Latest News From the Indian Retail Sector

Weekly Retail News from India

The categories covered in this report are: (Click to view)

General Plans and Information
Big players – plans and investments
International
HR News
Unique formats
Sector specific

General Plans and Information

1. Can the retail sector accommodate everyone?
With the big guns of retail focusing on Hyderabad and opening multiple stores, local vendors worry that the market might not have room for them anymore. With Reliance, Subhiksha, FoodWorld and Spencers buying fresh fruits and vegetables directly from the farmers, local vendors who cannot source directly for farmers and have to use middlemen might become more expensive then modern retail outlets.

Another concern is that modern format retailers will purchase all the good quality produce, and only second grade produce will be left for the lower-income groups. Mr. Madhu, a senior CPM leader and Rajya Sabha member said that "They (the organized players) sell at low rates initially. But once their supplies are streamlined, they will increase prices sharply."
Sunday, November 12, 2006
Source: The Hindu Business Line

2. Experts predict a shakeout
Reliance’s mega launch in the retail sector has propelled its rivals to ramp up operations which experts estimate will lead to a retail revolution in the next 3-5 years, followed by a shakeout. The potential for growth is still immense, with penetration only at 5% at present.

Current initiatives:

Current big guns of the retail world, Pantaloon and RPG are also expanding operations. Pantaloon will be increasing its 4 million sq ft of space in 30 cities to reach 30 million sq ft of space by 2010. RPG plans to double its 80 stores by next year, opening Spencer’s Hyper, Super and Daily in tier I and tier II cities. Piramyd is planning to increase its TruMart stores from 15 to 40 next year, mainly in tier II and tier III towns.
Sunday, November 12, 2006
Source: Financial Express

3. Modern retail formats create new marketing strategy
In an interesting turn of events, modern food retail chains such as Spinach, Reliance Fresh, Spencers and Food Bazaar are all in talks with local mom and pop grocers to stock and distribute their in-house brands in the food, home and personal care categories.

If kirana stores agree, they will be able to get higher margins on them in comparison to established brands and the retailers get higher volumes. These private labels will be sold either under their current brand names or would be changed to new names.

With competition growing between the two formats, kirana stores are wooing customers with multi-pack offerings, larger product categories and new ways to grow the business. Private labels are generally 20-25% cheaper than national brands.
Monday, November 13, 2006
Source: The Economic Times

4. High Street fashions now heading to the mall
Several high street fashion brands are opening stores in their old rival, the malls. Mumbai eatery Rajdhani operated from just one location, until it opened in 7 outlets in malls. The first store opened in Inorbit Mall in Malad, a western suburb of Mumbai in 2003. FabIndia has always been exclusive to high street locations but has now become a prized tenant for most mall developers.

Inorbit Mall will soon be adding more small retailers such as Blue Tonic, a small high street retailer. Ansals Plaza has also added high street retailers such as CTC Plaza, B C Sen Jewelers and Leohom Shirts recently. Yogesh Samat, CEO of Inorbit Malls adds that, "High-street retailers who have a very strong local presence tend to be an important way of differentiating. Merely having chain stores in a mall tends to give it a vanilla feel."
Thursday, November 16, 2006
Source: The Economic Times

5. Wal-Mart is coming to India

Wal-Mart's entry to India is now official. The US giant will be entering the Indian market with a joint venture agreement with Bharti Enterprises. The partnership will be an equal one with the stores owned by Bharti Enterprises operating franchised stores of Wal-Mart. The stores in India will be offering a low price to shoppers as the US stores do.

Sunil Mittal, MD of Bharti Enterprises said, "The joint venture, with equal stakes, will operate in areas where government allows foreign investment in retail, like cash-and-carry and logistics."
Monday, November 27, 2006
Source: Retail Week

Big players – plans and investments

1. Future Group’s 5th Central Mall to be in Ahmedabad
The Future Group will be opening its 5th Central Mall in Ahmedabad by 2009.
Although the company had identified some locations in the city, it was yet to finalize the decision. Sadashiv Nayak, head of operations (west zone) Pantaloon Retail said, “We will be coming up with a central mall in Ahmedabad and the work will be completed in three years.” The project will be constructed by Kshitij Real Estate Fund, which is owned jointly by Pantaloon and a private equity fund.
Monday, November 13, 2006
Source: Business Standard

2. Reliance Retail’s dairy business strategy might not be easy
Reliance Retail’s mega plans for its dairy business might not as smooth as they would want it to be. So far, the company has acquired milk processing units in Punjab and other close by areas and has a capacity to procure 400,000 litres of fresh milk on a daily basis, which will be increased to 700,000 litres per day.

The company has also started talks with some of the leading dairy companies in India, such as Mother Dairy, Gujarat Cooperative Milk marketing Federation (GCMMF) and Nestle to form a partnership to supply fresh milk to them. The problem lies in the fact that these companies are not likely to want to deal with a middleman and would rather deal with the farmers directly. In this regard, R S. Sodhi, general manager (Marketing) for GCMMF said that, “We have no plans to contract manufacture dairy products for anyone.”
Tuesday, November 14, 2006
Source: Daily News & Analysis

3. Pantaloon to invest $1 billion to compete with Reliance
Pantaloon will be investing $1 billion to compete with Reliance Retail’s mega rollout and investment. The company will be selling stakes in some of its divisions to raise money to open 4,000 stores by 2010. Reliance will be investing $5.5 billion to set up a chain of supermarkets, hypermarkets, convenience stores and gas stations across the country.

Pantaloon is expecting to reach a turnover of Rs. 300 billion ($6.6 billion) by the year 2011 and increase its retail space to 30 million sq. ft. Reliance plans to reach Rs. 1 trillion in sales by 2011 with 100 million sq ft of retail space. Kishore Biyani, MD of Pantaloon, says “The market is too huge to talk about the competitive element now,” and “We are all going to make the market grow and see that people consume and spend more.”
Wednesday, November 15, 2006
Source: Bloomberg

4. Birlas’ retail division on a hiring spree
Birlas’ retail division is fast picking up steam and already has 45 professionals. The shortage of retail talent in India has forced the company to hire from overseas. CNBC-TV18 reports that the company has hired two executives from Tesco and Wal-Mart to lead its hypermarket and supermarket divisions. The Aditya Birla Group will be investing Rs. 90 billion to open 3,000 supermarkets and 200 hypermarkets in 100 cities over the next 7 years.
Thursday, November 16, 2006
Source: moneycontrol.com

International

1. Bharti retail venture delayed; might join Wal-Mart
Bharti Enterprises anticipated deal with Tesco might not be happening after all and according to sources, the company is likely to join up with Wal-Mart. The company has traditionally set up its own stores everywhere it goes but is likely to follow the joint venture route to gain access to the Indian market. Wal-Mart already has its strategy in place, and plans to focus on small cities and metros, opening 12-18 stores in the first year and a half. The size of the stores will not be more than 140,000 sq ft.
Monday, November 13, 2006
Source: NDTV.com

2. Reliance Retail negotiating with Nestle for a possible tie up
Reliance Retail is said to be negotiating with Nestle for a possible tie up in the dairy business. According to sources, Reliance Retail is likely to use its expertise in logistics, procurement and processing the company’s dairy products. In return, Nestle would become a bulk supplier to Reliance, cutting costs of dairy products.

A buyout is also possible in the long run. In Malaysia and Thailand, Nestle has recently divested its dairy business to Fraser & Neave and could repeat it in India. If these talks go through, then the Punjab will likely become Reliance’s hub for dairy business, as Nestlé’s plant is located in Moga where 85,000 farmers supply milk.
Tuesday, November 14, 2006
Source: The Economic Times

3. Murjani to bring Diesel brand to India
One of the world’s leading fashion brands, Diesel is likely to be entering the Indian market with master franchise agreement with The Murjani Group. Once through, the franchise agreement will cover all Diesel product categories and based on the success in the Indian market, will then extend to other South Asian markets.
Wednesday, November 15, 2006
Source: The Economic Times

4. Wal-Mart might open stores in India with Wal-Mart
There is widespread speculation that Wal-Mart and Bharti Enterprises have tied up for a franchising deal for stores in India. At the same time, there are also rumors that the US giant will be entering in a cash-and-carry format in a joint venture with Bharti Enterprises. Although Bharti had been in talks with Tesco, no final decision has yet been taken.

Industry reports say that Wal-Mart will enter into two formats. According to one source, “The JV will set up 2 separate companies in India. One will be a back-end company, with business interests in cash-and-carry. The other company will deal with front-end retail, based on a franchising model. Under this model, the back-end cash- and-carry operations will act as a single sourcing point for the front-end consumer retail business. The Bharti Group is clear that it would get into a partnership with a foreign player only when it is holistic in nature, including back-end, front-end and logistics.”
Saturday, November 18, 2006
Source: The Economic Times, Business Standard

HR News

1. Retail training skills
The Retailers Association of India (RAI) announced that it has started a professional retailing skills (PRS) course that is designed specifically to teach skills in retail. The programme has been started in association with the S B Global School of Retail Management in Kochi. The course duration is 100 hours and there is also an internship with a RAI member company for an additional 50 hours.
Wednesday, November 15, 2006
Source: The Hindu Business Line

Unique formats

1. Alpha-Pantaloon win contract for duty free shop at Delhi airport
Delhi’s Indira Gandhi International Airport will be getting a face lift with the Alpha Airports Group Plc and Pantaloon Retail being awarded a contract to set up duty free shops. Alpha plans to bring in international brands such as Armani, Gucci, Christian Dior, Calvin Klein, Nike and Swatch to the airport and offer world class shopping standards. The upgrade would take place by 2010, when the new terminal would also be ready.
Wednesday, November 15, 2006
Source: The Economic Times

2. Future Group plans discount store for its private labels
The Future Group announced that it was planning to set up a chain of discount stores for its in-house labels. At present, the company has approximately 80 private labels and wants to work out a strategy to liquidate stocks and out-of-season merchandise.

Anshuman Singh, formerly with Welspun Retail, will be heading this venture, which is internally being called Value Fashion. The public name for the chain is yet to be decided. Stores are likely to be 70,000-80,000 sq ft. Merchandise sold at these discount stores will be lower than their prices at the regular stores. Its private brands include Indigo Nation, Scullers, John Miller, Bare, DJ and C, Annabelle and Gini & Jony and will soon be launching Navarasa, a label for women. Koroyo and Sensei are its two consumer durable private labels.
Saturday, November 18, 2006
Source: The Economic Times

Sector specific:

Home Furnishings

1. Bombay Dyeing to use a dual strategy for retail
Textile manufacturer Bombay Dyeing plans to use two separate strategies to market its products to low and high end consumers. The company is making an effort to not be known as a ‘discount’ brand anymore with this new strategy. Its competitors S Kumar’s’ Carmichael House and Welspun have both been increasing their top end brands and so Bombay Dyeing does not want to be left out.

According to Arun Bhawasingka, Head of Domestic Business for Bombay Dyeing, the company is not just focusing on the price to differentiate their products, saying that, "Apart from the price points, the look and feel of these new stores will be different to signify the high-end range of our products." Another differentiator would be location of the premier stores.
Tuesday, November 14 2006
Source: The Hindu Business Line

Consumer Durables

1. Croma plans to increase stores
Tata and Woolworths joint venture retail venture, Croma is fairly new but the response to it stores has been outstanding, leading to the company deciding to open more stores. According to Michael Luscombe, CEO of Woolworths, the company will be opening stores in Ahmedabad, Pune and other cities in western India before moving to north India. There will be 30 new stores in a year’s time, using an investment of Rs. 4 billion. Most stores will be in the 15,000 to 20,000 sq ft range.
Monday, November 13, 2006
Source: NDTV.com

Food & Grocery

1. Dabur launches ‘DARE’ to improve its distribution system
Dabur India has launched DARE, Driving Achievement of Retail Excellence, to reorganize its sales team and to improve its distribution efficiencies. This new strategy is part of its Dabur India’s Vision 2010, which aims to double its revenue and profits over the next four years through expansion, innovation and acquisition.

The company has investing Rs. 200 million in its first phase during which 500,000 towns and rural markets will be covered. The company has formed special sales teams focusing on rural market for six states-Punjab, Uttar Pradesh, Bihar, West Bengal, Madhya Pradesh and Maharashtra.
Tuesday, November 14, 2006
Source: The Economic Times

2. KFC plans to open 40 outlets
Yum! Brands division, Kentucky Fried Chicken (KFC) plans to open 40 new outlets across India by 2007. Currently there are 20 outlets in the country, at Chennai, Hyderabad, Bangalore, Pune, Bombay, Delhi, Kolkata, Chandigarh, Ludhiana and Agra. Of the 40 new outlets, 10 would be run by the company and the remaining would be franchised out.
Tuesday, November 14, 2006
Source: Business Standard

3. Subhiksha to cross 500 stores this month
Discount food retailer Subhiksha is likely to cross 500 stores this month and is building its private label brand and its mobile phone and pharmacy sections. The company will be opening 100 new stores this month to reach a total of 500 stores. Subhiksha is happy with the results of its phone retailing that it started in Delhi last month and is considering setting up a separate chain for the segment along with one for pharmacy products.

By March 2007, the company hopes to reach 750 stores. Store openings are happening at a faster pace now, due to adequate funds being raised and the company fixing its backend integration. The company has allocated Rs. 3 billion for its expansion, raising money through debt, equity and working financial capital.
Wednesday, November 15, 2006
Source: The Economic Times

4. Papa Johns plans to invest Rs. 1 billion in India operations
US pizza chain, Papa Johns announced that it would be opening 100 outlets in northern India with an investment of Rs. 1 billion. The company had recently opened stores in India. Initially, the company had planned to open 500 stores over the next 10 years, but with the robust growth and competition in the pizza industry, the company has now upgraded its expansion. Kamal R Tandon, chairman of Papa Johns India, said that the company’s, "…focus areas in North India would be cities in Punjab - Amritsar, Ludhiana and Rajasthan and the NCR region."
Wednesday, November 15, 2006
Source: The Economic Times

FMCG

1. HLL refashioning kirana stores
Hindustan Lever Ltd (HLL) has launched a project to improve the quality of kirana stores and make them compete with modern retail formats. The ‘Super Value Store’ programme is targeting mom-and-pop stores to update their look and help them add value to their stores. HLL will be buying shelf space from the retailer and giving a 3% discount to the retailer on its products. Besides theses tangibles, HLL will also train kirana stores on modern retail basics.

Industry sources estimate that the Super Value Programme will cover 15,000-20,000 kirana stores. One such store in South Delhi, who has been inducted in the program, has already seen a 20% increase in stores sales and a saving of Rs. 5,000-6,000 due to incentives of the scheme.
Monday, November 13, 2006
Source: The Hindu Business Line

Jewellery & Watches

1. DTC puts in Rs. 150 million for new jewelry range
De Beers marketing division, the Diamond Trading Corporation announced that it will be investing Rs. 150 million to promote and expand its range of products in India, including its new collection of solitaire diamonds, called Forever Mark. The new line will be launched in January 2007 and each of its diamonds will have a hallmark.
Wednesday, November 15, 2006
Source: Business Standard