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Aug, 12 2014

Profits on the shelves in F&G industry

The grocery shopping experience for the consumers has definitely changed. Now, customers can easily browse and choose between hundreds of options and also, take help of the appointed sales staff for right selection. The Industry has grown beyond imaginati

The Indian retail industry has experienced growth of 10.6 per cent between 2010 and 2012 and is expected to increase to USD 750-850 billion by 2015. Food and Grocery is the largest category within the retail sector with 60 per cent share followed by apparel and mobile segment. The new face of the food and grocery sector is indeed very impressive and franchising the concept has truly made the brands expand to unimaginable levels. Below are the leading names in the F&G industry growing by leaps and bounds via franchising-

=Owned by Mother Dairy Fruits & Vegetables Pvt. Ltd, brand Safal stands for fresh, safe and value for money produce. The brand started franchising in 1986 and currently has 400 COFO (company owned franchisee operated) outlets in Delhi and 35 COCO outlets in Bengaluru.

= Taaza, a Hyderabad-based chain of convenience retail stores provides groceries, fruits & vegetables, frozen foods, dairy products and much more to the customers. Taaza successfully operates five stores in and around Hyderabad. Brand's experienced management and seamless supply chain network assures to fulfill store demands.

= Future Group's Big Bazaar Direct is a revolutionary business model with a mix of digitisation and brick and mortar store. It is a unique concept of 'Assisted Shopping'. Consumers can shop at their convenience with the help of Big Bazaar Direct franchisees. These franchisees will serve as point of sales, offering customers a choice mix of home fashion, general merchandise and fashion from Big Bazaar. This is done with the help of a 3G enabled 10.1” tablet with the best deals from Big Bazaar.

= Another brand, Sahara Q Shop is the FMCG and retail arm of Sahara India Pariwar. Sahara Q Shop has an enviable portfolio of 895 products in various categories. The brand takes pride in its 100 per cent adulteration free products, which are available across the country through 1266 exclusive brand outlets, e-commerce, call centre, HORECA, quality mobile shops (QMS), and kirana stores.

= Jaiveco by Areva Lifestyle is yet another specialty convenience store format, focused on healthy food and lifestyle. Jaiveco is a multi-brand store, focused on fulfilling consumer needs. Being a convenience store format gives the brands an advantage of being a risk-free business model. The brand follows a complete FOFO model.

= Another brand, Morarka Organic offers certified organic products under its own brand 'Down to Earth' since 2005. Morarka Organic food products provide an opportunity for healthier and safer option and provide large range of organic food products. 90 percent of it is Indian kitchen grocery and ready to eat products.

Fruitful returns in F&G franchise

Ever since the super stores, hypermarkets and convenience store concept came into existence, the opportunity for investors and potential franchisees keen on investing in F&G sector has grown manifold. Pradipta Sahoo, Business Head, Horticulture, Mother Dairy Fruits and Vegetables Pvt Ltd says: “Safal stores are categorised as COFO stores where day to day operations are taken care by the franchisee. The franchisee is not needed to pay any franchise fee or royalty fee and can start the same with a very small capital which is refundable after a period of time. The franchisee is just required to place in its day to day requirement for stock and maintain the front end for consumers to visit. Every year Safal requires 100 franchisees to manage these outlets. 50 for new stores and another 50 for replacement in the existing stores.”

Big Bazaar Direct franchisee gets associated with the Big Bazaar brand with no working capital and a huge opportunity to excel as an entrepreneur. Vivek Biyani, Director, Big Bazaar Direct says: “ A Big Bazaar Direct franchisee has certain key benefits like comprehensive start-up and on-going training, customised, local traffic-driving marketing campaign support from Big Bazaar and also significant lower costs of operations with no rents, electricity and people costs.”

Big Bazaar Direct has around 400 franchisees across Delhi, Maharashtra and Gujarat. The brand aims for over 50,000 over the next three years.  Mother Dairy's, Safal targets a turnover of Rs 2000 crore by 2020. Areva Lifestyle has four stores and plans to expand to 20 stores by March 2015 with plans to expand into North India. Sahara Q Shop has an efficient mix of company owned company operated (COCO), franchisee owned franchisee operated (FOFO) and company owned retailer operated (CORO) stores across 15 states and 508 cities. Now, the brand plans aggressive expansion in North East and South India. Currently, with five stores, Taaza plans further expansion in Hyderabad. Morarka Organic currently has 45 franchise and five company owned stores. The brand plans to open 25 more stores in Hyderabad, Bengaluru, Chennai and Chandigarh. 

Training and support

Like every sector, the food and grocery too provides training to its franchisees and staff but here, it is much more rigorous since direct selling to consumer is involved. A consumer may make or break the store image if the service, goods variety and quality are not up to the mark.

Taaza Stores gives complete billing training and backend plus store operation training to its staff and franchisees. FOFO stores makes for 70 per cent of Sahara Q shop's exclusive brand outlets. The brand provides all necessary training and support to enable them run stores successfully. Jain of Areva Lifestyle opines: “We provide end-to-end support to the franchisee. Initially, during the setup process, we provide them complete training related to process setup, setting of infrastructure, staff selection, handling of necessary registrations and other procedures. We then train the staff and franchisee for store operations, managing stocks, operating computer systems, procurement planning, customer handling, product training etc. Big Bazaar Direct trains its franchisees on technical front. Stock and delivery will be the responsibility of Big Bazaar.

Morarka Organic's Down To Earth brand offers 'hands-on' support and proven business procedures and systems to assist in managing business to success. Strategic marketing support is provided in the areas of advertising, media, design, public relations, merchandising, local marketing and market research. Training also includes location scouting, HR, operations, retail management and IT support.

Challenges

There is no doubt that the F&G industry is a challenging one. It involves too many operations and dealing with logistics. India's grocery market is worth 300 billion USD and is one of the largest in the world. Brands essentially take care to overcome the challenges in the first few months of the store set up only. Atul Kumar Jain, Director, Areva Lifestyle says: “The major challenge is in matching the demand and supply. We need to forecast the demand patterns regularly, and anticipate seasonal variations. Other challenge is to ensure consistency of services to the consumer. Grocery is 12 hours X 7 days business, and maximum footfall happens on weekends and in the evening hours in normal days.  On top of it, most of the consumers prefer delivery at home, which requires process of order taking, and ensuring timely deliveries.”

On the other hand few believe that food sector is becoming more organised. People have started noticing organic foods in super markets and other stores but this was not the case two years back. Considering the changes, Mukesh Gupta, Director, Morarka Organic says: “The biggest challenge for the industry is to attract footfalls, customer retention and too many 'me too' formats.”

With another viewpoint, P Ravinder Rao, Managing Director, Taaza Stores says: “The major challenge is to maintain the best assortment as per customer needs and keep minimum store over heads. There is also a test from time to time to control the store shrinkage and bad goods.” The main challenge for in organised F&G retail is the penetration. Romie Dutt, Executive Director, Sahara Q Shop says: “Most organised retailers are concentrated mainly in urban areas whereas the main market for this category of retail lies in tier III cities and villages. Connected with penetration is the challenge of logistics. It is important that logistics are managed so efficiently that stores are never out of supplies and customer gets what he wants at the location of his choice.”

Dealing the logistics part

Logistics management has been a challenge for major brands. Gupta of Morarka Organic says: “We have company depots in 16 states. All the supplies for that state are made through respective depot and thus our logistics part is easy.” Taaza has its own company vehicles for stocks dispatch. On the other hand, Sahara Q shop operates on hub and spoke model of warehouse management. This reduces the time it takes in supplying products to the stores and consumers. The brand has also opened City Connect Centres, which act as supplying hub to all retailers, franchisees, distributors etc. The brand also has Q Shop on wheels, which enhances its logistic efficiency. Areva Lifestyle has its own distribution network, as well as tie-ups with logistics agencies to have a better coverage.  Majority component in the products is food, which requires specialised handling, while keeping the logistics costs low. The brand believes in maintaining just in time inventory at its franchise stores and fulfills the demand accordingly.

Brand catalyst for F&G

Agrimart by Ratnagiri impex Pvt Ltd is a brand that has made many pioneering efforts in introduction of motorised tools and machines for agricultural operations such as soil preparation, weed management, pest management, harvesting and other agricultural processes. The brand has 350 dealers, 55 Agrimarts and 40 Agrimart zones. S.A Gopalakrishna, Chief Executive Officer of the brand says: “Our mission is towards attainment of technical excellence and to enable the Indian farmer easy access and affordable reach to modern farm mechanisation processes. The Company has been successful over the past decade in introducing latest machinery, outdoor power tools and farming accessories from the best sources across the world.”

Essentials for better store management

= Area Potential

= Investment & involvement

= Good  Assortment

= Product

= Plan

= Promote

= Service

= Location

= Customer Loyalty

= Logistics management

 

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