A
new frontier
Preethy
Ann Kochummen appraises FoodWorld, a supermarket biggie down south,
and explores the finer nuances of the possibilities inherent in food
retail
In
a country populated by food-loving communities, food retail, especially
in the organised sector, hasn’t taken off particularly well. But there
are still a few names that have withstood the tests of changing consumer
behaviour and spending patterns, and have emerged victorious. In times
when growth was synonymous with geographical expansion, FoodWorld looked
and stayed South-friendly, consolidated itself, establishing more than
85 stores in the region.
The
Rs 350-crore FoodWorld started as a division of Spencer & Co, a part
of the RPG Group, and in May 1996, opened its first supermarket in Chennai.
The proportion of food retail in India is much less compared to the
total food consumed. Though food is sold through approximately 4.5 million
outlets, distribution is fragmented and the share of organised retail
is miniscule. According to KSA Technopak’s Consumer Outlook 2003, though
a substantial 42.1 per cent of consumer spends are on groceries, the
consumer is willing to travel only about 0.91 km for the same.
Clearly
then, convenience is an integral factor to grocery shopping. Recognising
this, FoodWorld supermarkets about 4,000 sq ft in area – sprung up in
various locations within a city, each catering to around a 2-km radius.
When FoodWorld began in 1996, consumer surveys revealed that people
were satisfied with their local kirana stores. They were nearby and
offered goods on credit. The perception was that supermarkets would
be more expensive, without the convenience of credit. Due to media spotlight
and the influx of more globally travelled Indians, this format is now
gaining acceptance. The FoodWorld strategy was, initially, to bring
in acceptance of the supermarket format, and then, to build the price-value
relationship in the consumer’s mind.
Times
are a-changin’
So
have consumers evolved in their perception of food retail as a part
of their daily domestic buying? Says Mala Morris, Head, Customer Service/Development,
FoodWorld, “Today, in cities that FoodWorld exists, consumers who haven’t
visited FoodWorld are rare. Often, we want to do focus groups with consumers
in the SEC (Socio-economic class) A, B, C1 categories who have not visited
FoodWorld, and it’s next to impossible to find them.
To that extent, acceptance is much higher now.” Currently, FoodWorld
boasts’ 30 lakh footfalls a month with an average bill value of around
Rs 200. It all came about with the continuous streamlining of processes,
effective cost reduction, and continuous innovation.
Though processed foods have longer shelf life, the concept of fresh,
homemade food is still ingrained. Going to an organised retailer for
daily domestic supplies, which is located at a considerable distance
from the place of residence. And therefore buying collectively for a
week or 10 days at one go, is not that common yet. Says K Radhakrishnan,
VP, Merchandising/ Marketing, “These reasons are psychological and will
change only over a period of time. Ten years ago, people made butter
at home; today they buy it, but people still make curd on their own,
10 years later they’ll be buying it.
While
organised retail will grow with changes in the pace of living, some
changes will also be brought about by organised retail.” Food retailing
operates on wafer-thin margins and large footfalls do not ensure a sound
bottomline. According to industry sources, knowledge of the regional
market is indispensable for increasing footfalls.
Merchandise-wise
FoodWorld works on the hub-and-spoke model. A hub is typically of 50,000-60,000
sq ft in area and serves about 30-40 stores in a radius of 30 km. A
regional buying office oversees all buying procedures. While globally
accepted food safety guidelines aren’t quite in force, a few Indian
regulations are adhered to. Non-branded products account for 50 per
cent of sales at FoodWorld; general merchandise is sourced locally.
While for branded products, buying directly from companies is preferred,
total streamlining of this process will require a....
contd.....
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