DISSERTATION REPORT

On

Emerging Opportunities in
Food Retailing in Uttar
Pradesh
The Degree of
The partial fulfillment of
Master of Business Administration(Agri-
Business)

Submitted To: Submitted By:

Prof. R P Singh Smriti Pandey
Director (ASRAM) MBA(Agri Business)

AMITY UNIVERSITY

1
 LUCKNOW

CERTIFICATE

This is to certify that this dissertation work is done

under my supervision during Jan, 09 to March, 09 as
the partial fulfilment of MBA (Agribusiness) at Amity
Business School, Amity University, Lucknow Campus.
Ms Smriti Pandey, has worked on the topic entitled
“Emerging Opportunities in Food Retailing in Uttar Pradesh”.
She has taken all the requisite guidance and
information. Her work is genuine.

2
 Researcher Faculty Guide
Director

(Smriti Pandey) (Mr. Ashish Chandra)

(Prof. R.P.Singh)

TABLE OF CONTENTS

1. Acknowledgement

2. Introduction

3. Objectives of the Study

4. Retail Industry- An Overview

5. Review of Literature

6. Research Methodology

7. Data Collection

8. Analysis & Results

9. Recommendations & Suggestions

10.Conclusion

11.Bibliography

3
ACKNOWLEDGEMENTS

4
 ACKNOWLEDGEMENTS
I feel really honored and blessed to be a student of this University, i.e.
Amity University, Lucknow Campus which provided me a platform to
nurture all the skills and techniques required for doing this project
effectively and efficiently.

I wish to express my sincere thanks to Prof. R.P. Singh, Director, Amity

Business School (ABS) for providing necessary facilities to conduct this
research work.

I consider my proud privilege to express deep sense of gratitude to Mr.

Ashish Chandra, my faculty guide for his admirable and valuable
guidance, keen interest, encouragement and constructive suggestions
during the course of the project.

I also thank the different agencies and Government departments, which

gave valuable information for the successful completion of this project.

I would also like to thank my mother Dr. Poonam Pandey and my father
Dr. A K Pandey and my younger brother for their inspiration and moral
support received in completing this work.

Last, but not the least, I sincerely thank all my class members for their
support and assistance extended during the course of this project.

(Smriti Pandey)

5
INTRODUCTION

6
 INTRODUCTION
Retailing consists of the sale of goods or merchandise from a fixed location,
such as a department store, or by post, in small or individual lots for direct
consumption by the purchaser. Retailing may include subordinated services,
such as delivery. In commerce, a retailer buys goods or products in large
quantities from manufacturers or importers, either directly or through a
wholesaler and then sells smaller quantities to the end-user i.e. consumer.
Retail establishments are often called shops or stores. Retailers are at the end
of the supply chain.

Food retailing industry has revolutionized the shopping experience of the

customers in India. It is growing at the rate of 30% and it is the major
driving force for the retail industry. The food retail industry consists of the
total revenues generated through food sales from supermarkets,
hypermarkets, cooperatives, discounters, convenience stores, independent
grocers, bakers, butchers and all other retailers of food and drink for the off
– premise consumption. Food and food products account for about 50% of
the value of final private consumption. The percentage of income spent in
households will drive growth in the food market. Indian consumers are
happy with store goods than the branded goods and are very conservative on
the packaged foods. Currently, the retail food sector is US$ 70 billion and is
expected to rise to US$ 150 billion by 2025.

The organized retail industry in the food and grocery sector in India has
existed for over 12 years. It has been observed that very few retail stores in
this sector have been able to reach a break-even point. Even so, the

7
organized retail industry has expanded multifold and different formats of
stores have been established.

Kirana stores have ruled India over 100 years. Common features of kirana
stores like customized home delivery, credit facility and selling products
lesser than the maximum retail price have made sure of a loyal customer
base. The kirana stores have been fighting off other format stores but have
been overpowered by convenience stores that advocate hygiene, wider
product range and better service. Hypermarkets, on the other hand, boast of
providing a wider product range, entertainment and shopping experience all
under the same roof. A big chunk of shoppers today choose large format
stores due to shift in income, social economic classification (SEC) and
lifestyle. It may be such that the kirana traders operating at the periphery of
the organized sector are the first ones to bear the burnt of the rapid
expansion of organized format stores. These traders might lose their
businesses to the organized sector relatively.

Dramatic changes have been observed in the shopping preferences of

customers. The number of customers, shopping for food & grocery, from
kirana stores to convenience stores (c-store) has increased. On the other
hand, the migration of customers preferring to shop from larger stores
(Hypermarkets) as compared to convenience stores has been swifter.
Convenience stores and hypermarkets maintain a different set of standard for
facilities and services offered by them to sustain in market competition. It
has been found that 78 percent of food & grocery customers (c-stores) are
willing to try any new organized retail store. A great challenge is posed to
convenience store retailers to capture a consistent customer base.
Convenience stores must now attempt to focus on certain significant factors

8
like store location, stocking the right merchandise mix, understanding
demographic profiles of prospective customers, providing value added
services, providing a great shopping experience and others.

The various factors paving the way to revolutionizing the food retailing in
India are: changing life styles and tastes, increasing disposable income,
increasing number of working women, change in consumption patterns and
the impact of western lifestyle.

Modern state of food retailing is not a demand led but the supply led. Major
spending on food and increasing usage of out of home food consumption
represent a significant opportunity for food retailers and food service
companies.

9
OBJECTIVES OF THE STUDY

10
 OBJECTIVES OF THE STUDY
The study of “Emerging opportunities of food retailing in UP” was framed
with following objectives:

• To study the opportunities of the food retail market in the region of Uttar
Pradesh.

• To compare the opportunities of the companies and their some products

in food retailing in the region of Uttar Pradesh.

• To recommend the strategies in food retailing.

11
RETAIL INDUSTRY: AN OVERVIEW

12
RETAIL INDUSTRY: AN OVERVIEW
The retail industry is continuously changing as the global and regional
economies are transforming worldwide. Our industry experts study these
developments to give critical analysis along with their personal opinion.
Retail industry encompasses aspects diverse as organized retailing, retail
channels like supermarkets, convenience store, and retail products (food and
non-food).

Retail Sector is the most booming sector in the Indian economy. Some of the
biggest players of the world are going to enter into the industry soon. It is on
the threshold of a big revolution after the IT sector. Although, retail market
is not so strong as of now, but it is expected to grow manifolds by the year
2010. The sector contributes 10% of the GDP, and is estimated to show 20%
annual growth rate by the end of the decade. The current growth rate is
estimated to be 8.5%, but CRISIL report says that the retail market is most
fragmented in the world and only 2% of the entire retailing business is in the
sector. There are about 300 new malls, 1500 supermarkets and 325
departmental stores being built in the cities very soon.

India has well over 5 million retail outlets of all sizes and styles (or non-
styles); the country sorely lacks anything that can resemble a retailing
industry in the modern sense of the term. This presents international
retailing specialists with a great opportunity. Retailing in India is
thoroughly unorganised. An overwhelming proportion of the Rs.400, 000
crore segment of the retail market is unorganised, only Rs.20, 000 crore
segment of the retail market is organised.

13
 90% 80%
80% 70%
70%
60%
50% 40% 40% 40%
40% 35% 35%
30% 20% 20% 20%
20%
10% 2%
0%

an
nd

na

a
a

nd
l
A

sia
i
az

di
re
in
op
US

iw

i
la

la

In
Ch
nt

Ko

ay
Br
ur

ai

Po
Ta
ge

al
Th
.E

M
Ar
W

The above data and the graph show that Indian organised retailing is not as
gloomy as foreboding from global retail operators. As only 2% of
organised retailing is done in India, but International retail majors such as
Benetton, Dairy Farm, Wal-Mart, etc have already entered into the Indian
retail market. Lifestyles in India are changing and the concept of "value for
money" is picking up. India's first true shopping mall – complete with food
courts, recreation facilities and large car parking space – was inaugurated
as lately as in 1999 in Mumbai (This mall is called "Crossroads"). Local
companies and local-foreign joint ventures are expected to more
advantageously position than the purely foreign ones in the fledgling
organised India's retailing industry. These drawbacks present opportunity to
international and/or professionally managed Indian corporations to pioneer
a modern retailing industry in India and achieve benefit from it. The
prospects are very encouraging. The first steps towards sophisticated
retailing are being taken, “Crossroads”, is the best example of this
awakening. More such malls have been planned in the other big cities of
India.

14
Food retailing has largely been in hands of small roadside grocer shops,
mandis and bazaars through out the Indian history but slowly the shift is
taking place towards retailing through supermarket stores. Retail food sale in
India was approximately $132 billion in fiscal year 1998 and is growing at
13-14% per annum. The retail market for fruits and vegetables has grown at
over 20 percent per annum. Of the total food and grocery market only Rs7bn
is in the hands of organized sector. This organized market is expected to
grow to Rs810bn by 2010. The table 1.1 sows the growth in growth in retail
outlets in India.

Table 1.1: Growth of Retail Outlets in India (‘000)

Outlets 1996 1997 1998 1999 2000 2001

Food 2769.0 2943.9 3123.4 3300.2 3480.0 3682.9
Retailers
Non- 5773.6 6040.0 6332.2 6666.3 7055.5 7482.1
food
Retailers
Total 8542.6 8983.9 9455.6 9966.5 10534.4 11165.0

Source: P.G.Chengappa, Lalith Achoth, Arpita Mukherjee, B.M.Ramachandra Reddy and

P.C.Ravi, Evolution of Food Retail Chains: The Indian Context, 5-6th Nov. 2003,

Agri-business seems to be the next big thing for corporate India. Top
conglomerates such as Reliance, Bharti, Dabur and Adani are planning to
enter the fruits, vegetables and dairy segments. Table 1.2 indicates the list of
big retailers who are into the business of fruits and vegetables.

Table 1.2.-Key Food Retailers in India

15
 S.No. Retailer
1. Pantaloon Retail India Ltd.
2. Subhiksha Trading
3. ITC
4. Pizza Hut
5. Domino’s
6. Adani Agrifresh India Ltd.
7. Reliance
8. McDonalds
9. Niligiri’s
10. Metro Cash2Carry
11. NAFED Apna Bazaar
12. RK Foodland
13. Namdhari Fresh
14. Spencer Plaza

It is common knowledge that the shelf life of most fruits and vegetables is
lesser than other products. Chances of mismanaging are high and the
repercussion will be seen straight on the bottom line. 'Dump and damages' in
this category, as it is known, have made even the most accomplished retail
minds sweat. The nature of the category is such that most consumers would
like to touch, feel and then buy their veggies and customers will invariably
not buy without touching and pressing, even when the said product is inside
a plastic packet. Some customers find packed vegetables very convenient as
they can just 'pick and go'. Space, which is always at a premium, is also
considerably saved by not selling 'loose' vegetables. However, this goes
contrary to most customers' preference, which could be one of the reasons
for lesser than desired share of fruits and vegetables (5-10%) in the
shopping basket currently seen in supermarkets. This has seen retailers
swinging between the 'loose and packed'. Like in any other category, buying

16
 plays a crucial role here too, more so as there is no transparency in pricing
unlike other products.

The retail boom will face a strong competition from the 12 million mom-
and-pop stores, which are easily accessible and approachable and provide
services like free home delivery and goods at credit. But buying from Malls,
Supermarkets and Department stores like Subhiksha, Marks & Spencer’s, etc
gives a different feeling and the environment of pick and choose from a
variety of products. A number of retail giants are also going to explore the
market such as Reliance Retail Ltd and Wal-mart. The revolution is driven
by large expectations where both domestic and international players will be
channel through which other large stores in India are spreading themselves
across the country.

Formats in Food Retailing:

The changing food consumption patterns, consumer need for convenience,

choice and value for money, are changing the set up of the retail format. The
Indian consumers visit 8 to 10 outlets to purchase the various food products.

These outlets include neighbourhood kirana stores, bakeries, fruit and

vegetable outlets, etc. which are very time consuming and unproductive way
of purchasing of food.

The various retail formats are as follows:

• Neighbourhood Stores or Kirana Stores:

17
 Semi­organized retailers like kirana (Khandani stores), grocers and provision 

stores are characterized by the more systematic buying from the mandis or 

the farmers and selling from fixed structures. Economies of scale are not yet 

realized in this format, but the front end is already visibly changing with the 

times. The model is very antithesis of modern retail in terms of the buyer 

(retailer)­seller (FMCG) equations. It is not unknown for MNC leaders to 

link the supply of one line of products to another slower moving line of 

products. These retailers are not organized in the manner that they could 

challenge the power of the sellers, most protests have been in the form of 

boycotts, which really haven't hit any company permanently.

• Hawkers 'mobile markets': 

This unorganized sector is characterized by the Thela vendors (also known

as “mobile market”) seen in every Indian by lane and is, therefore, difficult
to track, measure and analyse. But they do know their business; these lowest
cost retailers can be found wherever more than 10 Indians collect, like a
rural post office, a dusty roadside bus stop or a village square. As far as
location is concerned, these retailers have succeeded beyond all doubt. They
have neither village nor city-wide ambitions or plans their aim is simply a
long walk down the end of the next lane. This mode of “mobile retailers” is
neither scalable nor viable over the longer term, but is certainly replicable all
over India. Most retailing of fresh foods in India occurs in Mandis and
roadside hawker parks, which are usually illegal and entrenched.

18
 These are highly organized in their own way. Hawking of food products,
cooked food and FMCG products is a very interesting model of retailing.
Much has been written about these roadside “malls” from social security
issues to their nuisance value. However, if you put these hawkers together,
they are akin to a large supermarket with little or no overheads and high
degree of flexibility in merchandise, display, prices and turnover.

• Department Store:

A department store offers an extensive assortment (width and depth) of

goods and services that are organized into separate departments for the
purpose of efficient buying, assortment, promotion and above all ease of
shopping for the consumer. Such a format provides the greatest selection
of any general merchandize and very often serves as the anchor store in
shopping mall or shopping centre. In India, the number of department
stores is less compared to other retail formats such as supermarkets and
discount stores. For example, Shoppers' Stop is the first one to open a
department store in the early 1990s and currently operates 19 stores in
10 different cities in India. It is getting stronger and stronger year after
year. It attracts more than 12 million shoppers every year. Another
operator ‘Lifestyle India’ began operations in 1998 with its first store in
Chennai in 1999 and in March 2006, it opened one of the largest
department stores in the same city.

• Hypermarket:

Hypermarkets have emerged as the biggest crowd pullers due to the fact that
regular repeat purchases are a norm at such outlets. Hypermarkets not only

19
offer consumers the most extensive merchandise mix, product and brand
choices under one roof, but also create superior value for money advantages
of hypermarket shopping. Number of players operating hypermarket format
are increasing day by day.

One of the leading players in this format is Pantaloon Retail India Limited
which operates 32 Big Bazaars in twenty cities. In early 2006, the K. Raheja
Corp (C.L. Raheja Group) has introduced its value retail concept Hypercity
which is the country’s largest hypermarket at 118000 sq ft. Hypercity carries
product range varies from Foods, Home ware, Home Entertainment, Hi-
Tech, Appliances, Furniture, Sports and Toys & Clothing. Hypercity Retail
plans to open 55 hypermarkets by 2015.

As the market is expanding and consumers are in a mood to accept changes,

hypermarkets are getting overwhelming response from consumer. Currently
there are about 40 odd hypermarkets in India but this format holds a great
potential for growth. Hypermarkets can offer whole lot of benefits to
consumer. As all hypermarkets use food and grocery as crowd puller, the
price plays major role. Apart from price, other things retailers need to worry
about are offering right product mix at right price and right place. Ideally, a
40:60 mix of food to non-food should yield a blended gross margin of
around 18-19 %.

Hypermarkets will be successful if the retailers understand the shopper

better and design product offering tailor made for specific segment of
consumer. Retailers have to use efficient sourcing and merchandising
process to bring down cost of operation. The most important one is to phase
out inefficiencies from the supply chain and pass on a part of that benefit to

20
 consumer. Another way of improving margin is to increase percentage of
private label or store brand.

• Supermarket:

Unlike western countries where supermarkets are prominently visible, in our

country this is lacking. The supermarkets largely concentrate on selling food
related products and are considerably smaller in size compared to
hypermarkets. Their value proposition is also different from the
hypermarkets. The supermarkets offer relatively less assortments but focus on
specific product categories. They do not play the game on price rather use
convenience and affordability as their salient features. In India this role is
played by the provision stores and sweet shops. Interestingly the fresh
vegetables and fruits are sold on the foot path and in open markets.
Traditionally consumers feel conservative to buy fruits and vegetables from
air conditioned supermarkets. They prefer to buy either from the local mobile
vegetable sellers or from the nearest sabji market. Probably that works as
deterrent factor for the growth of supermarkets in India. But the situation is
changing and slowly supermarket operators are coming to their own.

A supermarket normally sells grocery, fresh, cut vegetables, fruits, frozen

foods, toiletries, cosmetics, small utensils, cutlery, stationery and Gift items.
In India Food World, Food Bazaar, Nilgiri (30 plus stores), and Adani are the
leading super market operators. One of the biggest super market operators in
the western India is Adani Retail Limited which operates Adani super market
plans to continue its journey to reach total 19 cities with the store strength of
60 plus in the state of Gujarat. ARL also plans to expand its operation in the
neighboring states of Rajasthan, Madhya Pradesh, Maharashtra and

21
Chhattisgarh. Subhiksha is one of the leading super market operators, who
largely operates in the southern part of India is expanding to western India.
One more retailer Reliance Retail is on the move and this retailer opened its
Reliance Fresh-a super market chain with 11 stores in Hyderabad in
November 2006 and is planning to enter 70 more cities within 2 years.
Fabmall a part of Trinetra Super Retail Limited is also expanding. By June
2006 Fabmall had 28 super markets in some cities and the retailer is
planning to open 25 outlets in Kerala by March 2007.

Food Bazaar operates in major cities in India with a floor space ranging
from 6,000 sq ft to 16,000 square feet and the format sells both food and
non-food items. The non-food items contribute about 22 per cent of total
sales and rest is contributed by the food related items. A Food Store
stocks an average of 7,000 stock keeping units (SKUs) and over 50,000
articles. The SKU's are divided into the broad categories - staples, fresh
produce and branded foods, home & personal care products. Staples
include groceries like rice, wheat, dal, spices and oils. Fresh produce
comprise of fruits and vegetables, which are sold loose through the
concessionaire arrangement. Along with national brands and local brands
the store keeps private labels in some product categories such as utensil
cleaners, preservatives and bakery products. For example in utensil
cleaner category private label gives the highest margin about 25 per cent
and commands a share of 50 per cent in the store. The private labels
offer flexibility to both the retailer and the consumer on price front. The
objective of the store is to offer variety at affordable price in each
category. Food Bazaar is made the transition from a just grocery retailer

22
 to developing emotional bonding with shoppers by providing some value
added services to the shoppers. Some of these initiatives include:

Live chakki: which allows customers to buy fresh wheat and have it
grinded there at the store

Fresh Juice counter: This provides customer to have fresh juices.

Live dairy: This provides customers with fresh milk and milk products.

Live kitchen: Customers have the option of buying vegetables, getting

them chopped, cooked fully or partly. Soups, salads and sandwiches are
also available

• Convenience Stores:

A Convenience store offers location advantage for the shoppers and provides
ease of shopping and customized service to the shoppers. It charges average
to above average prices, depending on the product category and carries a
moderate number of stock keeping units (SKUs). Normally it remains open
for long hours and shoppers use it for buying fill-in merchandize and
emergency purchases. In India, Convenience stores occupied 23 thousand
sq. meter of retail space with sales of about Rs 1347 million in 2005 and are
expected occupy 85 thousand square meter of selling space by 2010 . During
the same period, sales is expected to touch Rs 5271 million and number of
outlets are likely to grow from 510 to 2434. Twenty Four Seven a new
format of convenience store is operational in Delhi from June 2005. Twenty
Four Seven's portfolio comprises 3,500 stock keeping units (SKUs) of
branded fast-moving consumer goods and another 3,500 SKUs of

23
prescription and over-the-counter drugs besides 300 private labels products
across food, focusing on staples such as pulses and rice.

FDI Investments:

It is widely acknowledged that FDI can have some positive results on the
economy, triggering a series of reactions that in the long run can, it can lead
to greater efficiency and improvement of living standards, apart from greater
integration into the global economy. Supporters of FDI in retail trade have
said that how ultimately the consumer is benefited by both price reductions
and improved selection, brought about by the technology and know-how of
foreign players in the market. This in turn can lead to greater output and
domestic consumption.

But the most important factor against FDI driven “modern retailing” is that
the labour displacing to the extent that it can only expand by destroying the
traditional retail sector. It would make eminent sense that any policy that
results in the elimination of jobs in the unorganized retail sector should be
kept on hold.

The primary task of government in India is still to provide livelihoods and

not create so called efficiencies of scale by creating redundancies. As per
present regulations, no FDI is permitted in retail trade in India. But, allowing
51% FDI (which have been the proposed in February, 2006) will have
immediate and dire consequences. Entry of foreign players now will most
definitely disrupt the current balance of the economy; will render millions of
small retailers jobless by closing the small slit of opportunity available to
them.

24
For example, if Wal-Mart, the world’s biggest retailer sets up operations in
India at prime locations in the 35 large cities and towns, the supermarket
will typically sell everything, from vegetables to the latest electronic
gadgets, at extremely low prices that will most likely undercut those in
nearby local stores selling similar goods. Wal-Mart would be more likely to
source its raw materials from abroad, and procure goods like vegetables and
fruits directly from farmers at preordained quantities and specifications. This
means a foreign company will buy big from India and abroad and be able to
sell low – severely undercutting the small retailers. Such re-orientation of
sourcing of materials will completely disintegrate the already established
supply chain.

But, the government of India is considering the opening up of the $330

billion retail market with adequate provisions to protect neighbourhood
stores.

Future of food retailing:

Food retailing industry has revolutionized the shopping experience of the

customers in India. It is growing at the rate of 30% and it is the major
driving force for the retail industry. Food and food products account for
about 50% of the value of final private consumption. The Urban Middle
Class continues to grow by 20-25 million annually. The percentage of
income spent in households will drive growth in the food market. The
population is young, better exposed to modern lifestyles, and has a
preference for packaged food and beverages. This growing Indian Middle
Class, have higher propensity to consume, fuelled by easy availability of
credit due to popularization of plastic cards. Currently, the retail food sector

25
is US$ 70 billion and is expected to rise to US$ 150 billion by 2025. The
graph below shows that the share of food & grocery in the sales of retail is
more than any other item like clothing, durables, footwear, books and music,
etc. In retail sales, the share of food & grocery is the highest i.e. 77%. The
share of the clothing is 7%. The share of durables and jewellery &
accessories are 4% equally. The share of medical services, health & beauty
and home furnishing are 2% equally. The share of footwear and books &
music are 1% equally.

Total Retail Sales

Food & grocery

Clothing
Durables
Jewellery & accessories
Home Furnishing
Health & Beauty
Medical Services
Footwear
Books & music

More than 1,000 Food retail outlets operational across many Indian States
and Retail space of over 3 million sq. ft. have come up for F&G
supermarkets, department stores and hypermarkets. Improve in logistics,
warehousing, state-of-the-art technology and availability of quality
processed and packaged food are factors that will boost the growth of
organized F&G retail in India. Indian corporates like ITC, Godrej, and DCM

26
Shriram have initiated the process of direct supply linkages with the farm.
Corporate major Reliance is investing heavily on this front. Wal-Mart too
plans back-end operations with Bharti.

Nearly 80 per cent of agricultural produce in developed countries gets

processed and packaged. It is just about 2 per cent in the case of India.
Marine Food Parks and Agricultural Special Economic Zones are already
being worked out to ensure that farmers are not displaced. The development
of food processing will definitely give rise to food retailing in India.

More than 5,000 new outlets, 100 hypermarkets, 500 department stores and
2000 supermarkets are opening. Over 5,000 small and big existing outlets
are to undergo a complete facelift. Organised retail in India will increase at a
high rate.

Home-grown as well as international restaurant chains present in both high

street locations and malls represent the organized food services retail sector.
This sector is in its growth phase and offers opportunities across a variety of
retail formats.

Thus, the above description shows that food retailing sector is growing
at the high rate. The entrance of international food retailing companies in
India will change the experience of consumers in India. This will also
give competition to the Indian organised retailers. It will also effect the
shopping experience of Indian consumers.

27
 Challenges In Food retailing:

• The first challenge facing the organized retail industry in India is the
competition from the unorganized sector. Traditional retailing has
established in India for some centuries. It is of low cost structure, mostly
owner-operated and has negligible real estate and labour costs and there are
little or no taxes to pay. Consumer familiarity that runs from generation to
generation is one big advantage for the traditional retailing sector. In
contrast, players in the organised sector have big expenses to meet and yet
have to keep prices low enough to be able to compete with the traditional
sector.

• High costs for the organized sector arises from: higher labour costs, social
security to employees, high quality real estate, much bigger premises,
comfort facilities such as air-conditioning, back up power supply, taxes etc.

28
 Organised retailing also has to cope with the middle class psychology that
the bigger and brighter a sale outlet is, the more expensive it will be.
• The Indian consumer has a demand for freshly cooked food than over
packaged food. The Indian consumer is extremely value conscious. The
packaged food players need to drive down prices by almost 35-40% to be
comparable on cost with home made players.
• There are multiple cultures, languages and religions which bare having huge
bearing on the tastes and preferences of the Indian consumers. This will pose
challenge for the players aspiring to develop the Indian presence.
• As the retail expands, there is expected to be a dearth of skilled
manpower. The lack of institutions and courses for different aspects of
retail management will have an impact on overall supply of quality
manpower.
• The local law does not easily permit the organizations to open the stores.
• Agricultural markets, in most parts of the country, are regulated under
the State APMC (Agriculture Produce Market Committee) Acts. The act
was established to protect farmers and set a minimum support price.
However, today it is creating a problem for the competitive marketing
system and smooth supply of raw materials to agro-processing
industries. Thus, it affects the on time delivery of the products to the
retail outlets.

29
REVIEW OF LITERATURE

30
 REVIEW OF LITERATURE

• Kumcu Erdogan, Kumcu Ercan M. (1987) discussed that the small food
stores are dominant form of food retailing in Turkey. They argued that country-
specific-demand-side variables such as consumption patterns and shopping
habits, supply side variables. These supply side variables are marketing by
stores and markets entry conditions and public policy. These variables play
important roles beyond the stage of economic development in determining the
food retailing structure in the developing countries.
• Joshi Pradnya A., Patel Sonali P. (2000), suggested from the study that Fresh
vegetables & fruits are exposed to potential microbial contamination. Consumer
demand is to use fresh vegetables & fruits which are bacteriological safe.
According to them, the microbial load in local market samples was very high as
compared to super market & Hydrogen Peroxide can be used as rinsing agent to
improve the quality of fresh vegetables & fruits.
• Hahn, Green William F. and Richer D. (2000) suggested the dynamic
econometric model relating the wholesale meat prices to retail prices. The
wholesale meat demand was estimated using the monthly data on the U.S.P
rises and quantities of beef, pork and chicken. The hypothesis was that there
were fixed proportion between wholesale meat inputs and retail meat outputs.
• Cude Brenda J. and Morganosky Michelle A. (2001) analyzed that the
consumer does cross shopping between supermarkets and non traditional food
retail outlets. They examined the reasons by focus groups which were
conducted in two major metropolitan markets and one medium size market.
Focus groups patronized the increased number of the types of food retail

31
 outlets, but they said that they didn’t spent more time in grocery shopping at
multiple formats of food retail outlets.
• Gevens Maggie, Brengman Malaika and Jegers Rosette S. (2002) said that
consumers are not fond of the way they do grocery shopping. On the other
hand, consumers seem to prefer that the retail stores evolve in retailing
superstores, rather than choosing the more revolutionary alternative of online
shopping that indicates the prediction of the future success of online retailing
that may be inflated and the experiential aspect of high-touch products should
be underestimated.
• Cummins, S. and Petticrew, M. and Sparks, L. and Findlay, A. (2005),
suggested that when adjusting for age, sex, educational attainment and
employment status, there is no population impact on the daily food and
vegetable consumption and psychological health. They assess the effect on fruit
and vegetable consumption and psychological health of a “natural experiment
by the introduction of large scale food retailing in a Scottish community.
• Sehran P., Narendra Babu R., Sureshkumar R. and Venkataramanujan V.
(2007), suggested on the basis of microbial quality assessment that pork
products were found to be better in comparison with other meat products. They
studied on microbial quality of the commercially available beef, pork, mutton
and chicken products in Chennai city. They found that mutton products showed
the highest microbial counts in all the microbial quality parameters.
• Andres Sven M. (2008) suggested the evidence of retail oligopoly and
oligopsony power. It estimates indicate that retail market power accounts for
0.5% to 11% of the retail unit margins of beef and pork. There is also the
estimate of the degree of oligopoly and oligopsony market power in the German
food retail industry. It is derived by applying a set of monthly state level retail
of beef and pork marketing data in the federal state of Hessen, Germany.

32
• Gohin Alexandre, Guyomard Herve (2008) suggested the pricing behavior
for food retailing firms in both a quantity-setting oligopoly engaged in the joint
production of demand –related final goods and quantity-setting oligopsony for
supply-unrelated wholesale goods by developing the empirical model. This
model was applied to french food retail industry and three commodities were
distinguished like dairy products, meat products and other food products.
• Mangla K.P, Chenagappa P.G. (2008), suggested the main strategy of the
food retail chain ensures a steady and continuous supply of fresh vegetables and
flow of income to the farmers. This linkage has been able to change the method
of farming and marketing arrangement followed by the food retail chains. This
model of linkage is specially suited to small and marginal farmers. It improves
their economic conditions by providing an opportunity to grow and supply
high- value vegetables round the year at the descent price.

33
RESEARCH METHODOLOGY

34
 RESEARCH METHODOLOGY

Research Design:

The comparative study was performed in the research. This would explain
the opportunities of food retailing. The comparison was done between the
food retailing companies and their products.

Data Source:

The primary data was collected through the following ways:

• The case studies

• Various officers of the food retail outlets

The secondary data will be collected through the following ways:

• Books of retailing
• Websites of the various companies in food retailing sector.

Area Of Study:

The area of the study was Lucknow. As we know that Lucknow is the capital
of Uttar Pradesh. The food retailing is increasing at the very high rate in the
city. There is a great channel of unorganized retailing in Lucknow and now
the organized retailing is also emerging in the city. There have been
establishments of many food retail outlets in the city. The main players of

35
food retailing are: Food Bazaar, Food Mart, Food World, Barista, Pizza Hut,
Domino’s, McDonalds, KFC, etc.

Sampling Method:

The sampling method which was adopted in selecting the food retailing
companies was and retailers through purposive stratified random sampling.
The food retailing companies is dealing in selling of many products which
are not same. So the strata were formulated among the various retailers of
the food retailing companies.

Research Tools:

The research tools were the comparison between the companies through the
case study. The graphs and charts would be used to explain the comparisons
and the opportunities in food retailing.

36
DATA COLLECTION

37
 DATA COLLECTION
The region which was selected by the researcher was Uttar Pradesh. The
total geographical area of Uttar Pradesh is 2, 43,286 sq. km. The total
population in Uttar Pradesh is 166 million people. The rural population is
79.2% of the total population. The urban population is 20.8% of the total
population.

38
Table 1.3 : Population Of Uttar Pradesh

S.No Item Unit Figure

1. Area ‘000 sq. km. 241
2. Total Population No. 16,61,97,921
3. Urban Population No. 3,45,39,582
4. Rural Population No. 13,16,58,339
5. Urban Population as % to % 20.8
total population

39
6. Rural Population as % to % 79.2
total population
Source: Census of India, 2001, http://www.upgov.nic.in

As the Table 1.3 shows that there is the population of Uttar Pradesh is very
large and it is the most populous state in India. The majority of the
population is engaged in agriculture, so there are many prospects of the
growth of food retailing. The farmers who are engaged in agricultural
activities would provide their produce to the retail companies. But, still we
see that there is not much development of organized retailing in Uttar
Pradesh because of the local policies of the government.

The government has taken some steps to safeguard the productivity of the
farmers, so the companies cannot take their produce directly and this leads to
the enclosures of the retail outlets in the market of the state. For example,
closure of Reliance Fresh outlets in different parts of the state. So, there is
not much development of organized retailing in the state. But, there is a
great channel of unorganized retailing in the Uttar Pradesh. The unorganized
retailing is growing at the very high rate in the whole state.

Now, the organized retailing is also increasing because of the growth of FDI
investments in India. The growth of organized retailing is increasing in the
state and the organized retailers are slowly targeting the lower class of
consumers in the state by opening their outlets in the area of lower class
dwelling.

There is also the large requirement of employers in the retail sector in Uttar
Pradesh.

Table 1.4: Employment and requirement of the retail industry

40
Workers Management Total Officers Requirement
Officers Workers Total
Officers
61 36 97 2663 6868
Source: http://www.upgov.nic.in

As the Table 1.4 shows that there is large requirement of employees for the
retail sector in the state. The development of the retail sector will lead to
give employment to the people of the state. This would help in increase of
the living standards of the people of the state and the propensity to earn will
increase the development of organized food retailing in Uttar Pradesh.

The case study is given below which shows the comparisons between the
two companies i.e. Pizza Hut and Domino’s.

Case Study: Comparison of Pizza Hut and Domino’s

Until 1996, Pizza in India was synonymous only a bready dough base
slathered with some ketchup. Since 1996, there was a proliferation of 'high-
priced branded' pizzas in the market, with the entry of international pizza
chains. Domino's and Pizza Hut, the two big US fast food chains entered
India in 1996and their first outlet was opened in Uttar Pradesh. Each
claimed it had the original recipe as the Italians first wrote it and was trying
desperately to create brand loyalty.

41
Domino's and Pizza Hut – tried to grab as large a slice of the pizza pie as
possible. Domino’s Pizza is expanding its base in India by opening 500
outlets to add to its current tally of 156 outlets, across 50 cities in India by
2011 with an investment of Rs.1,000 crore.

The organized pizza market in India is worth Rs.500 crore and Domino’s has
a substantial 45% market share in the market of Uttar Pradesh, and
registered a healthy growth of 60% over last year, while Pizza Hut which
holds around 30% market share. While Pizza Hut relied on its USP of
"dining experience", Domino's USP was a 30-minute delivery frame. To
penetrate the market, both the players redefined their recipes to suit the
Indian tastes.

Domino's went a step ahead by differentiating regions and applying the

taste-factor accordingly. Domino's also made ordering simpler through a
single toll-free number through out the country. Domino's and Pizza Hut
expanded their market ever since they entered India.

Domino's entered India in 1996 through a company – owned franchise

agreement with Vam Bhartia Corp. This franchise was in the states of Delhi,
Uttar Pradesh, etc. The first outlet was opened in Delhi. With the
overwhelming success of the first outlet, the company opened another outlet
in Delhi. By 2000, Domino's had a presence in all the major cities and towns
in India. It was also opened in Lucknow. Pizza Hut had company-owned
franchisees – Universal Restaurants Pvt. Ltd. in the states of Delhi, Uttar
Pradesh, etc. Pizza Hut entered India in June 1996 with its first outlet in
Delhi in India. Initially, the company operated company-owned outlets.

42
However, keeping in line with its worldwide policy where Pizza Hut was
gradually making a shift from company-owned restaurants to franchisee
owned restaurants, Pizza Hut made the shift in India too.

When Domino's entered the market of India, the concept of home delivery
was still in its nascent stages. It existed only in some major cities and was
restricted to delivery by the friendly neighbourhood fast food outlets.
Eating out at 'branded' restaurants was more prevalent. To penetrate the
Indian market, Domino's introduced an integrated home delivery system
from a network of company outlets within 30 minutes of the order being
placed.

However, Domino's was not the trendsetter so far as home delivery was
concerned. But where Domino's stole the market was its efficient delivery
record. Domino's also offered compensation: Rs.30/- off the price tag, if
there was a delay in delivery. For the first 4 years in India as well as in Uttar
Pradesh, Domino's concentrated on its 'Delivery' act. For its delivery
promise to work, Domino's followed a 11-minute schedule: one minute for
taking down the order, one minute for Pizza-making, six minutes oven-time,
and three minutes for packing, sealing and exit.

Pizza Hut, on the other hand, laid more emphasis on its "restaurant dining
experience." It positioned itself as a family restaurant and also concentrated
on wooing kids. Its delivery service was not time-bound. A company official
said, "The Pizza making process takes about 20 minutes and since we don't
usually deliver to places which are beyond the reachable-in-half-an-hour
distance, customers can expect home delivery within 45 minutes."

43
Moreover, analysts felt that Pizza was something that just was not meant to
be delivered.

Domino's sold a 12" Pizza for Rs 265. The high price was attributed to the
high quality of ingredients used. However, with competition increasing
from Pizza Hut, Domino's introduced price cuts, discounts to attract the
customers.

The future will see both giants battling it out by catering to the Indian taste.
More pan Indian menus are expected to be released. On the marketing front,
the clear leader happens to be Domino’s which has formed exclusive
partnerships to set up its stores in upcoming malls and industrial campuses.

44
 ANALYSIS & RESULTS

ANALYSIS & RESULTS

The above case study shows the comparison between the two main players
of the food retailing companies i.e. ‘Domino’s and Pizza Hut’. These two
companies are operating in region of Uttar Pradesh.

Domino's entered India in 1996 through a company – owned franchise

agreement with Vam Bhartia Corp. This franchise was in the states of Delhi,
Uttar Pradesh, etc. The first outlet was opened in Delhi. With the
overwhelming success of the first outlet, the company opened another outlet
in Delhi. By 2000, Domino's had a presence in all the major cities and towns
in India. It was also opened in Lucknow. Pizza Hut had company-owned

45
 franchisees – Universal Restaurants Pvt. Ltd. in the states of Delhi, Uttar
Pradesh, etc. Pizza Hut entered India in June 1996 with its first outlet in
Delhi in India. Initially, the company operated company-owned outlets.
However, keeping in line with its worldwide policy where Pizza Hut was
gradually making a shift from company-owned restaurants to franchisee
owned restaurants, Pizza Hut made the shift in India too.

When these two companies have entered in India, they have created the
revolution in the retail format and offered consumers the new experience in
the market. Before, Pizza was not much popular in India. But, the entrance
of the two companies has brought the “Pizza Revolution” in the Indian
market. The Domino’s strategy was concentrated in home delivery while
Pizza Hut, laid more emphasis on its "restaurant dining experience." It
positioned itself as a family restaurant and also concentrated on wooing kids.
Its delivery service was not time-bound.

The results of this case study are as follows:

• The Domino’s have targeted the people who are home sick and wants to stay
in their home but do not like to the food of ‘branded restaurant’ by
delivering the food at their home. Domino's introduced an integrated home
delivery system from a network of company outlets within 30 minutes of the
order being placed. Domino's also made ordering simpler through a single
toll-free number through out the country. Pizza Hut, on the other hand, laid
more emphasis on its "restaurant dining experience." It positioned itself as a
family restaurant and also concentrated on wooing kids. Its home- delivery
service was not time-bound.

46
• Domino's was not the trendsetter so far as home delivery was concerned. But
where Domino's stole the market efficiently by offering compensation:
Rs.30/- off the price tag, if there was a delay in delivery. While, in the case
of Pizza Hut, the officials said that, the Pizza making process takes about 20
minutes and since we don't usually deliver to places which are beyond the
reachable-in-half-an-hour distance.

• The pizza market in Uttar Pradesh is worth Rs.100 crore and Domino’s has
a substantial share of 45% and it is growing at the rate of 60%. While, Pizza
Hut has the market share of 30%.

Market Share of Domino's and Pizza

Hut

50%
Market share

40%

30%

20%

10%

0%
Domino's Pizza Hut
Companies

As the graph above shows that the Domino’s has more market share in
the market in Uttar Pradesh region.

47
• Domino's sold a 12" Pizza for Rs 265. The high price was attributed to the
high quality of ingredients used. However, with competition increasing
from Pizza Hut, Domino's introduced price cuts, discounts to attract the
customers. The lowering of the price leads to the growth of the Domino’s in
the market.

Thus, through this case study it can be said that Domino’s has much
market capture in the market of Uttar Pradesh.

48
As the above graph shows that there is the increase in the household
income of the people. The increase in income will leads to the
propensity of the people to earn on food and so the food retailing
industries will increase. This will also leads to the increase in organized
retailing in the state. There is establishment of many organized food
retail companies in the state. Now, the state is emerging as a great hub
for food retailing.

As we see that the income of the people is rising in Uttar Pradesh, as

the income of the people is rising, this will increase in food retailing in

49
the state. It can be seen from the above study that there is requirement
of employees in retailing in Uttar Pradesh, so the job seekers will
acquire the jobs through their experience and the food retailing would
increase in Uttar Pradesh. Through this research it can be analyzed that
there are many opportunities of food retailing in Uttar Pradesh.

50
RECOMMENDATIONS & SUGGESTIONS

RECOMMENDATIONS & SUGGESTIONS

51
 The recommendations & suggestions for the study of ‘Emerging
Opportunities in Food Retailing in Uttar Pradesh’ are as follows:

• The government of Uttar Pradesh is enforcing some laws which lead to the
enclosures of the many retail outlets in the market. These laws were to
safeguard the productivity of the farmer. The suggestion is that these laws
should not be enforced so that food retailing must be increased in India.
• The organized retailers must follow the marketing strategies that would help
them to attract every class of the people.
• The retailers always try to maintain the quality of the food products so that
consumers buy more products and food retailing get increased in the state.
• The trained employees should be employed in the stores so that consumer
does not face problems while purchasing the products.
• The food retailing companies should perform promotional activities so that
consumer can easily understand the quality of the product and purchase that
product with full satisfaction.
• The items should be easily accessible to the consumers so that they have
option to decide on the various alternatives.

52
CONCLUSION

CONCLUSION

53
Food retailing industry has revolutionized the shopping experience of the
customers in India. It is growing at the rate of 30% and it is the major
driving force for the retail industry. Food and food products account for
about 50% of the value of final private consumption. The Urban Middle
Class continues to grow by 20-25 million annually. The percentage of
income spent in households will drive growth in the food market. The
population is young, better exposed to modern lifestyles, and has a
preference for packaged food and beverages. This growing Indian Middle
Class, have higher propensity to consume, fuelled by easy availability of
credit due to popularization of plastic cards. Currently, the retail food sector
is US$ 70 billion and is expected to rise to US$ 150 billion by 2025.

Food retailing has largely been in hands of small roadside grocer shops,
mandis and bazaars through out the Indian history but slowly the shift is
taking place towards retailing through supermarket stores. Retail food sale in
India was approximately $132 billion in fiscal year 1998 and is growing at
13-14% per annum. The retail market for fruits and vegetables has grown at
over 20 percent per annum. Of the total food and grocery market only Rs7bn
is in the hands of organized sector.

Through the study of the research it can be seen that there are many
opportunities of food retailing in Uttar Pradesh. The consumers are always
willing to purchase on the food as it is their basic need. The share of the
sales of the retailing in food and grocery is very higher than any other items.
So the opportunities of the food retailing are increasing as the propensity of
spending of the consumers is increasing and it is giving rising to the sale in
food retailing.

54
The challenge facing the organized retail industry in India is the competition
from the unorganized sector. Traditional retailing has established in India for
some centuries. It is of low cost structure, mostly owner-operated and has
negligible real estate and labour costs and there are little or no taxes to pay.
Consumer familiarity that runs from generation to generation is one big
advantage for the traditional retailing sector. In contrast, players in the
organized sector have big expenses to meet and yet have to keep prices low
enough to be able to compete with the traditional sector.

To conclude it can be said that despite of the challenges which are faced by
food retailers, there are many prospects of the food retailing in India and its
states. It would be beneficial for the companies in food sector as the
agriculture is the main occupation of the people in Uttar Pradesh and raw
materials would be easily available from the farmers.

55
BIBLIOGRAPHY

BIBLIOGRAPHY

56
• Kumcu Erdogan, Kumcu Ercan M. (1987) Determinants of food retailing in
Developing Economies: A case of Turkey, Journal of Macromarketing, vol.
7(1987), pp.26-40
• Hahn, Green William F. and Richer D. (2000) Joint cost in meat retailing,
Journal of agriculture and research economics, Vol. 25(2000), pp.109-127
• Cude Brenda J. and Morganosky Michelle A. (2001) Why do consumers
cross shop between different types of food retail outlets, Journal of food
distribution research, Vol 2(2001), pp.56-60
• Gevens Maggie, Brengman Malaika and Jegers Rosette S. (2002) Food
retailing now and the future: A Consumer perspective, Journal of retailing
and customer services, Vol. 10(2002), pp.41-51
• Cummins, S. and Petticrew, M. and Sparks, L. and Findlay, A. (2005),
Large scale food intervention and diet, British medical journal
Vol.330(2005),pp.683-684
• Sehran P., Narendra Babu R., Sureshkumar R. and Venkataramanujan V.
(2007), Microbial quality of retail meat products available in Chennai city,
American Journal of technology, Vol.2(2007),pp.55-59
• Andres Sven M. (2008), Recurring Market power for food retail, Atlantic
Economic Journal vol. 36(2008), pp. 441-454
• Gohin Alexandre, Guyomard Herve (2008), Measuring market power for
food retail activities: French evidence, Journal of Agricultural Economics
Vol. 51(2008), pp.181-195
• Mangla K.P, Chenagappa P.G. (2008), A novel agribusiness model for
backward linkages with farmer:a case of food retail chain, Agricultural
Economic Research Review, Vol. 21

57
• Joshi Pradnya A., Patel Sonali P. (2000),Microbiological analysis of fresh
vegetables & fruits and effect of anti-microbial agents on microbial load,
Journal of food Protection, Vol. 65 (4), pp.677-682.
• Statistical Outline of India (2001-02), NCAER

• National Council of Applied Economic Research (NCAER)

• Indian readership survey (IRS)

• http://www.upgov.nic.in/upinfo/census01/cen01-1.htm
• www.ficci.com/media-room/speeches-
presentations/2006/oct/agri/sauravahuja.pdf
• www.chillibreeze.com/articles_various/Food-Retail-industry.asp
• www.managementparadise.com/forums/service-sector-management-s-
s.../19709-food-retailing-india-challenges-trends.htm
• http://www.pizzahut.com
• http://www.domino’s.com

58