RURAL INDIA BOOMS

Rural India is booming like never before. At an estimated 720 - 790 million consumers, the Indian rural market has begun to attain size and growth rates to make it very attractive to companies. According to a report by CII and Tecnopak 'Rural markets are growing at double the rate of urban markets for many product categories'. Rural India accounts for more than 45% of total market in most consumer products including FMCG, consumer durables, two wheelers and 4 wheelers.

The FMCG Market last year has grown by 23% in rural India ( 18% in Urban India)

Consumer Durables are growing by 15% in rural India

Telecom is showing a growth of 31%

Growth and Penetration of some key FMCG categories in rural India

(Source IMRB, Period Dec 2008 to November 2009)

Rural India contributes to 43% of national income. There has been a consistent increase in incomes in rural India. Rural Income stood at $ 220 Billion ( Rs 9.9 lac crores) in 2004-05 which is expected to grow to $ 424 Billion ( Rs 19.12 lac crores) by 2010-11, a CAGR of 12 %. ( Source CII-Tecnopak).

There is no doubt that the aspirations and lifestyle of consumers in rural India is growing and are fast approaching the urban consumers lifestyle. The result - rural consumer now want's products and services that enhance his lifestyle - even though he is still very price conscious and demands value for money.

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Shoprite changes hands - now with Future Group

South Africa's largest grocery retail chain, Shoprite Holding's sole outlet in India located at Mumbai has been taken over by the Future Group. The 55,000 sq ft 'Shoprite Store' sold multibrand products in India. This was till now operated in India by Nirmal Lifestyle through a franchisee agreement with Shoprite Holdings Ltd.
Future Group plans to launch a new brand of stores and the Shoprite outlet will be first in this format. These stores will consist of 85% food and grocery merchandise and would also have a instore bakery. Whereas Future Group has a food supermarket chain called 'Food Bazaar', these outlets are much smaller in size ranging from 10,000 to 15,000 sq ft. Shoprite would be the first large format food outlet of the Future Group. The new store is expected to be launches on the 28th of this month.
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Malls of India

The last few years have seen a substantial growth in the no of malls in India. Some of the largest malls in India are detailed below

Malls of India

The malls in India however pale in comparison to malls present around the world. Some of the world's larges malls are

World's Largest Malls

The largest Indian mall is just about one fourth the size of Dubai Mall - an indication of where India stands today and the huge potential for more malls to come up. This is more so if one takes into account the handsome growth that India is witnessing and huge increase in disposable incomes now with the Indian Consumer.

Aditya Birla Retail's Future Plans for 'More Hypermarkets'

Aditya Birla Retail is planning to invest aggressively in the coming years. It plans to invest Rs 1800 crores ( $ 400 million) over the next 8 years to add substantial no of it’s ‘More’ Hypermarkets pan India. The company is planning addition of one store per month at an investment of Rs 20 crores ( $ 4.5 Million).

Aditya Birla Retail has currently
I. Supermarkets 632 Nos
II. Hypermarkets 6 Nos

Plans to increase ‘More’ Hypermarkets to 100
The minimum size of the Hypermarkets is 50,000 sq.ft whereas the supermarkets are around 2500 sq. ft in size.

The current Indian Retail sector is estimated to be $ 350 Billion and growing at 15% per annum.

Retail in India - Some Facts

Population of India
1.1 Billion
Middle Class : 300 million
Size of the Sector
Annual sales in The Retail Sector in India is estimated at Rs 24,300 Billion ( $ 540 Billion) . 80% of this in the unorganised sector - mainly small Mom & Pop stores. ( Source ATKearney).
Organised Retail
Currently at Rs 1500 Billion ( $ 32 Billion) or 6% of the total retail sector. This segment is growing at 2% ( Source NCAER)
Consumption
People living in small towns and villages account for 59% of Consumer Durables such as refrigerators and Washing Machine sales. These towns and villages also account for 53% of Consumer Goods like soaps, detergents and shampoos.(Source NCAER).
Rural India
Rural India has shown consistent and robust growth for the last 4 years . It was only the last season that saw a slight downturn because of the poor monsoon. A Rs 1755 Billion ( $39 Billion) stimulus package was specially introduced for development of rural infrastructure. An added stimulus is the $16 Billion (Rs 716 Billion) loan waiver scheme for farmers along with the $ 7 Billion ( Rs 300 Billion) job scheme introduced by the Government of India for rural India.

Carbonated Drinks Market in India

Some facts about the Carbonated Drinks Market in India
Size of the Market : Rs 7000 crores

Market Shares of Major Brands
Thums Up 15.8%
Sprite 14.2%
Pepsi 13.7%
Coca Cola 8%
Thums Up , the leading brand in the carbonated drinks market is specially strong in West Bengal and Andhra Pradesh. Coca-Cola India with Sprite, Thums Up and Coca-Cola in it's basket is the clear leader in India.
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Consumer Electronics - High Growth

The period January to November 2009 has seen a robust growth in consumer electronics in India as per data released by ORG-GFK. This was particularly so in the case of high value products.
The figures for the period Jan to Nov09 are

LCD TVs sales grew 93% to 10 Lac Units
Washing Machines sales grew 14% to 24 lac units
Refrigerators sales grew 16.5% to 50 Lac units.

70% sales of consumer electronics came from large cities.
Leading players have shown handsome growth - Samsung at 25% and LG at 30%.

Withing refrigerators, the Direct Cool Refrigerators showed a whopping growth of 21% and sales to 36 Lac units . The premium frost free refrigerators however grew 7.4% to 14.5 lac units.
On an overall basis however the growth in Televisions was only 5% to 1.17 crore units

Carrefour set to enter India

Carrefour is on the verge of finalizing a deal with Kishore Biyani of Pantaloon Retail to enter the Indian Market. Carrefour is Europe's largest retailer and has been scouting around in India looking for a suitable partner for the last 6 years. With Walmart and Tesco already having made a foray into the $350 billion Indian retail market, it was important for Carrefour to gain presence in India.

The 87 Billion Euro retailer plans to set up franchisee stores which will be a part of Future Value Retail, a 100% unit of Pantaloon Retail.

The Carrefour franchisee stores will be targeting the higher income segment of customers and will be pitted against retailers like Hypercity which has 4 stores and operates in 3 cities including Mumbai.

The deal is expected to be signed in March signalling a new all round thrust on retail activity in India.

Check out Keith Dunn: Chapter 6.2.4 Defining the product hierarchy

Hi,

I want you to take a look at: Keith Dunn: Chapter 6.2.4 Defining the product hierarchy 

RELIANCE RETAIL BRINGS IN TESCO TALENT

Report has it that Reliance Retail has appointed Gwyn Sundagul from Tesco Thailand as its new CEO for the Reliance Value retail format. The 47 yr old Gwyn is currently the Marketing Director with Tesco, Thailand. Four other senior executives from Tesco, Thailand are also expected to quit Tesco and join Reliance Retail.
Reliance retail faces major problems today , very similar to the type that Tesco faced in Thailand when they started operations. It is expected that Gwyn Sundagul with his experience in setting Tesco in the the right direction will be able to do the same to Reliance.
Consequent to this appointment, major changes are expected in the existing management structure with Raghu Pillai expected to focus more business development and bringing in more global alliances.
Some facts about Reliance Retail
Presence : 14 states and 86 cities and 1000 stores
Turnover of Reliance Retail + Reliance Fresh (Last Fiscal) : 2400 crores
Loss ( Last Fiscal) : Rs 260 crores

PER CAPITA EXPENDITURE IN INDIA

The per capita expenditure by an average Indian in urban India is Rs 1312 whereas in rural India it is only Rs 695.00 . These figures were revealed by the National Sample Survey organisation ( A Government of India undertaking). An interesting revelation is that while the urban Indian spends 39% of his expenditure on food, in rural India the spend is as high as 52%.

The disposable income therefore available for the rural Indian is a much lower Rs 332 or 48% for his spend on non food items. In comparative terms, the rural Indian spends almost the same amount on medicine as his urban counterpart. On education, whereas the urban Indian spends a high Rs 92 or 7% of his expenditure, the rural Indian spends only Rs 22 or 3% of his total per capita expenditure.

CARREFOUR'S INDIA PLANS

According to unconfirmed reports, local real estate giant Parsvnath Developers has said it is likely to form a venture with Carrefour soon, regarding retail operations in India. The group did not specify more details of the deal, adding, "We will announce a tie-up once we sign the documents".
 Earlier this year, the Future Group announced it is looking into a partnership with Carrefour, regarding back-end operations. Carrefour has not commented on either report.

Parsvnath also announced it will open 10 retail stores this year and develop 21 commercial projects as part of its plan to enter the retail sector on its own. Parsvnath said it plans to open 75 hypermarkets and boutiques in five years.

FMCG MARKET IN INDIA - SOME FACTS

FMCG market in India and prospects in rural India.
FMCG Sector Market Size today Rs 1,10,000 crores.
FMCG Market Size in the next 5 years ( by 2014) will be  Rs 1,85,000 crores
Products such as soaps, hair oil and biscuits have reported good sales in rural India.
Godrej Comsumer Products has reported a 40% growth in rural sector ( April-Sept09).
25% sales of Marico comes from rural India .
Rural and Semi-urban India accounts for 50% of Dabur India’s domestic sales

VISHAL UP FOR SALE !

The Debt-ridden Vishal Retail is up for sale. As part of the Corporate Debt Restructuring Plan, the retailer's bankers have set a precondition of a strategic investor to be brought in by Vishal.
The current promoter, Mr Ram Chandra Agarwal holds 62% stake in the company. . The market cap is around 150 crores.
Vishal has been going through troubled times since the last one year. In an effort to consolidate, 20 stores were shut down in the last 6 months and currently Vishal has 170 stores over 110 cities with an employee strength of 8500. Over 60% of Vishal's revenues come from Lifestyle products - apparel and footwear while food takes up 25% and the rest from household and consumer electronic products.
There are 13 main lenders to the retailer with SBI leading the group with an exposure of 175 crores. Other big lenders are HDFC, UCO, LIC, HSBC etc.
It is believed that Vishal is in talks with 2 potential investors including a prominent retailer. The process of restructuring may see the exit of Mr Ram Agarwal completely from Vishal Retail.

TOP BUSINESS SCHOOLS OF INDIA

The Top Ten B-Schools in India according the Business India Survey

1. Indian Institute of Management Ahmedabad , Ahmedabad
2. Indian Institute of Management Bangalore , Bangalore
3. Indian Institute of Management Calcutta , Kolkata
4. Indian School of Business, Hydrabad
5. XLRI Jamshedpur , Jamshedpur
6. Indian Institute of Management Lucknow Lucknow
7. Management Development Institute Gurgaon
8. S.P. Jain Institute of Management & Research Mumbai
9. Institute of Management Technology Ghaziabad
10.Jamnalal Bajaj Institute of Management Studies, Mumbai

Starting average salaries range from Rs 7.8Lacs ( Institute of Management Technology) to Rs 18 Lacs ( Indian School of Business.
Source : Business India

RURAL INDIA BUYING FRENZY

Dhanteras day saw a buying frenzy in rural India. This came after almost 2 months of austerity and poor sentiments. Everything from Fridges, Televisions, appliances and kitchen items were lapped up by consumers.and shops remained open till late at night.

Besides the local ' Kirana Stores' organised retail too saw crowds thronging the retail outlets. In value terms, Consumer Durables were the major items that were picked up by consumers. In terms of numbers, it was kitchen utensils and other kitchen items that were much in demand.

It is estimated that organised retail saw a growth around 20% over the same day last year.

DHANTERAS SHOPPING

The festival is Dhanteras which falls 2 days before Diwali is of special significance to retailers in India. This day is particularly auspicious for consumers to buy some items for the home and kitchen. The world 'Dhan signifies wealth and hence on this particular day , it is regarded as auspicious for women to buy some gold and utensils.

Retailers in India see sales peeking on this day when the average daily sales goes up ten fold. This is particularly so in the case of kitchen items, consumer durables and any household goods of steel.. Retailers specially stock up goods for Dhanteras and look forward to heavy sales.

There also are legends associated with Dhanteras, the most well known being that of Sanundramanthan, the name given to the churning of the ocean by gods and demons for getting amrit or nectar from the ocean. The result of the churning was the arrival of Dhanavantri, the physician of the Gods alongwith the jar of elexir. Since then the day came to be celebrated as the day of Dhanteras.

Retailers - Happy Selling

INNERWEAR MARKET IN INDIA

Some facts of the Lingerie market in India that could be of immense interest to retailers.

Innerwear Market Size ( in value ) : Rs 9500 crores
Size of the Apparel Market in India : Rs 128,380 crores
Women's Inner Wear : Rs 6,200 crores ( This is almost double the size of mens innerwear ).

35 to 45% of innerwear is branded.

With changing lifestyles, the market has shown 8% growth in value terms in 2008. The most discerning and demanding consumers are in the age group of 25 to 45.

STOCK SHRINKAGE

One problem that all retailers around the world face is Stock Shrinkage - loss of goods from employee theft, shop lifting and vendor fraud. In India, the problem is particularly acute with shrinkage accounting for 3.1% of total sales . This amounts to a colossal amount of $2.5 Billion ( Rs 122.5 Billion) per year ( source : The Global Theft Barometer 2008)
A huge 45 to 50 % of this stock shrinkage is on account of Employee theft, 30 to 35% is due to shoplifting by consumers and the balance being attributed to vendor fraud/administrative lapses etc.

Globally , the average figure for shrinkage is 1.34% of sales. India however has an abnormally high 3.1% of sales. Compare this to 1.48% of The United States and 1.3% of UK.

Some common measures taken by retailers are CC TV monitoring, frisking of employees etc. These however do not seem to be enough and major retailers in India have now come together to combat the menace of Shrinkage particularly employee theft. These include Reliance Retail, Future Group, Spencers and Aditya Birla retail who will share notes on employees found guilty of theft. The current practice is to dismiss employees caught stealing who however do not face problems getting employed by any other retailer as there is almost no system of cross reference from previous employers. The plan is to circulate a blacklist of defaulting employees to prevent them to be employed by others.
Hopefully this will bring down shrinkage to some extent.

LESS FESTIVAL SPENDING IN RURAL INDIA

There are clear indications that the farmer in rural India does not have the same kind of income that he had last year to spend on the festive occasion of Dhantheras and Diwali. The sentiment is highly visible amongst farmers. In a survey in Central India amongst farmers, most of them have indicated a shortfall of almost 30% in yield due the drought conditions in the early part of the Kharif season. This was further aggravated by unseasonal rains in the last few days which has not only delayed harvesting of crops but has also resulted in loss of crops.
Large farmers ( holding of above 25 acres) do not expect to spend less this Diwali , however small and medium farmers are certainly spending less this season. The greatest impact has been on the small farmer.
The heavy buying of consumer durables and other household products that happens during Dhantheras will also be subdued this year. In rural India, many consumers buy for the wedding season which follows Diwali during Dhantheras. However this year due to the delayed harvest and consequent delay in encashment of crops, this will be pushed back and buying will happen only in November and that too on a subdued note.
Retailers need to take note of this changed scenario.