. Therefore, the market for processed rice has expanded, which has also led to the growth of organized milling. According to a recent study by Rabobank, in 2003, rice mills in organized sector had a growth rate of three percent in terms of volume and value of milled rice. As per the research this growth rate would be doubled to six percent in the period of 2005 – 2010 – 2015, both in terms of volume and value.
Packed to perfection
There are few staples that are found in such a wide range of packaged formats and so extensively in so many combinations as rice. In packaged forms of various brands, rice is processed in varying degrees and forms including the regular-milled, parboiled, precooked, quick or instant rice in various forms of broken rice, brown rice, glutinous-rice, instant rice, frozen rice, organic rice, paddy rice or rough rice, parboiled rice, red rice, white rice or milled rice. Although the most premium and ubiquitous packaged rice is the Indian Basmati, growing awareness and innovation are now driving a ‘certain set of consumers to try processed rice variants such as brown rice and organic rice.
According to Ohri from Tilda Riceland, the share of brown and organic rice in total category sales may be insignificant as of now but the industry is expecting to see a new line of informed consumers coming in. Singh at Lal Qilla is also hopeful about future prospects, saying, “The market for processed rice is growing, especially in the western countries and metropolitan cities of India. Therefore, we have already introduced brown Basmati and now working on the concept of organic Basmati.”
Viney Singh at Max Hypermarkets believes that organic and brown rice sales have already been able to carve a niche for themselves in the overall category. Technopak’s .Sethi confirms that brown rice is the cur¬rent talking point. “Organic rice is here to stay, as their health benefits are being endorsed more seriously. However, it is pesticide-free rice that that has the potential of being scaled up much more as a concept. Organic rice, though definitely healthier, still belongs to a niche market. Besides, pesticide-free rice appeals to a mass market, and not a niche market.”
Brown Rice: The whole kernel remains intact and is still surrounded by all layers of bran. After the husk is removed the remaining product is called brown rice. This is what lends brown rice its quality of being more nutritious than the conventional white rice.
Red Rice: Is made by parboiling the paddy before husking, leaving a part of the bran on the grain giving it a red colour. It is consumed in select parts of India, especially in Kerala and Goa.
Organic Rice: For rice to be certified ‘organic’, the field used must have gone for three years without use of pesticides, fertilizers, or any chemicals and the crop must be grown, harvested, stored and milled under organic conditions.
Power of the brand
The wide range of packaged rice brands is dominated by the Basmati rice but includes many other processed rice variants as well. Here’s what India’s major rice manufacturers and marketers are offering at retail:
Kohinoor Foods Ltd.
Satnam Overseas’ Kohinoor Foods Ltd. offers a wide range of
packet brands of Basmati, non-Basmati, instant and ready-to-eat
rice products. The brands are found in almost all the major
retail and wholesale chains including Metro Cash n Carry,
Reliance Fresh, Food Bazaar, Spencer’s, Vishal, Subhiksha,
HyperCity, More and Nilgiri’s.
The most coveted Basmati rice variants are Kohinoor Supreme, Kohinoor Brown & Kohinoor Organic. Kohinoor Supreme is the pure traditional Basmati rice present in the organised trade for two years. Kohinoor Brown is the healthier choice for Basmati rice. It is an un-milled rice, a kind of a whole grain and carries a mild nutty flavour. Kohinoor Organic is a natural Basmati rice grown under an organic farming pattern. It comes with IMO and Indian Organic certifications.
The company’s other famous brands are Trophy Gold, Trophy Royale, Charminar, 365, Nawab and Falcon. Trophy Gold is pure quality superior Basmati rice, while Trophy Royale is an extra-long Basmati grain variant. Charminar and Kohinoor 365 are two other sub-brands under the Basmati category, while Falcon is non-Basmati pulav rice with a long grain, and Nawab is also a non-Basmati long grain aromatic rice.
L T Overseas Ltd (Daawat)
LT Overseas Ltd. is one of the country’s leading processors
and exporters of packaged rice foods under the flagship brand
“Daawat”. The brand is among the top players in
the domestic branded Basmati Rice market in the Super Premium,
Premium and Economy categories. As per market estimates, Daawat
occupies a market share of about 25-30 percent. Under the
Daawat brand, the company offers Daawat Select, an authentic
Basmati rice and according to the company, its most prestigious
product. It is retailed in 1 kg, 2 kg, 5 kg, 10 kg and 20
kg packs.
Daawat premium Basmati rice is a traditional pearly white and deliciously aromatic special quality Basmati rice. Available in 5 kg, 10 and 20 kg jute bags. Tyvek paper packs and poly pouches, it is also offered in 500 gm, 1kg and 5 kg poly pouches, 2kg and 5 kg pet jars and a 5 kg festival pack.
Daawat popular Basmati rice is a high-quality, yet economical variety of Basmati rice. The packs are available in 5kg, 10 kg and 20 kg jute bags , 1 kg and 5 kg poly pouches and 5 kg pet jars.
Daawat Gold Basmati Rice is a royal long grain Basmati rice available in 1 kg, 5 kg and 10 kg packs, while Daawat Super, another fine Basmati rice, is offered in ½ kg, 1 kg, 5 kg, 10 kg, 20 kg and 25 kg packs.
Daawat Rozana is an everyday super-economical Basmati rice available in 1 k, 5 kg, 10kg and 25 kg packs.
Daawat Devaaya Basmati Rice is polished, graded with a distinctive pearly texture and has been one of the most popular brands with the masses for its affordability. It is available in 1kg, 5 kg and 20 kg packs, Heritage Basmati rice is yet another quality Basmati rice with slender white grains available in 5kg, 10kg and 20 kg jute bags and kg and 5 kg poly pouches.
Daawat Chef’s secretz Basmati Rice, one of the most powerful brands among the institutional customers, is available in almost all modern and traditional retail stores. It is available in 1/2kg and 1 kg packs.
Elte long grain rice is a non-Basmati polished rice variety, but a long grain rice like Heritage. Available in 5 kg, 10 kg and 20 kg jute bags and 1 kg and 5 kg poly pouches.
| Current sales and future potential for rice mills in the organized sector, 2003 – 2015 | ||||||||||
| Rice milling – modern rice mills | 2003 volume (m tonnes) | Average price(US$ /tonne) | 2003 value (US$m) | 2003 growth rate | 2010 volume (m tonnes) (projected) | 2010 value (US$m) (projected) | 2015 volume (m tonnes) (projected) | 2015 value (US$ m) (projected) | Growth rate 2005 – 10 (projected) | Growth rate 2010 – 15 (projected) |
| 20 | 350 | 7000 | 3% | 30.07 | 10,525.40 | 40.24 | 14,085.38 | 6% | 6% | |
| Source: Rabobank | ||||||||||
KRBL Ltd. (India Gate)
KRBL Ltd.’s rice variants are retailed under the ‘India Gate’
brand. Besides leading the domestic market in India, KRBL is
also one of the largest Basmati rice exporters and suppliers
to the Middle-east, Europe, USA, Canada and Africa.
Besides India Gate, the company’s flagship brand, KRBL also offers other rice brands such as Doon, Nurjahan, Aarthi, Royal, Zafrani, Sonale, Sostha, Train, Rice King, Joy, Football, Taj Mahal, Indian Farm, Sun Flower, Lion, Unity, People’s Princess, Sarina, Queen of Hearts and Bemisal. The company is now planning to promote the brand “Made in India” in domestic as well as overseas markets. The brands are found in 1 kg, 5 kg and 20 kg consumer packs on the retail shelves.
Lal Qilla
Lal Qilla Basmati rice, a renowned and traditional packet
rice brand in India, claims about 28 percent share in the
total sales of branded, packaged rice in India.
Lal Qilla Basmati rice is the flagship brand and is a pure, traditional Basmati retailed in 1 kg poly packs at Rs 130, 2 kg at Rs 255, 5 kg at Rs 640 and 20 kg poly packs at Rs 2,600.
Other brands are Golden Qilla, a premium quality traditional Basmati, and Qilla Excel – a Pusa 1121 Basmati. This product is available in 1 kg poly pack at Rs 125 and 5 kg at Rs 650.
Qilla and President are the Dehraduni Pusa Basmati rice variants. The products are sold at Rs 85, Rs 170, Rs 425 and Rs 1,600 packed in 1 kg, 2 kg and 5 kg poly packs, and 20 kg jute bags, respectively.
Shahjahan is a super quality Basmati available at Rs 95, Rs 190, Rs 465 and Rs 1,800 in 1 kg, 2 kg and 5 kg poly packs, and 20 kg fabric bags, respectively.
Golden Chhap Aged Basamati is the second-range aged traditional Basmati retailed in 1 kg and 5 kg poly packs at Rs 90 and Rs 470 respectively and in 20 kg jute bags for Rs 1,700, while Golden Chhap Daily Meal Basmati Rice is the third-range aged traditional Basmati rice. The products are available in 1 kg and 5 kg poly packs priced at Rs 80 and Rs 400 respectively, and in 20 kg jute bags at Rs 1,500.
Lal Qilla also offers No 517 Long grain Rice, a long grain non-Basmati Parmal rice variant priced at Rs 700, for 25-kg in a jute bag, and 507 Biryani Rice – a rice variant also known as Sharbati. It is available in 1 kg poly packs and 25 kg jute bags priced at Rs 55 and Rs 1,150 respectively.
Apart form these, the Lal Qilla portfolio also includes Dobar, Tibar and Mungra rice qualities under the brand ‘Golden’.
Shri Lalmahal
Shri Lalmahal provides a wide range of fine Basmati and non-Basmati
rice. The main brands are Shri LalMahal (the flagship label),
Pargol, Heena, Shanker Bhog .and Mughlai. Shri LalMahal is
premium quality Basmati rice sold in consumer packs of 1 kg,
2 kgs, 5 kgs, 10 kgs, 20 kgs and 30 kgs.
The company also has varieties of Organic Basmati, Brown Basrnati, Dehradooni Basmati, Supreme Quality Basmati and Parboiled Basmati.
The company’s non-Basmati rice includes varieties such as Indian Long Grain, Medium Grain, Short Grain in raw, White and Parboiled types, broken Long Grain Parboiled, broken Long Grain Silky, Medium Grain and Round or Short Grain rice.
Shrilalmahal Group has won the APEDA (Agriculture and Processed Food Export Development Authority) award for the last nine years consecutively.
Tilda Riceland
Tilda Rice comes from the Tilda Riceland Limited. Tilda is
currently retailed in all metros and major towns at chain
stores including Big Bazaar, Spencer’s, HyperCity, Sabka Bazaar,
Reliance Fresh and More. The types are found in Basmati, Long
Grain and Regional rice portfolio. There are eight sub-brands
that Tilda currently offers, including Tilda Pure Basmati,
a traditional Basmati priced at Rs 165 per kg; Tilda Resham,
an¬other pure variants of Basmati priced at Rs 150 per
kg; Tilda Wandaful Pusa Basmati, whose rice grains are Pusa
variety of the milled Basmati rice and are perfect for Biryanis
and Pulaos, available at Rs 140 per kg; Tilda Chamak Chhota
Basmati, a Basmati that lends an ideal texture to creamy milk
puddings, desserts and sweet dishes and is sold at Rs 55 per
kg; and Tilda Brown Basmati, the popular, brown Basmati priced
at Rs 150 per kg.
In the Long Grain category, the company offers Tilda Khush – long grain rice with very elongated and slender grains, an extremely pure non-Basmati variety and priced at Rs 90 per kg; and Tilda Parmal, also a long grain, flavoured non-Basmati milled Parimal variety available at Rs 55 per kg.
Tilda also offers a unique, regional variant called Tilda Sona Masoori, which is a non- Basmati Sona Masoori variety popular in South India and a staple diet for the region. This is the perfect rice for making tamarind & tomato rice for the south India pockets and is economically priced at Rs. 32 per kg.
Jagat Agro (Jagat)
The ‘Jagat’ brand was launched in 1992 by Jagat Agro Commodities
Pvt. Ltd. Besides being one of the major Basmati rice manufacturers
in India, Jagat is now planning to enter the exports market.
The manufacturer retails premium Basmati under the flagship
Grand ‘Jagat’ and offers a wide range of raw Basmati and parboiled
rice. In non-Basmati, Jagat Pearl Rice is retailed in the
packaged form. The Jagat brand can be found on the shelves
at Reliance Fresh,”Big Bazaar. More, Rice World, and
Rice Haat (the exclusive company showrooms).
Under Basmati, the company has Jagat Royal, a traditional
pure Basmati which is found in 1 kg pack priced at Rs 120
and a 5 kg pack priced at Rs 600. Jagat Malai Basmati Rice
is a blend of traditional Basmati 370 and 386 and is sourced
entirely from Punjab priced at Rs 120 for 1 kg and Rs 600
for 5-kg packs.
Jagat Khusbbu Basmati Rice is a blend of Taraori Basmati and
Basmati 1 and hails from Haryana. The product is sold in 1
kg packer priced at Rs 105 and 5 kg packet at Rs 525.
Jagat Manpasand Basmati Rice is a blend of Bas mati 1, Taraori
Basmati and Desi Basmati in an affordable price range and
priced at Rs 90 for 1 kg and Rs 450 for 5 kg of packs.
Jagat Sadabahar is a Dehradun variant and a blend of Basmati
1 and Desi Basmati; it is priced at Rs 85 for 1 kg and Rs
425 for 5 kg of packs.
Jagat Everyday Basmati Rice is the economy variant. It consists
of 40 percent full grain and 60 percent broken Basmati rice.
Super Everyday is sold at Rs.80 for 1 kg and Rs 400 for 5
kg packets and Everyday Basmati at Rs 60 for 1 kg and Rs 300
for 5-kg packs.
Jagat Special Sella Basmati rice is a blend of Taraori and
Basmati 1 rice parboiled at the paddy stage with a processing
of steaming and drying, while Jagat Pearl is a non-Basmati
Parimal Rice variant blended with less than two per cent broken
rice and priced between at Rs 40 for 1 kg and Rs 200 for 5-kg
packs.
REI Agro
REI Agro, one of the leading players in the Basmati rice category,
offers a wide range of brands such as Kasturi, Real Magic,
Mr. Miller, Hungama, Hansraj and AI-Tahaan in the segment.
The brands are segre-gated into Premium, Midrange and Economy
ranges.
Premium range labels include Kasauti and Real Magic; Midrange brands are Mr. Miller and Ikon, while the Economy range includes Hansraj and RainDrop.
Safal Rice
The Safal brand from Mother Dairy offers a range of Basmati
pack¬aged rice that is milled, processed, sorted cleaned
and packed.
Safal Gold Basmati Rice is the finest traditional long grain Indian Basmati rice. Safal Silver Basmati Rice is Indian long grain Basmati Rice, while Safal Premium Parmal Rice is a long grain Indian Parimal rice. (Safal is regarded as one of the first retailers to sell parmal rice in packaged format.)
Veetee Fine Foods
Veetee Fine Foods started operations in 1992. It offers Veetee
Gold Organic Basmati, which is grown under an organic farming
process and is certified by control union certifications.
It is available in 1 kg mono cartons and 20-25 kg paper bags.
Veetee Gold Brown Basmati Rice is unpolished Basmati rice, containing essential vitamins, minerals, protein and fibre and is available in 1 kg mono cartons and easy-to-use 5 kg jars.
Veetee Supreme Basmati Rice, the flagship brand of the Veetee range, is an elegant supreme quality Basmati, available in 1 kg poly packs and in 5 kg easy-to-use jars and paper bags.
Picric Select Basmati Rice is avail¬able in 1 and 5 kg poly packs, as well as 30 kg jute bags, as is Picric Everyday Rice, the budget brand in non-Basmati varieties, which is available in 1 kg and 5 kg multi layer packaging and in 30 kg jute bags.
Priya Foods
Priya Foods is a part of Ramoji Group offering some popular
varieties of rice in south India.
Priya offers Sona Masoori rice, the short grain rice that is popular and the staple food in South India, in 5 kg and 20 kg packs; and Idli Rice, a superior quality rice primarily used to prepare soft and fluffy idlis, dosas and paniyarams, the popular dishes in South India. It is also used to make traditional Kerala food items such as Puttu, Appam, Idiyappam and Pathiri.
Also among the smaller, regional brands is Aeroplane, a label from Amir Chand Jagdish Kumar (Exports) Ltd. It offers several variants under numerous sub-brands: Aeroplane Regular Basmati, Aeroplane Super Basmati, Special Dubar Basmati, Aeroplane Priority Basmati, Aeroplane Wah!, Aeroplane La Taste, Aeroplane 1121 Basmati, World Cup, Palm Tree and Aeroplane Nazia Raw Rice.
| India’s rice bowl | ||
| Brand | Pack sizes | MRP (in Rs) |
|---|---|---|
| Super Kohinoor Organic rice | 1 kg box | 145 |
| Super Kohinoor Brown rice | 1 kg jute bag | 140 |
| Super Silky Kohinoor | 1 kg pack | 140 |
| Super Kohinoor | 1, 5 kg | 138, 680 |
| Trophy Royale | 1, 5 kg | 111, 545 |
| Trophy Gold | 1, 5 kg | 95, 465 |
| Charminar | 1, 5 kg | 93, 455 |
| Aeroplane Raw La-Taste | 1 kg X 20, 5kg X 4 = 20 kg | 117, 585 |
| Aeroplane Raw Super Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 111, 555 |
| World Cup Raw Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 103, 515 |
| Palm Tree Raw Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 90. 450 |
| Lal Qilla | 1, 2, 5 kg | 140, 275, 690 |
| Qilla Excel | 1, 5 kg | 125, 620 |
| Golden Chhap Aged Basmati | 1, 5 kg | 105, 520 |
| India Gate Classic Basmati | 1, 5 kg | 142, 705 |
| India Gate Doon Premium | 1, 5 kg | 139, 690 |
| Indian Gate Super Basmati | 1, 5 kg | 124, 615 |
| Noorjahan Basmati | 1, 5 kg | 94, 465 |
| Bemisal Basmati | 1, 5 kg | 99, 495 |
| India Gate Basmati Tibar | 1, 5 kg | 102, 505 |
| India gate Basmati Dubar | 1, 5 kg | 81, 400 |
| India Gate Mongra | 10 kg | 416 |
| Tilda Resham | 1, 5 kg | 140, 700 |
| Tilda Wandaful | 1, 5 kg | 130, 650 |
| Tilda Khush | 1, 5 kg | 80, 400 |
| Daawat Brown Rice | 20 X 500 gm | 48 |
| Daawat Brown Rice | 10 X 1 kg | 93 |
| Daawat Select Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 152, 752 |
| Daawat Gold Biryani | 1 kg X 20, 5kg X 4 = 20 kg | 136, 672 |
| Daawat Super Basmati | 40 X 1/2 kg , 20 X 1 kg, 4 X 5 kg | 67, 133, 656 |
| Daawat Rozana Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 78, 384 |
| Daawat Rozana 90 Super Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 62, 304 |
| Daawat Devaaya Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 101, 496 |
| Heritage Basmati | 1 kg X 20, 5kg X 4 = 20 kg | 109, 536 |
| Neesa Regular | 1, 5 kg | 99, 495 |
| Indian Star | 1, 5 kg | 155, 775 |
Ready-to-eat rice
Ready-to-eat rice meals are currently available as self-contained,
individual lightweight packs of various rice preparations.
There are several bands in India with ready-to-eat rice meals.
In the ready-to-eat segment Kohinoor offers a range of rice
dishes in traditional tastes, including Steamed Basmati Rice,
Madras Lemon Rice Biryani, Chinese Fried Rice, Tomato &
Chili Pulao, Brown Basmati Rice, Mushroom Cheese Pulao, Paneer
Tikka Biryani, Kashmiri Rajma with Steamed Basmati Rice, Punjabi
Kadhi Pakora with Steamed Basmati Rice, Pindi Chana Masala
with Zeera Rice, Yellow Dal with Peas Pulao, Mutter Paneer
with Steamed Basmati Rice, Dal Palak with Zeera Rice, Paneer
Makhani with Steamed Basmati Rice, Mughlai Kofta Curry with
Peas Pulao and Madurai Lemon Rice with Sambhar.
The ITC brand ‘Kitchens of India’ also has a range of ready-to-eat
rice preparations in a wide range of vegetarian and non-vegetarian
forms. These include Noormahal Biryani, Bohri Biryani, Yakhni
Pulao, and Hyderabadi Mutton Biryani.
Kitchens of India also offer Rajma Masala with Basmati Rice
and Yellow Dal Tadka with Basmati Rice meal kits.
MTR Foods Limited is one of the top five processed food manufacturers
in India and offers a range of ready-to-eat rice-based combo
meals. The varieties are Bisibele Bhath, Rajma Chawal, Diet
Delite Rasam Rice, Jeera Rice, Sambar Rice, Lemon Rice, Tamarind
Rice, Masala Rice and Tomato Rice.
Ready-to-eat foods from Veetee Foods are popular especially
in south India, but also available across India. The products
include Brown Bas¬mati Rice, a whole grain ready-to-eat
brown Basmati in a 250 gm packet; Garlic Herb Brown Basmati
Rice, a whole grain Basmati cooked with natural herbs and
garlic and marketed in 250 gm pack; and Brown Basmati Biryani,
a cooked combination of whole grain brown Basmati and diced
vegetables offered in a 250 gm pack.
Tilda Riceland is also to shortly enter the ready-to-eat segment.
Private labels
Given its voluminous consumption, rice is a category whose
numbers make sense for food retailers to participate in. Therefore,
in recent times, almost all leading grocery chains have rolled
out private labels in rice. Some of these are Max Economy,
Max premium, More private label, Shoprite private label, Spencer’s
Smart Choice Regular, Spencer’s Smart Choice Premium Nilgiri’s,
Food Bazaar, Metro, Heritage, V Fresh from Vishal Mega Mart,
Reliance Select etc.
Spencer’s, among the more aggressive private label proponents,
offers Spencer’s Trophy, Nature’s Bounty and Smart Choice.
“We have private labels in both non-Basmati and Bas¬mati
rice segments, under Nature’s Bounty and Smart Choice. While
almost 100 percent of non-Basmati rice in our, stores is in
private labels, it is only 20 percent of Basmati rice that
is sold through private labels in our stores,” says Sheikhawat.
Private labels at the Aditya Birla promoted More chain include
More and More Select.
Spar’s private labels in rice are ‘Spar Select’, ‘Spar Value’
and ‘Best Price’, which offer Basmati rice, boiled rice as
well as raw rice varieties. The share of stock is 80:20 for
private labels to the brands in Spar.
HyperCity sells packaged rice under the in-store label “Hypercity”
in Basmati, non-Basmati and Brown rice categories.
Strategies to stimulate
According to Sheikhawat at Spencer’s, all top branded Basmati manufacturers are putting up strong distribution networks and focusing intensely on the domestic market. “Hence, stock availability even in small quantities is not an issue now. However, we do face challenges in terms of procurement from across the country when it comes to private label Basmati as the source is only North India.”
For the brands, price is one of the important indexes for product placement, segmentation and getting initial market presence. Product superiority, brand authority and merchandising dominance are some of the critical pointers for Indian market, say analysts. According to experts, branded manufacturers have so far not communicated their products’ USP’s over unbranded products (both in the regular as well as the “value-added” categories) well, resulting in slow growth of the brand¬ed market as a whole.
Says Dutta from Third Eyesight, “Branding needs sustained and significant marketing support, as well as a clear distinctive positioning, which is more robust in the branded wheat flour market than in rice. From the very beginning rice manufacturers have focused more on export and international consumers, than on the domestic market.”
According to him, packaged flour takes two intermediate steps away from the consumer’s chores by not just providing an assurance of quality of the grain but also the step of grinding it into flour, so the benefit perceived by the consumer is significantly higher than in the case of rice. For rice, premium products such as brown rice and organic rice are still driven by occasional purchases, which need to be augmented by promotions on recipes, benefits and positioning as wholesome meals. “There is still lackluster demand for brown and organic rice. Though Indians are becoming health conscious, the benefits of these varieties are yet to be communicated,” agrees Pawa at Jagat Agro.
Technopak’s Sethi from Technopak opines, “Brown rice is the latest rage in India, and manufacturers should exploit the ‘word of mouth’ publicity. Other rice-based foods and formats – rice cakes, rice snacks, puffed and flattened rice, instant rice and food service outlets focused on rice – can also boost the trend.”
Some retailers point out that the benefits of brown rice and organic rice also need to be promoted by doctors and health clinics. Some companies are also reportedly planning to come up with Health Management rice, which is basically low GI (Glycemic Index) rice meant for diabetics and weight watchers. “The next innovation that can revolutionise the segment is the introduction of genetically modified Golden rice, which supplements beta-carotene, a precursor of pro-vitamin A in the edible parts of rice,” says Sheikhawat.
“Retailers can share the responsibility of promoting a new brand or variety by’ making the customers aware of the benefits and through sampling. Regional or local varieties of rice also need promotion; this could boost overall consumption of branded rice,” says HyperCity’s Ashutosh Chakradeo. “However, proper category management is required to introduce and promote different varieties and brands in rice so that the consumer is focused and not overwhelmed or confused by the plethora of brands,” says Ohri.
Besides product placement, brand positioning and product innovation, one crucial thing that the brands point to is innovation in pack sizes. According to Singh from Lal Qilla rice, “Small and handy packets of the rice for daily consumption en¬courage consumers to go the branded route.”
Clearly, there is also a vast opportunity for private label development in this category. Most private labels are currently positioned at the entry level of any category, thereby providing the retailer more flexibility in pricing, better control over quality and higher margins. “The
HyperCity in-store brand is positioned at the mid level and provides consistent quality and value pricing. As a brand it is the highest seller in the staples category and contributes to more than 40 percent of the category sales,” says Chakradeo.
While currently private labels are not a great threat to the established brands, things may change over the next couple of years, as Ohri from Tilda Riceland states. According to him, “Ultimately it is the quality, experience and the brand promise, which will playa crucial role. Whosoever is able to deliver the elements will be able to establish itself as a long term player.”
Lal Qilla’s Singh however, believes that brand positioning for private labels will be difficult and a time consuming process.
“Private labeling is like a commodity business, in which no doubt the volumes are big but the room for brand positioning is nil,” he says.
Jagat Agro’s Pawa says that while as of now private labels are only sold in the retailer’s stores and brands benefit from a wider distribution net¬work, in an evolving scenario brand positioning has to be strengthened to be a sustainable player.
Commenting on the challenges, Singh from Max Hypermarkets comments that a fair amount of in-vestment and time is needed to build a brand with regard to spending on advertising, promotional activities and space allocation. “Brand placement is quite crucial, as a retailer has to be very clear where he has to position and pitch against the manufacturer’s brand. The brand placement, pricing and quality carry significant weight age,” he says.
On positioning, Sheikhawat says, “We are thinking of various routes to position rice, based on regional requirements and use. The challenge really has been to get the best quality at the optimum price because even brand loyalty has been shifting from high priced brands due to affordability factor.”
Regardless of which brands or labels make it to the top draw, there is little doubt that branding will propel branded rice consumption in India. “Family packs – created around eating habits of different regions – will have to be promoted aggressively. Focus on segmental offering of products like for regular use, specific or occasional use should be taken care of. There is a huge promise from health-conscious consumers which can further drive consumption towards packaged rice,” Sheikhawat suggests.
“We expect new brands to emerge out of creation of new efficiencies, which will go on to dominate or capture a big share of the market in the next five years,” predicts Sethi from Technopak. Kohinoor Food’s Mahajan confirms that the shift may be slow, but is clearly happening. “As is the case for categories like spices, salt, sugar, and even household cleaners, we see a shift from local to branded; we foresee a similar pattern for the branded packaged rice as well.”
admin
January 14, 2009
Wednesday 14 January 2009 11:42
The exciting developments in India’s dynamic, consumer-led retail sector and the export opportunities being created for British companies are the subjects of a conference to be staged by UK Trade & Investment’s London International Trade Team on 27 January.
Far from discouraging internationalisation, the economic
downturn provides an incentive for UK firms to seek out and
evaluate potential for export development, positioning themselves
to take full advantage when growth returns.
The half-day conference will provide retailers and representatives
of associated service industries – including logistics, infrastructure,
and supply chain management – with an overview of the changing
Indian market, focusing on its rapidly expanding consumer
class. With India’s economy growing at a rate second only
to China (GDP rose 9.1% in 2007/08), huge demand for goods,
services and investment is being created.
The event marks the launch of a report, "The Retail Opportunity in India 2009", commissioned by UKTI London from retail consultancy Third Eyesight. The report examines key factors such as India’s growing middle class, the changing face of the retail sector, supply chain considerations, Indian tax law and FDI regulations, cultural nuances to be taken into account when doing business, and more.
Unlike many other markets, India’s population profile will remain young for a long time. The total under-25 population – about 560 million in 2005 – is expected to be around 600 million in 2025, a highly significant population of earning and spending potential customers. So, any company looking at addressing the Indian market must view it as a long-term opportunity, rather than a short-term fix.
Devangshu Dutta, CEO of Third Eyesight, and one of the speakers at the seminar, says: "The growth of the consumer market in India is not a blip, but a sustained (and sustainable) process, because the consumption base also comprises a large number of people whose incomes and needs are growing.
Other expert contributors will include:
Laxmi Chaudry will speak about the impact of culture on business and how awareness of culturally sensitive issues can enhance your ability to do business effectively in the Indian market. Other contributions will include an economic and political overview of India; the recipe for effective partnerships between India companies and UK retailers; and a presentation on supply chain management.
Overall, the event is ideal for directors of major UK retailers
currently exporting to India or planning to export there;
and retail companies and logistics enterprises wanting to
learn more about opportunities in the rapidly expanding Indian
market.
admin
December 30, 2008
By Aanand Pandey & Pradipta Mukherjee
From the Business Standard Strategist
New Delhi December 30, 2008
Emami’s old-school promoters were nimble enough to acquire Zandu. They need many more manoeuvres to become a major FMCG player.
Radhey Shyam Goenka, 61, the joint chairman of the Emami group, loves to take an occasional dig at the group chairman and his friend of over 40 years, Radhey Shyam Agarwal. Like most old-school entrepreneurs, Agarwal has a habit of scribbling down numbers on a piece of paper during meetings. When Goenka and Agarwal sit with the next-generation directors from the two families, at times Goenka snatches the scribbled note from Agarwal’s hand, gives it to one of the directors and asks him to check the final figure. Surprisingly, every time Goenka has done this, Agarwal’s final figure has turned out to be incorrect. “Our children laugh at this,” says Agarwal.
Goenka is the cool one, known for his meticulous planning, while Agarwal is the galloping warhorse, whose business instincts appear incredible at times, but, according to Goenka, “turn out, amazingly, to be prophetic”. Sure enough, most of the promoters’ decisions bear the stamp of Goenka’s diligence and Agrawal’s foresight.
They characterised their first life-altering decision. In 1974, the duo left cushy jobs at one of the Birla companies to sell “beauty and cosmetic products priced 30 per cent higher than the competing brands, piled on the back of a hand-pulled rikshaw”, according to Agarwal’s younger son and Emami’s executive-director, Harsh Vardhan. One could hardly predict that the duo will take the business, started with a seed capital of Rs 20,000, to where it is today: Rs 1,700 crore flowing in from fast-moving consumer goods, newsprint, edible oil, real estate and health care. It again came into play four years later when they took over a sick unit named Himani Ltd and pressed on to make it work for eight years.
In 1984, Himani gave them Boroplus, a blockbuster product that rejuvenated their FMCG business.
As Emami acquired Zandu Pharmaceutical Works recently — the culmination of a six-month battle — it fought with precision and planning. The mark of foresight, however, is yet to be seen.
To seal a deal
To acquire an Indian listed company, one needs a Teflon exterior, which would prevent things from sticking. Mumbai-based Rs 140-crore Zandu is a 100-year-old company that manufactures more than 300 herbal and ayurvedic products. A zero-debt company with a strong brand name, Zandu has always been an attractive target for both Indian as well as multinational FMCG companies.
In May this year, when Emami picked up 23.6 per cent stake in an off-market deal from the Vaidyas, one of the two promoter groups of Zandu, it looked a smart, albeit expensive, move. According to reports, Emami paid Rs 130 crore to the Vaidyas at an offer price of Rs 6,900 a share (including Rs 100 a share as non-compete fee).
Immediately after Emami’s announcement of the mandatory open offer of 20 per cent to Zandu shareholders at Rs 7,135 a share, Zandu sought to stave off what it saw as a hostile takeover bid by taking recourse to a popular and effective tactic known in M&A parlance as the Shark Repellent manoeuvre. It sent a notice to Bombay Stock Exchange saying the company intended to issue preference shares to the company’s promoters and directors. This was aimed at fortifying Zandu’s second promoter group, the Parikh family. Emami got wind of the note and sent a legal notice to Zandu the next day, which forced the Parikhs to withdraw the plan. “The independent directors on the Zandu board were kind enough to understand our point of view,” says Harsh Agarwal.
Meanwhile, Zandu’s shares at BSE stayed around Rs 10,000 a share in anticipation that Emami will raise the offer price. Emami’s promoters remained unfazed. “We think we have done a fair evaluation keeping in mind the industry standards,” said a press statement issued shortly afterwards. Meanwhile, the stock market soared in July, when Emami’s open offer opened.
By that time, the expected had happened. The Parikhs, anticipating Emami’s next step, had raised their stake in Zandu from 18 per cent to 22 per cent. They owned another 20 per cent, said industry sources, through family members and associates. At the same time, the Parikhs had gone about knocking on all possible doors — Securities & Exchange Board of India, the Company Law Board (CLB) and the Bombay High Court — but by the end of August, it was clear that as far as the Parikhs were concerned, Zandu was a lost cause.
By mid-September, Zandu’s shares had fallen below
Rs 16,700 and that was when Emami doubled its offer to Rs
15,000 a share. Zandu ran out of options when CLB asked the
two companies to try and settle out of court.
On October 3, Emami revised the offer to Rs 16,500 a share
and, according to sources, this was when some of the Parikh
family members evinced interest in quitting the company, saying
they would not get a better price. Trade reports were released
soon after, stating that Emami had entered into a share-purchase
agreement with Zandu. Looking at the price that Emami paid
for the deal — Rs 800 crore for a Rs-160 crore entity
— it appears that diligence may have given way to adventure.
Experts say the deal holds lessons for future buyers. KPMG’s corporate finance director, Nandini Chopra, who also heads the firm’s valuations practice, says: “Acquirers in future would possibly seek to be more in control of their pursuits by ensuring that they are negotiating, from the outset, with majority blocks of shareholders.” This would help mitigate the risk of another shareholder block perceiving it as a potentially hostile situation. “This will also prevent the target company’s remaining shareholders from putting up bid defence strategies, which would ultimately increase the cost of acquisition, or, worse still, thwart it,” she adds.
Emami’s persistence with the deal says something about what it expects from the acquired company. “At almost 5.5 times the sales multiple and almost 30 times EBIDTA (earning before interest, depreciation, tax and amortization) multiple, Emami is expecting stupendous growth from the Zandu franchise,” says C Ravishankar, manager-strategic and commercial intelligence, transaction services, KPMG India.
Speaking to the strategist after the acquisition, R S Agarwal indicated that he expected Emami’s FMCG business to touch Rs 1,100 crore by 2009-10. Harsh Agarwal, who has been overseeing the post-acquisition brand consolidation, sounded even more optimistic. “We expect our sales and profitability to grow by two to three times in the next couple of years,” he said.
According to Associated Chambers of Commerce and Industry,
FMCG sales have not been affected by the current slowdown
and the sector is expected to touch $25 billion by the end
of 2008, as against $20 billion in 2007.
A positive industry outlook and Emami’s compounded annual
growth rate at an impressive 25 per cent for the last three
years, the anticipation is soaring in the region of 34-35
per cent. However, the steep takeover price and historically
low growth of the Zandu franchise (10 per cent CAGR) indicate
that there is more to Emami’s enthusiasm than meets
the eye.
Analysts say the intent is not only to unleash the untapped
potential of the strong Zandu brand — deploying a mix
of marketing, distribution and operational strategies —
but also to prepare the ground for Emami to play a bigger
role in the consumer goods market. Earlier this month, R S
Agarwal and R S Goenka issued a statement saying that the
company plans to position itself as a “food products
and personal care major”. Food products and personal
care comprise the biggest slices of India’s Rs 96,000
crore FMCG pie, accounting for 43 per cent and 22 per cent,
respectively.
Marked markets
Emami has not yet announced the final product strategy but careful analysis seen in the light of recent announcements shows that its product portfolio is changing in terms of the market size of each product category. Before Zandu came into the fold, Emami was the market leader in two niche categories: Boroplus cream, with 70 per cent, led the Rs 190 crore antiseptic creams market, and Navratna, with over 50 per cent, headed the Rs 397 crore cooling oil category. “Now, with the Rs 120 crore Zandu Balm in its fold,” says Harsh Agarwal, “Emami leads the ‘rubificient’ (local pain ointment) category with a combined market share of more than 25 per cent… Zandu balm is the market leader and Menthoplus the strong third player, so both can continue without competing with each other. They can play complementary roles.”
Similarly, the Rs 170 crore Cyawanprash category, dominated by Dabur Chyawanprash with 61 per cent share of the market, will see a bigger Emami footprint paved with Zandu Special, Sona Chandi and Kesari Jeevan. ayurvedic medicine, antiseptic creams Harsh Agrawal sees Emami’s consolidation in the classical ayurvedic medicine category as the biggest advantage of the deal. Indian over-the-counter herbal and ayurvedic medicine segment is estimated at Rs 7,500 crore. Dabur leads this segment with 10 per cent market share.
Emami and Zandu’s combined product portfolio does not give Emami enough to stand up to the might of the Rs 2,360 crore Dabur, Rs 2,290 crore Marico or Rs 1,267 crore Glaxo Smithkline Consumer Healthcare India — much bigger FMCG players. Experts say Emami will take its first big step to becoming a serious player in the FMCG segment when it comes up with defined product architecture. AT Kearney India principal Debashish Mukherjee says an evolved product architecture, displaying a much bigger scope than its present “ayurvedic proxy” positioning will be the first critical step if Emami aspires to be an FMCG major. “Merely changing or rearranging the existing product categories will not put Emami into the big league,” he adds.
Mukherjee adds that unless herbal or ayurvedic consumer
goods players hit mass retailing, they can’t hope to
challenge serious FMCG players such as Hindustan Uniliver
or Proctor and Gamble. Smaller players, such as, Emami will
have to think of ways to gain access to product categories
they can’t reach. Product improvisation, customisation,
even price variations can help. Emami’s Chyawanprash
product range, for instance, could see price variations with
the inclusion of Kesari Jeevan, which is in the premium consumer
segment. Similarly, the rubificient range can see price differentiations.
The market is in the villages
Categories such as health supplements and cooling oil have a huge untapped potential in the urban and rural markets. The Rs 600 crore health supplement market has a surprisingly low penetration level of 0.2 per cent in rural and 1 per cent in the urban markets. Similarly, cooling oil has a huge potential in the rural market. With the increased media reach, Emami has a big market waiting to be explored, and it can only be reached through a wide and efficient distribution network.
The cooling oil category has few rivals, all of them local players (Dabur Super Thanda, Himange, Himtaj). Emami’s substantial advertising and promotions spending — more than 20 per cent of sales every year, much higher than the FMCG industry average of 11-12 per cent — can provide the beachhead.
Emami has a strong sales network of 2,800 distributors with direct supply to 400,000 retail outlets and a product reach of 2.6 million outlets across India. Urban distribution channels cover modern format outlets and retail stores and rural sales channels include Emami mobile traders and Emami small village shops.
Emami has also tied up with ITC e-Chaupals, Indian Oil Corporation petrol pumps and the India Post network. Moreover, it has five sales channels divided into rural and urban areas. Unlike Zandu’s distribution channels, which were strong in the West and South, Emami’s network is evenly spread out in all regions of the country.
Third Eyesight chief executive Devangshu Dutta says growth in the smaller towns and rural markets can still be driven by penetration and improved availability levels of stock-keeping units. There are still vast swathes of consumers in India whose consumption of packaged skin and personal care products is negligible. The main causes of optimism about continued growth would stem from this aspect of untapped markets and unfulfilled demand.”
An AC Nielsen report for April-September 2008 showed that value and volume growth across a range of products, such as, skin creams, lotions and hair oils, was much higher in the rural markets than in urban markets.
admin
December 7, 2008
By Sapna Dogra Singh
Business Standard
New Delhi December 07, 2008
Lack of an apex body, along with the absence of time-bound deadlines, are being cited as reasons behind the poor implementation of the scheme for integrated textile parks (SITPs), which is the textile ministry’s flagship scheme, according to industry experts.
The objective of this scheme launched in 2005 was to create jobs and world-class infrastructure. However, so far, out of the 40 sanctioned parks, just four have become operational.
"It is a grand plan but actual execution is very slow," said Devangshu Dutta, chief executive officer of Third Eyesight, a consultancy firm which has worked with some of India’s leading textile companies. There are multiple stakeholders, including the central government, state governments, district authorities and several companies. "Bringing them together is a difficult job," said Dutta.
Under the SITPs, the government provides up to 40 per cent of the cost of setting up a textile park with a ceiling of Rs 40 crore. Till now the ministry has contributed Rs 450 crore. The industry has pitched in with nearly double this amount. The combined investment is expected to touch Rs 2,000 crore by 2009-end.
The Parliamentary Standing Committee on labour has also made similar observations in September. While ruing the slow pace in the progress of SITPs, it has recommended that a time-bound action plan should be drawn up to ensure that the sanctioned textile parks become fully operational as any delay in this regard may not only involve the cost overrun but could also result in weaning the entrepreneurs away from scheme.
According to a senior textile ministry official, the reasons for delays are local issues which involve land deals, pollution and environment clearances in case of processing parks and sometimes there’s conflict amongst the entrepreneurs, which could result in the cancellation of the park.
The four parks, which have become operational are — Palladam HiTech Weaving Park at Palladam in Tamil Nadu, Brandix India Apparel City at Vishakhapatnam in Andhra Pradesh, Pochampally Handloom Park at Pochampally in Andhra Pradesh and Gujarat Eco Textile Park, Surat, Gujarat.
Most of the parks are progressing smoothly and by year end about five to seven more parks would become operational, informed the ministry official and added that the progress has also slowed down now because of the financial constraints that people are facing in view of the current economic slowdown, added the official.
Incidentally, an inter-ministerial Project Approval Committee
(PAC) for SITPs is meeting in the third week of December to
review the progress of the textile parks and also to take
a call on cancellation of some of the parks. At least three
projects are likely to be cancelled and be given to other
interested parties, said the official.
The committee meets on a quarterly basis.
admin
December 6, 2008
By Zainab Morbiwala
Images Retail
December 2008
THE HISTORY OF CATALOGUE RETAILING IS INTERESTING. WHAT BEGAN OUT OF NECESSITY, SOON DEVELOPED INTO A CHANNEL OFFERING CONVENIENCE OF SHOPPING FROM HOME. WITH THE TREND OF CATALOGUE RETAILING YET TO GAIN MOMENTUM IN INDIA, MOST RETAILERS – STILL FOCUSSED ON THE BRICK AND MORTAR FORMAT- ARE YET TO FULLY EXPLOIT THE TRUE POTENTIAL OF THE MEDIUM.
THE ROOTS
As the name suggests, Catalogue retailing is a non-store retail
format where the retail offering is communicated through a
catalogue to the consumers. Mail-order catalogues debuted
in 1856 when Orvis began selling fishing gear in USA. In 1872,
Aaron Montgomery Ward made an arrangement with the National
Grange, America’s largest farming organisation, to offer 163
items of merchandise under ‘The Original Wholesale Grange
Supply House’. Ward’s catalogue was followed by one published
by Richard Waren Sears, who started selling watches in 1886
through mail-order business. Elaborates Devangshu
Dutta, CEO, Third Eyesight, “Catalogue retailing evolved
in the west to meet the needs of far-flung towns and rural
settlements since regular retail stores could not be established
or profitably run in each area.
Since then, catalogues and other forms of non-store retailing including television and the internet marketing have evolved in different markets.
Adds Dutta, “Very often, retailers use catalogues as a complementary channel to store retailing. UK’s Argos, now also in India, evolved its unique catalogue-stores, that turned the model upside-down, making physical stores a walk-in opportunity for the much bigger catalogue from which customers could place orders.” Sharing the success of Argos UK, Andrew Levermore, CEO, HyperCity, says, “Argos UK has annual sales of close to 2.6 billion Pounds annually and the catalogue is present in over 70 per cent of UK homes.”
INDIA STORY
It has been only about 10 months since the launch of Argos
in Mumbai. HyperCity Retail India Ltd, along with Shopper’s
Stop Ltd, entered into a franchise agreement with Home Retail
Group, UK, to offer a unique multi-channel shopping experience
under HyperCity Argos. Currently operational only in Mumbai,
the concept will be introduced across India when HyperCity
debuts in other parts of the country. Talking about the HyperCity
Argos operation, Levermore says, “For us it is the retailing
of products through the medium of a book with more than 300
pages, listing over 4,000 products. Catalogue retailing is
‘not’ a promotional leaflet of a few pages that is inserted
in the newspaper. It still requires the customer to visit
a physical store to purchase the product.” Apart from
HyperCity Argos, there is Lovy Khoslfs Elvy, which offers
high-end home decor and interior products through a catalogue.
An offshoot of export major, Stalwart Creations, Elvy introduced
a mail-order catalogue in India three years ago. While HyperCity
Argos’ catalogue is currently restricted to the customers
in Mumbai, Elvy facilitates customers across India to place
orders through their catalogue. Kh9sla says, “Catalogue
retailing in India did not really exist when Elvy started
out. It was very demanding’ and a very challenging task. We
had to be thorough with our processes to meet the high expectations
of our customers. “Prior to Argos and Elvy, Otto Burlington
was operational in the Indian market (about 15-17 years ago)
with Catalogue Burlington. Despite being a pioneer in India
and popular in UK, it was phased out very soon. Explaining
the reasons for Burlington’s failure, Khosla says, “The
three infrastructural properties required to support catalogue
retailing – effective telecommunication, easy mode of payments
(e.g. credit cards) and a structured distribution set-up –
were not in place.” Dutta observes, “Catalogue management
sciences are probably not being applied effectively. The shopping
dynamics and the operational success factors differ in home
shopping and physical stores.”
PHYSICAL PRESENCE
It is interesting to observe that both HyperCity Argos and
Elvy have their standalone stores as well. Shares Levermore,
“Having store presence cements the brand in the consumer’s
eye and allows the customer to feel the product. When starting
out, store presence ensures credibility and safety in the
consumer mind.” The catalogue stores of HyperCity Argos
offer customers the facility to browse through the catalogue
and view the products before making the purchase. High involvement
and high investment products across categories such as furniture,
technology, jewellery etc. are available on display. Customers
also get to see other products at the special viewing and
demonstration areas in the store. Sharing whether catalogue
retailing can survive without a physical store, Khosla feels,
“Yes, it possibly can. However, it might take longer
to penetrate the larger database present in the country. For
us, a combination of both works.” Commenting on the catalogue
design, Levermore says, “There is much science around
this and can be learned only with years of experimentation.”
As for Elvy, Khosla has made sure to bring out a catalogue
based on international standards. Both Elvy and HyperCity
Argos launch their catalogues every six months.
INTERNATIONAL PERSPECTIVE
According to Khosla, the resistance to catalogue shopping
is much higher in India than in any other country. “We
need to work much harder to build a comfort level for our
customers.” Adds Levermore, “For the Indian consumer,
going out for shopping is still very much a leisure activity
as there is little competition for leisure in the form of
sports clubs or parks. In the West, shopping is often seen
as a necessary but somewhat painful experience. This will
evolve to be the case in India, but only eventually.”
CHALLENGES
According to Dutta, the primary challenge to successful
catalogue retailing is logistics. “Merchandising, space
management, frequency of mailings, offers and promotions need
to be managed differently. But possibly the biggest challenge
is logistics. Most modern retailers in India are still establishing
their logistics framework around the country; and their entry
into catalogue retail would take the complexity to a whole
new level. Not to underestimate the issue of handling returns.
In fashion merchandise, for instance, catalogues can run a
return rate of as high as 40 per cent in some products,”
he points out. Pumendu Kumar, associate VP, Technopak
Advisors, says, “Any kind of non-store retailing, of
which catalogue is also a part, is based on the credibility
of the seller. The second thing is the range of products being
offered and its prices vis-à-vis the market operating
price. Unless the retailers are established as strong retail
brands, customers will not be very experimental with catalogue
retailing. And since prices change constantly in India, printing
of catalogues at regular frequency is also a challenge.”
Samar Singh Sheikhawat, VP-marketing, Spencer’s Retail Ltd,
underlines the two key challenges, “Lack of domestic
expertise to run catalogue retailing as a function, and the
right merchandise – stock needs to be available to run catalogue
retailing as a profitable business proposition and the right
category of product needs to be chosen for this format.”
GETTING IT RIGHT
Levermore feels that furniture and large-ticket appliances
are the strongest categories for this type of retail. Khosla,
on the other hand, believes that as long as the customers
have confidence in the brand, the movement of a specific product
category is of no relevance. “For a brand to be a part
of a catalogue, it must fit the target consumer profile, offer
products that fit the assortment and should be able to deliver
sufficient margin for the retailer to be profitable,”
Levermore states. Dutta observes, “Brands internationally
consider catalogues as a retail environment, which is in someone
else’s control – so while the additional market footprint
is welcome, the margins could be lower and the brand’s image
is impacted by other brands in the catalogue.” Giving
a brand’s perspective on being a part of HyperCity Argos’s
catalogue, Nilotpal Mrinal, brand manager, Remington, says,
“Argos is Remington’s largest catalogue retail partner
in the UK. We are happy to work with them in India too. However,
the concept of catalogue retailing is yet to take shape in
India to the levels where it can contribute a considerable
share to Remington.”
FUTURE EDITIONS
Technopak Advisors’ Kumat asserts that the catalogue business
in India will have higher potential in the years to come.
“The key enabling factors will include: customers having
less time for shopping, established retail brands, better
customer service etc. As the Indian market is spread over
a large geography, brands can target thousands of consumers
through a catalogue.“
Dutta adds, “Product integrity, predictability, and customer service are key success factors at the ‘frontend’. Customer service needs to be process and systems-driven. And with so many BPOs today, India is probably better geared for back-end customer service infrastructure and management practices to support catalogue retailing. From the point of view of standardisation, products such as mobile phones or durables meet the criterion of standardisation but price dynamics vary hugely – a catalogue can become non-competitive as soon as it is launched.” Levermore feels that India is still very much in the experimental stage and it will not be not possible to clearly predict the model’s full potential for some time.
Sharing suggestions for those in the business of catalogue retailing, Dutta says, “Most Indian retail catalogues have the look-feel of a business-to-business order guide, with a limited grid layout and no excitement! If retailers want to succeed with a catalogue, they should consider it as much a living environment as a physical retail store. In fact, it is a bigger challenge to create a catalogue that is as dynamic and alive as the store itself, considering that the customer’s only interaction with the brand are the pages.” Kumar’s checklist of do’s and don’ts for retailers reads as: “Do’s – price benchmarking with the market, good product range, dynamic catalogue, delivery on time and after-sales service; Don’ts – focus only on building the catalogue without proper attention to fulfilment.”
