FUTURE GROUP TO GO WHOLESALE IN RURAL INDIA

The Kishore Biyani led Future Group with successful urban retail chains such as Big Bazaar and Pantaloons is now planning to capture the rural markets of India through the wholesale route.

The group made it’s first foray into rural retail by taking over the Godrej run Adhar Retail chain of stores in 2008. Adhar Retail  now currently operates 51 stores in Maharashtra, Gujarat , Punjab and Haryana. Future Group is now planning to open 50 wholesale stores in the next four year. These wholesale stores will be based in district headquarters and operate through 300 franchises each. The process of enrolling village franchises has already started through Adhar .

It is planned to enlist 20,000 franchisee outlets in villages that would be serviced by the wholesale stores.

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INDIAN ECONOMY TO GROW AT 8.6%

According to data released by the Central Statistics Office, the India economy is set to grow by 8.6 % in 2010-11. The growth figures for 2009-10 were 8%.
The farm sector has particularly shown a robust increas which stands at 5.4% in the current fiscal. This is against the growth of 0.4% in the previous year. Services sector growth is expected to be 9.6% and manufacturing sector at 8.8%.

Per capita income this year is estimated to grow by 17.3% and at current prices is estimated at US$ 1203.3 ( Rs 54148).

NEW CONSUMER PRICE INDEX

The Government has unveiled a National Consumer Price Index which reflects the changing lifestyles of both rural and urban consumers. The new CPI incorporates the price of serveral key services including telephone bills, education and recreation.  According to the Government, the new CPI for rural, urban and combined will be released in February.

The highest share of wallet being food is common for both the urban and rural consumers - though a rural consumers spends more than 50% of his income on food. Medical care and Fuel & Lighting also take a higher proportion of the rural consumer's wallet.

FMCG RURAL DEMAND TO SHOW 50% GROWTH IN 2012

In a Press Release on January 3, 2010 , The Associated Chambers of Commerce and Industry in India ( ASSOCHAM) have forecasted an extremely robust growth in the FMCG sector. The Press Release is detailed below

Fast Moving Consumer Goods (FMCG) will be witnessing more than 50% of growth in its Rural and Semi-Urban Segments by 2012 which in totality is projected to grow at an CAGR of 10% to carry forward its market size to over Rs.1,06300 crore from present level of Rs. 87,900 crore, according to an analysis carried out by the Associated Chambers of Commerce and Industry of India (ASSOCHAM).

 The growing penchant and insatiable appetite of rural and semi-urban folks for FMCG products will mainly be responsible for this development as their manufacturers will have to deepen their concentration for higher sales volumes in such niche areas.

 Also, the urban population will develop a larger craze for organic products in the FMCG sector from health point of view and as their will not be a large number of products of organic nature in the FMCG sector, this industry will have to look for larger market size in the rural and semi-urban areas, says the Chamber’s analysis.

 In the rural and semi-urban areas, FMCG market penetration is currently about 2% in general as against its total growth rate of about 8%, said ASSOCHAM President, Mr. Dilip Modi while commenting on the Analysis on FMCG Rural and Semi-Urban Prospects.

 Mr. Modi said the Indian rural market with its vast size and demand base offered a huge opportunity that FMCG companies cannot afford to ignore. With 150 million households, the rural population is nearly three times the urban.

 ASSOCHAM Chief said that the FMCG products which will attract the eyes of rural and semi-urban folks will mainly comprise soaps, detergents, cold drinks, consumer durables, toothpastes, batteries, biscuits, namkeens, mosquito repellants, refined oil, and hair oil. In the semi-urban areas which will include townships of larger sizes, the Chamber estimates, a good number of malls will have been put up in the next 2-3 years which will sell large volumes of FMCG products and thereby increase their demand phenomenally.

 Though the rural and semi-urban demand of FMCG products will grow larger and higher, it will put a severe pressure on the margins of manufacturers of FMCG products because of cut-throat competition, says the Chamber analysis. The branded companies in the FMCG sector that will make killings will include a known number like Nirma, HLL, Dabur, ITC, Godrej, Britannia, Coca-Cola, Pepsi etc.

 The rising rural and semi-urban income levels coupled with massive advertisement of FMCG products in the electronic media will spread so much of awakening in the rural and semi-urban folks towards fast moving consumer goods products so much that these will enlarge their affordability for them.

 ASSOCHAM has therefore suggested that to tap the rural and semi-urban market, better infrastructure facilities like roads, better telecom connectivity to rural persons, proper sanitation and healthcare facilities should be created.

ADVERTISING THIS WEEK BY RETAILERS

This festive season saw customers splurging and all retailers showed increased revenue incomes as well as growth in same store sales. There has been a lull both in retailer advertising activity as well as consumer buying for the last 2 weeks of Novmber. Retailers, realising that customers need to be pulled back into stores have once again eimbarked on an aggressive advertising blitz.

Big Bazaar has launched a full page ad campaign with ' Monthly Bachat Bazaar' as the theme and  prices and quality being the focus areas and special attention being given to prices, free offers on detergents and fmcg products.

Reliance too has launched an aggressive ad campaign with full page ads in the national dailies. The Theme - 'Winter Wonders' . Focus here too is on price and the difference between MRP and Reliance prices. Also highlighted are what they call the 'Stars of the week'. Let's see how customer's see these products and  their prices.

 Pantaloons this week launched their 50th store with ' The ultimate Fashion Experience'.

 SRS value bazaar has declared December as the Maha Bachat Month. The focus here too is on prices and the offers - price offs, combos, bulk discounts etc etc.

 Home Town is focusing on Bathrooms and ending their special offers this week with this closing ad.

 Reliance Digital in an effort to arrest the declining sales in electronics has declared an end of season sale with so called special prices and bargains.

 The Mahendra Group retail venture - Mom & Me have launched their hunt for child stars for their forthcoming camgaigs by inviting kids to be photographed and selected. 

Vishal continues with it's rationing theme. The focus - apparel, glass & crockery and other home products.

It would be interesting to watch how retailers perfom in the month of December. November was a hugely successful month for everyone and consumer sentiment indicates that December should auger well for everyone.

MONTHLY ECONOMIC REPORT – MINISTRY OF FINANCE

Issued by the Ministry of Finance, Goverment of India.

MONTHLY ECONOMIC REPORT - OCTOBER 2010

RETAIL SHRINKAGE STILL HIGHEST IN INDIA

In an annual survey conducted by the Centre for Retail Research in Nottingham, UK, the Indian retail sector lost Rs 9296 crores (USD 2065 Million) to theft and shoplifting. As per the Global Retail Theft Barometer Study, India has the dubious distinction of having the highest rate of retail shrinkage in the world. In India, 47.3% of retail shrinkage was due to shoplifting and 26.4% due to employee theft. The highest rate of shrinkage was seen in Apparels.
 
Globally, retail theft was estimated at US $ 107.3 Billion which translates into 1.36% of total retail sales for the period July 2009 – June 2010 which is reduction from the previous year’s 1.43 %. As per the study , the lowest rate of shrinkage was seen in Taiwan which stands at 0.87% of retail sales. The average rate in the Asia-Pacific region was 1.16%.
 The decrease in shrinkage over the previous year was primarily due to increased spending by retailiers on loss prevention and security which went up by 9.3% to US$ 26.8 Billion.
Source : PTI23112010

DHANTERAS & DIWALI RETAIL SALES HIT THE ROOF

This Diwali season saw unprecedented sales by retailers, consumer durables companies, apparel outlets and jewellers with consumers going on a buying frenzy across the country. The only exception was  Punjab and to some extent Haryana which were very recently affected by floods.
Retailers and companies have reported a healthy year-on-year growth ranging from 20 to 80% growth. And this growth is not restricted to urban India. Retailers in rural India have shown growths from 80 to 120% growth in sales during this period. In rural India, this growth has been majorly driven by CDIT - specially white goods and appliances though other household goods - particulary kitchen products, apparel and Food & Groceries have also shown very robust growth.
There is a growing belief and confidence  that this consumer confidence will remain high on the back of a good monsoon, rising incomes, positive economic forecasts and a booming stock market. 
Retailers reported about 25% jump in average bill size, as demand for premium products such as flat-panel televisions, double-door refrigerators, fully-automatic washing machines, home theatres, branded gold and diamond jewellery, fashion apparel, imported gifts and branded furniture soared with consumers upgrading their household items. The fear mindset of consumers has completely vanished.

Source : Economic Times, RM reseach team

FDI IN MULTI BRAND RETAIL

There are strong indications that Foreign Direct Investment ( FDI ) in multi brand retailing will soon be a reality. Indications are that there would be cap of 26% on investments allowed.  Sources say that a political consensus has been hammered out at the highest levels of UPA and influential wings of the government including the PMO, Finance Ministry, Agriculture Ministry and the Planning commission are backing this important economic reform.

FDI in retail could transform the way agriculture produce is procured, stored, conserved and marketed in the country.


Source : Financial Express: November 18, 2010

HAPPY DIWALI

WISH YOU ALL A HAPPY AND PROSPEROUS DIWALI

RURAL CONSUMER MARKET GROWTH STORY

It is now the turn of rural India to mirror the growth story of urban India. The rural consumer market, which grew 25 per cent in 2008, is expected to reach Rs 19125 Billion (US$ 425 billion)  in 2010-11 with 720-790 million customers, according to a white paper prepared by CII-Technopak . The figures are expected to double the 2004-05 market size of Rs 9900 Billion (US$ 220 billion).
FMCG
According to figures released by market researcher Nielsen, demand for personal care products grew faster in rural areas than urban areas during the period January-May 2010.
In shampoos, rural demand grew by 10.7 per cent in value terms, while in urban markets, it rose by 6.8 per cent. Similarly, toothpaste sales grew by 9.1 per cent in rural India and by 4.4 per cent in urban markets.
Retail
The rural retail market is currently estimated at Rs 5000 Billion (US$ 112 billion), or around 40 per cent of the Rs 12,500 Billion (US$ 280 billion) Indian retail market, according to a study paper, 'The Rise of Rural India', by an industry body.
Hindustan Unilever (HUL) is planning to significantly increase its rural reach. According to Harish Manwani, Chairman, HUL, the quality and quantity of rural coverage will go up to the extent that "what we have done in the last 25 years we want to do it in the next two years." Currently HUL products reach approximately 250,000 rural retail outlets and the company intends to scale it up to nearly 750,000 outlets in two years time.
Automobiles
Car sales in rural India have been on the increase in the last three years since the government announced various schemes such as farm loan waiver etc, for the rural population.
Maruti Suzuki's share of rural sales has increased from 3.5 per cent to 17 per cent in the last three years. Mahindra & Mahindra (M&M) is now selling more Scorpios in rural and semi-urban markets. Scorpio sales have increased from 35 per cent to 50 per cent in the last two years.
Exciting days ahead for Rural India !!

INDIA'S CONSUMER MARKET

According to a study by the McKinsey Global Institute (MGI) called 'Bird of Gold': The Rise of India's Consumer Market, total consumption in India is likely to quadruple by 2025, making India the fifth-largest consumer market in the world by 2025.

The BMI India Retail Report for the third-quarter of 2010released in May 2010 forecasts that the total retail sales will grow from US$ 353 billion in 2010 to US$ 543.2 billion by 2014.
Growing young population : Indian population in the age group of 15 to 59 forms the real consumer base for durable companies. This population is estimated to grow to 800 million by 2016.

According to recent estimates, household income in the top 20 boom cities in India is projected to grow at 10 per cent annually over the next eight years.

The Indian FMCG sector, with a market size of US$ 25 billion (2007-08 retail sales), constitutes 2.15 per cent of India's GDP. This is poised to grow between 10 - 12 percent annually.

There exists a well-established distribution network spread across six million retail outlets (including two million in 5,160 towns and four million in 627,000 villages)

NEW FDI RULES EXPECTED

There are indications from the Goverment of India that a new policy on foreign direct investment in the politically sensitive multi-brand retail sector will soon be announced. Currently FDI is not allowed in the lucrative retail sector  in India. The retail sector today employs 33 million people and is dominated by the Kirana Shops.

The Department of Industrial policy and Promotion (DIPP) has initiated a debate on this sensitive issue of allowing FDI in the multi-brand retail sector.

It received inputs from stakeholders, including business chambers, WalMart India and French retail major Carrefour, besides the wings of the government. The concept paper had favoured opening of the sector, subject to creation of back end logistics by the foreign retail stores. The committee comprises officials from ministries of Micro, Small and Medium Enterprises, Agriculture, Finance, Rural Development, Commerce and Industry and Consumer Affairs.

While multi-brand retail is closed for foreign investors, 51 per cent FDI is permitted in single brand retail while there are no restrictions on inflows in wholesale cash and carry format business. According to the discussion paper, India annually loses more than Rs 1 lakh crore (US$22.523 billion) in agri-products, including fruits and vegetables, due to lack of proper infrastructure like cold chain storage and warehousing. While there had been political resistance to the idea on the presumption that global players would swallow the small 'mom & pop' (kirana) stores, the industry has been pitching for allowing FDI in the retail sector.
Asia Pulse: October 12, 2010

AD SPLURGE

Navratra's started yesterday and with that came a splurge of ads from all urban retailers. From bringing in the New to an Exchange Offer to Sports Fitness - it's all there.  The first to break out was Big Bazaar with a double front page spread in the Times of India - the ad loudly welcoming the new with a wide range of products. Does the ad mean New Products or New Season ?? Anything new in the products being offered ? Couldn't find any  - wonder if customers that the ad is targeting would !

The Big Bazaar Ad

Home Town ( Another future group retail format) is focusing on an exchange programme on furniture. Could be a great success if the offers are good and exchange offer's value. The Value offered in exchange for old items - Rs 15000 for an old sofa set to Rs 75 per Kg of old plastics. The caveat is that the purchase values is to be 4 times the exchange voucher value.

Exchange Offer of Home Town

Vishal too has released a half page ad with a somewhat Bizarre message - 'Sports and Fitness Rationing' and then talks about a flat 40% off. Products offered range from food to Kurtis to LCD TVs to Mobile phones. The connection to Heath and fitness was difficult to spot.

The Sports & Fitness Rationing ad of Vishal

Reliance retail with it's Reliance Fresh, Super & Mart formats is focusing on 'Lowest Prices on Fruits & Vegetables' in it's full page ad. The lowermost portion of the ad talks about '1000's of products below MRP at our stores'. Does this statement really carry any weight with customers ? All stores today sell these products below MRP.

 Reliance & Lowest Prices

With the onset of the festive season, this frenzy is bound to increase  as the countdown to Diwali begins. It would be interesting to see the approaches and the offerings of the main players in Indian Retail during this season.

RETAIL ROUNDUP

RELIANCE RETAIL PLANS 4,000  NEW STORES IN 4 YEARS
Reliance Retail has mega plans for the next 4 years. The Mukesh Ambani promoted retail chain plans to open 3,000-4,000 stores across its 19 formats, in addition to the existing 1,000 stores. Reliance Retail currently operates 19 formats, some of which are Reliance Fresh, Timeout, Trendz, Jewels and Digital.  The company also aims at a growth rate of not less than 100% for the financial year 2010-11.
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BHARTI RETAIL GOES WEST
According to sources, Bharti retail is planning its first hypermarket in Mumbai. The 60,000 sq,ft store is planned at the Neptune Magnet mall in Bhandup and is expected to open in the 1st quarter of 2011. It is additionally planning another 20  stores in Mumbai, Pune and Nanded. To service these stores, a Distribution Centre is planned on the Mumbai-Pune highway.
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RELIANCE RETAIL TO ENTER CASH-AND-CARRY BUSINESS
Cash and Carry in retail is the flavour of the day. Reliance too plans to jump on the bandwagon with 3 new stores in the next 6 to 8 months. Reliance is going solo on this - no foreign partner of joint venture. The stores are planned to be in 1.5 lakh sq ft in size.
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MOBILESTORE TO ADD 700 OUTLETS
Mobilestore today is 1200 stores strong spread across 200 cities with a 45% market share in organised telecom retail. It is now planning to add another 700 outlets in the next 6 months. 200 stores are in process and another 100 in the pipeline. In tier 2 and tier 3 towns, the company is adopting the franchise model which will help add around 500 stores. Mobilestore will also be financially involved in these franchised outlets.Mobilestores are owned by the Essar Group.
BS260910
METRO NOW EYES PUNJAB
Metro Cash & Carry is now extending its reach into Punjab after operations in Karnataka, AP, Maharashtra and West Bengal. Metro opened it's 2nd outlet in Hydrabad on 23rd September.  The Punjab operations of the wholesale retailer are expected to be operational in 2011 with an investment of Rs 2400 Million.
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URBAN INDIA CONSUMERS UPGRADE CONSUMER DURABLES

Consumers in Urban India are busy upgrading their TVs, Airconditioners and Washing Machines. . The last 7 months till July have shown a robust growth in these segments . This growth has been led by LCD TVs, Split Airconditioners and Fully Automatic Washing Machines. In a year of major sports action, high end TVs growth is expected to grow even more spilling over to rural India too.
The last seven months have also seen robust growth of entry level products in rural India. Industry leaders expect the growth in rural India in these entry products to be as high as 40% during the coming festive season. (Category Managers/Buyers in retail pl note and stock accordingly)
GROWTH THIS YEAR (7 months till July'10) :
Televisions
LCD TVS    :    70%        Overall   :  4.8%
Air Conditioners
Split ACs    :    58%         Window ACs   :   18.6%        Overall   :  41%
Refrigerators
Direct Cool :    14.7%      Frost Free     :    13.7%        Overall   :  14.5%
Washing Machines
Fully Automatic   :   16.5%     Overall  :  9.7%
(Source GfK-Nielson)
The overall outlook in consumer durables for the year 2010 is positive. Industry leaders expect TV sales to double in units this year besides a very healthy growth in refrigerators.

Exciting times ahead in this industry.

ECT250910

EXPANSION PLANS OF RETAILERS IN INDIA

Retailers are back on an expansion spree. With the economy opening up again and consumer spend on the rise, retailers in India are once again looking to expand operations. Some headlines :
M & S PLANS 32 MORE STORES
Mark and Spencer  is planning to set up 32 more stores in India by 2013. The company is a joint venture between Mark and Spencer Plc of the UK and the Reliance Group. MSRI has 18 large format stores in major cities in India.
BI 04092010
MAX OF LANDMARK GROUP TO ADD STORES 
Max, the retail chain from the Landmark Group of Dubai, plans to have a chain of 60 stores in India by 2010-2011. It has inaugurated its first store at Bhopal and the third in Madhya Pradesh taking the total count in India to 33 outlets. The company intends to expand to metros, tier II and III cities across India. Max operates more than 115 stores across West Asia, Egypt, India, Turkey, Yemen and Palestine.
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CARREFOUR TO OPEN ITS FIRS STORE BY YEAR-END Retailer Carrefour of France plans to open its first Cash & Carry ( wholesale) store in India by the end of 2010. This store will be opened in New Delhi .
ET04092010

SHARE OF WALLET

Rural India is showing dramatic shift in share of wallet and is fast catching up with urban India in spend trends.

Share of Wallet – Rural India

 

Rural India spends the maximum share of wallet on Food – a whopping 55% followed by 10% on travel. The lowest share of wallet goes to housing and health – a mere 4 and 5% respectively.

Share of Wallet – Urban India

The Urban Indian consumer however spends only 45% of his wallet on Food and Beverages. This is also a reflection of the higher incomes of the urban consumer. There is also a significant  difference in spend on education between the urban and rural consumers – the urban Indian spending 9% of his wallet on education while the rural consumers spends only 6% on education.

Source: Max-NCAER,2007      ET072010

Changing Landscape of Rural India

The rural landscape in India has shown a major change in the last 10 years. Opportunities of creating wealth and progressing economically have never been so great. There is now improved infrastructure, road connectivity has gone up substantially, there are more electrified houses and more permanent homes.

This represents a huge opportunity for retailers and other consumer good companies to expand markets and enter almost virgin markets.

Source : ET072010

FUTURE GROUP EYES VISHAL RETAIL

Reports are afloat that Kishore Biyani is in the race to take over the troubled Vishal Retail Ltd.

TGP Capital has already bid to acquire Vishal Retail. TPG has already obtained the approval of a consortium of lenders to purchase Vishal in March. The Indian retailer’s board had last month approved a non-binding, non-exclusive memorandum of understanding for talks with TPG.

Biyani on being asked declined to confirm or deny the report. . “I am not saying anything on that (topic). I am not commenting,” he said.
 Amol Jain, director of TPG, declined to comment while Vishal’s managing director Ram Chandra Agarwal denied that there was any proposal from the Future Group.
 Vishal’s bankers, including State Bank of India, HDFC Bank Ltd and ING Vysya Bank Ltd among others, are currently engaged in the restructuring of debt amounting to Rs730 crore.

Mint220710