• Indian food retail sector is highly unorganized and fragmented. The degree of fragmentation is much higher among food retailers than among non-food retailers. Organized food retail formats account for 72 % of global food sales. This share is less than 1 percent in India.
  • The organized food retail market is estimated at INR 20 bn (Approximately 0.2 % of food expenditure in India).This has displayed rapid growth, albeit from a small base, exceeding 40 % annually.
  • Most organized retailers in India are regional and use single formats such as convenience stores, supermarkets, hypermarkets or cash and carry. In contrast most international retailers have multiple format models. Besides reflecting the stage of evolution of retailing in India, this also highlights the capital constraints of existing players in India, restricting their ability to make large investments.
  • In India food companies are much larger in size than the organized food retailers in India. In contrast, the retailers are larger in size, than food companies, in developed countries.
  • There are an estimated 12 million retail outlets in India, with a total retail space of about 2 billion sq ft. About 5 million of these outlets are engaged in retailing of food and food products.
  • The majority of food and food products are retailed through neighborhood kirana stores. A typical kirana store has a retail space of 200sq. ft and sells 500 to 800 stock-keeping units (SKUs). The kirana stores focus on dry food products in the absence of infrastructure for cold storage. Bulk of fresh produce is sold by vendors with push carts. Meat, poultry and marine products are primarily sold by small retailers in wet markets.
  • A kirana store’s single largest advantage over organized formats is its proximity to consumers. However the limited space of such stores, together with capital constraints of the operators, has translated into restricted choice, low value for money, poor quality and lack of shopping experience for the customer. There have been instances of significant deterioration of food products which have short self lives, on account of poor hygiene and storage conditions at retail outlets.
  • The fragmented retail structure results in inefficient storage and transportation of food products, wastages and value loss, and high cost of distribution.
  • The Key impediments to growth of organized food retailing in India are lack of infrastructure, technology and capital. FDI is not allowed in retailing with the exception of cash & carry formats.
    (Source: Ministry of Food Processing Industry, Govt. of India, Vision 2015 Report)
  • Since nearly 60 per cent of the average Indian grocery basket comprises non-branded items, the branded food industry is homing in on converting Indian consumers to branded food.
    (Source: IBEF website http://www.ibef.org/industry/retail.aspx accessed on 12th March 2007).

Indian Market Features favorable to Food Retail:

  • Food and food products account for 53% of the value of final private consumption estimated at INR 8600bn (2003-04 at current prices).
    (Source: Ministry of Food Processing Industry, Govt. of India, Vision 2015 Report)
  • Rising incomes ( Over 40 % of Indian households in rich and consuming class segment by 2006-97)
  • Young population (75% below 35 yrs age)
  • Increasing number of women in workforce (Female work participation has increased from 11.5 % in 1991 to 31.0 % in 2001 in Urban area)
  • Focus on enjoying life in Urban India( Percentage share of final consumption expenditure on Eating Out has increase from 8.0 % in 1999 to 12.2% in 2002)
    (Source: FAIDA Revisited, 2005)