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Grocery Chains – Supply Chain + Existing Chains

February 20, 2009


Supply chain indiaThis is the second and the last part of our coverage on Grocery Chains Retailing in India. Read Part -1 Introduction and Scope here.

Supply Chain/Logistics:
With the large players like Reliance, Bharti – Wal-Mart, Tatas entering into in retail market, there will be enhanced focus on improvements in logistics and supply chain infrastructure. Retailers as well as third party logistics providers will increase their investment in logistics infrastructure. To gain cost leadership in the market, big players have to minimize costs by developing supply chain infrastructure. Warehouses, distribution centres and transportation will see modernization in the form of Enterprise Resource Planning (ERP), Just in Time (JIT) and IT automation.

Cash and carry operation will shorten the supply chain. A cash and carry retailer buys directly from producers and manufacturers and sells to business customers from its wholesale centres. In this way, it will shorten the supply chain and eliminate the high costs associated with a fragmented supply chain.

Change in Government regulations like abolition of CST would lead to change in supply chain model. Companies would switchover to centralized warehousing and hub and spoke distribution
network from their present supply chain system.

In the long run small retail players will merge with big players or big retailers will take over small retail chain in order to increase their reach. The consolidation will lead to increase in market size of organized retail segment.

Review of Existing Grocery Chains in India:
Big Bazaar: Though Hypermarket, well known for its value for money positioning in the Grocery segment. The average size of store would be 50,000-60,000 sq. ft area at an average cost of Rs 15 crore per store. Future Group also operates Food Bazaar a pure play Supermarket chain. Building excellent private labels localized for the Indian consumer.

Subhiksha: Subhiksha is one of the largest supermarket, pharmacy and telecom chain. Started in 1997 in South Chennai, it is now present across 1480 outlets and spread across more than 90 cities. Though is grounded for operational trouble in the current economic slowdown.

Reliance Fresh: a retail venture of Reliance Retail currently has 453 stores in over 45 towns and cities all over India.

Star Bazar: Trent ventured into the retail hypermarket with the launch of its Star Bazar in 2004. Trent is planning to launch 50 new hypermarket stores – Star Bazaar in the next five years at an investment of around Rs 2,000 crore.

Spencers Retail:There are 400 stores across 65 cities covering a retail trading area of 2 million square feet. Operates across various formats – Spencers’ Express, Fresh, Daily, Super and Hyper.

More: a retail brand of Aditya Birla Retail Limited was launched in May 2007 offers branded FMCG products and house brands, fruits, vegetables, grocery, frozen food, bakery, homecare, personal care and pharmacy.

Spinach: a part of Wadhawan Food Retail (P) Ltd. opened its first store in Bandra-Kurla Complex in 2006. Currently have 26 stores in Mumbai and Thane district. Spinach will open 100 stores in Mumbai, Pune, Kolhapur, Kolkata, Nashik, Sangali. Bought Sabka Bazaar.

Foodland Fresh: Foodland Fresh has more than 40 convenience stores, located in various locations across Mumbai, Navi Mumbai & Thane. It caters to the food and grocery needs of households.

Foreign Players in Cash & Carry:
Metro Cash and Carry: METRO Cash & Carry started its operations in India in 2003 with two Distribution Centres in Bangalore. With this METRO introduced the concept of Cash & Carry to India. It is B2B distribution centre.

Bharti Wal-Mart: 50:50 joint venture between Bharti Enterprises and Wal-Mart for a cash and- carry venture in India.

SPAR International: Dutch retail giant SPAR International, also entering into grocery retail market in India. It has tied up with the Landmark Group for its hypermarket. SPAR International will have two retail formats.

Careefour and Tesco have been looking for partners to enter this space.

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