Gourmet Website Proposal

Understanding the Trend and Factors in Retail Sector 2

Supporting Factors :! 2

Increasing young urban population.! 2

Chart 1 : Median Age Comparison 3

Food Purchase Behaviour.! 3

Chart 2: Consumer spending by Category 3

Retail Sector - Organised/Traditional 4

Chart 3 : Composition of Retail Market 4

Chart 4 : Traditional Vs Organised Retail 5

Imported Food Market 6

Chart 5: Market Value of Imported Foods 8

Study of Organised Market 8

Understanding the Trend and Factors in Retail Sector
Changing lifestyles and the boom in organised retailing have resulted in growing
demand for imported food and drink in India. The market for such specialty foods has
only begun to take off in the last four to five years, and is growing at a rate of around
30% to 40% per annum.

As import regulations have been relaxed and import duties reduced, big names,
including Godrej, Reliance and Pantaloon, have moved into the market, opening
specialty food stores, selling imported foods such as cheese, pasta, cookies, olive oil,
chocolates, dried fruits, sauces and cereals. Other factors behind the growing
popularity of imported foods are rising incomes and increased foreign travel, while
demand has also been swelled by the growth of specialty restaurants.

Future market development will be dependent on importers taking a long-term view rather
than shifting opportunistically from product to product and an expansion of the organised
retail market.

Supporting Factors :

Increasing young urban population.

Increasing urbanisation (28 per cent urbanisation in 1996 ,40 per cent by 2020),
increasing younger population( 54 per cent of India is 25-35), and greater disposable
incomes for the middle class, which according to FICCI, is 22 per cent of the total
population support an increase in retail spending. Moreover, this figure is expected to
rise to 32 per cent by 2010. About 40 million households earn $4,000-10,000 (Rs
1,85,649.93-4,64,156.96) per household and comprise salaried employees and self-
employed professionals. This segment is expected to grow to 65 million households by
2010.
12% of the GDP is based on amount spent on Wedding celebration. Since 54% of the
country is in the age group 25- 35, it will have a significant impact on the food market.
GAIN Report - IN6111 Page 4 of 17

format of shopping. Meanwhile, traditional grocery shop owners are also gradually
reformatting their operation by increasing floor space, and introducing self-service format,

Major Trends – Indian Economy

price discounts and other value-added services.

Consumer Demographics

India has
• 2andlarge andgrowing
fastest growingeconomy
middle class (200-300 million),
after Median Agealthough it cannot be
of the Population

comparedChina.
with the "middle class" in the United States and other western countries. It also
Median Age in 2000 Median Age in 2025
has a large and growing young population; the median age of the population is about 24
years,• and
4thover
largest
100economy by PPP
million Indians are in the 17-21 years
45 age bracket. The share of
households in the upper middle/high
• 2 most populous country in the
nd income group (annual
40 household income > rs. 90,000
or $20002world
) has with
grown from 14% in 1989/90
53% of the population to 28 percent
35 in 2001/02, and is projected at 48
percent in 2009/103 . 30

Age (in years)

below 25 years
25
• A urbanization
Increasing growing middle
andclass of 200-250
a growing IT industry has 20 led to emergence of new upper-end
million
residential areasspread
aroundacross the country.cities with15 greater aggregation of professionals as
large metropolitan
well as
• double-income
Country’s per(working women)
capita income households.10There are 35 cities with a population of
grew
more than 1 million. The growth of upper/middle income 5 consumers with higher purchasing
at 7.4 per annum for past four
power is fueling the demand for life style products and0 services including a superior shopping
years.
experience.
India USA
The increasing pressure on time for the upwardly mobile
China Russia UK
double-income
Countries
households is resulting in consumers increasingly seeking a one-stop shopping venue.
Chart 1 : Median Age Comparison
Food Purchase Behavior
Food Purchase Behaviour.
Roughly 51 percent of Indians’ household consumption expenditure is on food (54 percent in
rural Roughly
areas and51%
42 percent in urban
of Indianʼs areas). consumption
household Consumer spending is largely
expenditure onfood
is on basic(54%
itemsin rural
like grains,
areas pulses,
and 42%vegetable
in urban oils, and sugar.
areas). The share
Consumer of value
spending added on
is largely food itemsitems
basic in thelike
consumer basket
grains, typically
pulses, is veryoils
vegetable low. However,
and recent
sugar. The consumer
share surveys
of value addedindicate increased
food items in the
spending on high-value products such as milk, meat, eggs, and fruits and vegetables.
consumer basket typically is very low. However, recent consumer surveys indicate
increased spending on high-value products such as milk, meat, eggs, fruit and
INDIAN CONSUMER SPENDING BY CATEGORY
vegetables and this spending is expected to increase by 10% per year.

Source: NSS Report No. 505, Household Consumer Expenditure in India, 2004

Chart 2: Consumer spending by Category

• India has a large vegetarian population.

2
$11,200 on purchasing power parity basis.
3
For more information on the Indian household income profile, please refer our ‘Exporter Guide (IN6089) report.
Primary Source: Market Information Survey of Household, National Council of Applied Economic Research.

UNCLASSIFIED USDA Foreign Agricultural Service

Retail Sector - Organised/Traditional

Chart 3 : Composition of Retail Market

The latest evolution in retail has been online shopping which combines the
convenience offered by the neighborhood store with the a modern international
shopping trend. We have in fact seen the proliferation of the internet and online
facilities in various aspects such as buying traveling tickets, online banking, paying
bills.
 Food Retail
500
450
400
350
USD Billions

300
250
200
150
100
50
0
2006 2007 2010 2012
Year

Organised Traditional

100

75
Percentage

50

25

0
2006 2007 2010 2012

Chart 4 : Traditional Vs Organised Retail

Statistics:
1. Food retail is projected to increase by 5% per annum. It has however exceeded
expectations.
2. Organised Retail sector grows at 30-35% per annum
3. Various sources estimate that food spending is 60 - 70% of total retail spending.
Imported Food Market
The ‘untapped’ Indian market with a vibrant economy and a large middle class offers
potential opportunities for foreign suppliers of food and agricultural products.
At present, there are 20-50 million upper/upper-middle Indian consumers (annual
household income > Rs. 0.6 million or $ 13,500) who can afford to regularly purchase
imported food products, and this number is growing. Market sources estimate that the
spending of these consumers has been growing annually at about 10-12 percent
versus the overall spending growth of 6-8 percent for all consumer classes.
Imported food items are largely limited to the organized retail sector and grocery stores
catering to high-end consumers in the urban areas. The share of imported products in
the organized sector food and grocery inventory varies from 3 to 5 percent.

Value - US$ Million; Quantity- Tonnes

S. No. Category 2005-2006 2006-2007 2007- 2008 Growth

Value Qty Value Qty Value Qty

1 Fruits 113 3E+05 160.9 364192 202.8 347471 50%

2 Vegetables 4.62 14355 0.86 4560 2.92 9760

3 Fish

Fresh 22.4 12127 24.08 10526 33.99 13575 50%

Processed 0.95 229 0.55 180 1.22 293 28%

4 Meat

Fresh 0.45 90 0.33 39 0.74 115 64%

Processed 0.86 324 0.81 379 1.8 672 120%

5 Dairy 7.97 3133 23.61 12565 14.58 3804 100%

Cheese 2.80 605 2.92 550 4.79 758 64%

Whey 1.68 938 4.31 2217 4.10 1003 144%

Milk and 1.43 635 1.85 731 2.77 838 49%

Cream

Butter 1.80 881 14.14 8898 2.16 973 16%

S. No. Category 2005-2006 2006-2007 2007- 2008 Growth
Value Qty Value Qty Value Qty

Yougurt 0.8 60 0.18 116 0.28 123 55%

Icecream 0.8 9 0.18 28 0.43 89 138%

Butter Milk 0.1 4 0.03 24 0.06 20 50%

6 Pasta 5.30 3806 2.55 2191 8.51 5970 200%

7 Confectiona
ry

Chocolate 10.6 4224 13.53 5649 20.39 5837 31%

Sugar 4.91 2074 5.98 2920 11.26 4003 93%

Cocoa 14 29.93 47 57%

8 Biscuits 2.5 2.7 3.0 10%

9 Processed
Fruits and
Vegetables

Juice 8.70 8489 15.21 13006 16.83 11394 10%

Jam 1.36 651 1.40 874 1.55 617 10%

Sauce 4.38 3235 5.55 3862 11.40 8065 105%

Mayonnais 0.11 0.20 0.37 81%

e and Salad
Dressing

Cereal 12.4 21.08 35.83 70%

10 Other
Foods

Honey 0.47 502 1.30 1008 2.91 2529 123%

Olive Oil 5.24 1426 5.42 1481 8.72 2484 61%

11 Nuts

Almonds 141 154 172.3 11.36%

(3&?05)-5$:&@((#&A($+#:&5,-<&,67%&B(#5$)&3($B",&(3&3((#&$5,"7+&7%&5>05-,5#&,(&6"C5&"&=7#5&
$5"-6<&&

5.4 Growth in imported food

D)&"C5$"45&*$E")&F)#7")&%05)#%&"&%74)737-"),&0($,7()&(3&67%&7)-(B5&()&3((#:&")#&=7,6&3((#&
-()%*B0,7()&7)-$5"%7)4&E.&"E(*,&G2&05$&-5),&5"-6&.5"$:&3((#&$5,"7+7)4&7%&4"7)7)4&0(0*+"$7,.&7)&
S. No. Category 2005-2006 2006-2007 2007- 2008 Growth
F)#7"<&H)5&(3&,65&85.&3"-,($%&#$7C7)4&,67%&%5-,($&7%&-6")47)4&3((#&-()%*B0,7()&0",,5$)%:&
Value Qty Value Qty Value Qty
(,65$%&E57)4&E5,,5$&7)3$"%,$*-,*$5:&7)-$5"%7)4&#7%0(%"E+5&7)-(B5%:&7)-$5"%7)4&5>0(%*$5&,(&,65&
(*,%7#5&=($+#:&5,-<&&
Pistachios 32.3 40.44 50.55 25.6%
'6")47)4&+735%,.+5%&")#&,65&E((B&7)&($4")7%5#&$5,"7+7)4&6"C5&$5%*+,5#&7)&"&4$(=7)4&#5B")#&
TOTAL 402 534 663.26
3($&7B0($,5#&3((#&")#&E5C5$"45%&7)&F)#7"<&I65&B"$85,&3($&%*-6&%05-7"+,.&3((#%&7%&4$(=7)4&
E$7%8+.<&
Chart 5a: Market Value of Imported Foods
A7,6&,65&$5+">",7()&(3&7B0($,&$54*+",7()%:&B").&E*%7)5%%&6(*%5%&%*-6&"%&/(#$5J:&95+7")-5&
")#&K"),"+(()&6"C5&B(C5#&7),(&,65&B"$85,&E.&(05)7)4&%05-7"+,.&3((#&%,($5%&")#&%5++&
7B0($,5#&3((#%&%*-6&"%&-655%5:&0"%,":&-((875%:&(+7C5&(7+:&-6(-(+",5%:&#$75#&3$*7,%:&%"*-5%&")#&
-5$5"+%<&H,65$&3"-,($%&E567)#&,65&4$(=7)4&0(0*+"$7,.&(3&7B0($,5#&3((#%&"$5&$7%7)4&7)-(B5%&
")#&7)-$5"%5#&3($574)&,$"C5+<&?05-7"+7,.&6(,5+%&")#&B*+,7L-*7%7)5&$5%,"*$"),%&6"C5&"+%(&3*5++5#&
,65&#5B")#&3($&5>(,7-&7B0($,5#&3((#&7)4$5#75),%<&&

?(B5&5>"B0+5%&,(&7++*%,$",5&,65&4$(=,6&(3&7B0($,5#&3((#M&

25

20
'6(-(+",5&
$ million

15 '()35-,7()5$.

10
H+7C5&(7+
K"%,"
5
'655%5
0
2005-06 2006-07 2007-08

Cheese Pasta Chocolate Confectionery Olive oil

&
Source: Commerce.nic.in
1. The5.4&/$(=,6&7)&7B0($,5#&3((#:&N221O2P&QR?S&B7++7()T<&
Figure imported food market is growing by 30 - 35% every year.
2.
D+B(%,&"++&3((#&$5,"7+&%,($5%&7)&F)#7"&#5C(,5&%74)737-"),&"B(*),%&(3&%65+3L%0"-5&3($&7B0($,5#&
0$(#*-,%<&I67%&C"$75%&3$(B&G2&05$&-5),&,(&"%&6746&"%&U2&05$&-5),&7)&%,($5%&%*-6&"%&V*,%&")#&
?07-5%<&&
THE MATERIAL BELOW IS WORK IN PROGRESS

Study of Organised Market

12&
 Supermarket # Mu Shelf Sales Year on Value Daily
mb Space % Year of Custo
ai % Growth Invento mers
ry

Deli - example 1 1 90 >90 >25

Sante

Godrej 2 2 >70 >80 35%

Natures (2006)
Basket

Reliance 900 20
Fresh

Big Bazaar 120 20

(Pantaloon
group)

Spencers 80

More (Aditya
Birla group)

Metro Cash 5
and Carry

Walmart 40

Facts: This data is supported by several sources- AT Kearney, Earnst and Young,
USDA(United States Department of Agriculture) , RNCOS and more.
• As per AT Kearney’s India ranks as the number one retail destination for the
second consecutive year in its Global Retail Development Index.

• The Indian retail market is poised to grow at 30% compounded over the next five
years.
• Organized retail will account for 15 - 20% of this market as opposed to 3% in
2007
•
Challenges:
Despite gaining wide acceptance in the Indian market, the market for imported foods continues
to face certain hurdles. Some of the challenges faced are the following:
"# Despite a gradual increase in the demand for imported products, the market is still
relatively small as the demand for such products is mainly from the upper income groups;
however, this is anticipated to change as incomes increase in line with India!’s economic
growth.
"# The prices are forced to remain high owing to the high import duties ranging from 20 per
cent to over 60 per cent.
"# Lack of consistent supplies of brands is another major issue faced by retailers in India.
Very few importers deal with particular brands for a long period of time. Most of them buy
products that are fast moving and shift to other brands or products in a short span leaving the
Indian consumers to remain one time buyers of most imported products.
"# A number of imported food products do not adhere to the basic guidelines of the
Prevention of Food Adulteration (PFA) Act such as stating the vegetarian and non-vegetarian
symbols on the package, spelling out the manufacturing and expiry dates, not giving directions
for use and other information in English and so on.
"# The high cost of transportation is another major bottleneck.
"# Infrastructure challenges such as lack of sufficient cold storages, poor development of
ports and related infrastructure in India is a hindrance to the import of food products, especially
the ones with a shorter shelf life.
"# Adherence to the various food laws prevalent in India, especially the ones related to
labelling requirements, packaging, use of colours and additives, shelf life, sanitary and
phytosanitary requirements, is also a cause of concern among the importers.

Population in Mumbai:
Population of the city : 20 Million
Estimated Expat Population in Bombay is 40,000
Estimated Indians- former NRI’s - 200,000
Estimates of Indians from Upper Middle Class families that are accustomed to foreign
foods - 200,000

The above data shows that there is a large target population in Mumbai.

Financial Forecast:

Our aim to determine how much we need to sell to reach Cash Break Even.

Outgoing/Maintainance Expenses
Category Amount Comments

Monthly Running 50,000

Expenses

Man Power -1 to dispatch 10,000

orders
 Category Amount Comments

Transportation Cost 0 To be included in cost of

items

Storage Facility 0 Use existing infrastructure

Other help for 0 Use existing resources

adminstration/
management/marketing

60,000

Incoming Revenue:
Margin of Profit on Every Item sold - 15%
Average Price of Item - Rs 150
Min Amount of each Sale : Rs 500
Average Bill per Sale : Rs 1000
Profit Per Bill : Rs 150
Assume that every customer orders only once a month.

Orders Serviced Per Month (25 working days) : 666

Orders Serviced every day : 26

So we would need 666 customers to generate a revenue of 100,000 which

exceeds our minimum operating revenue.

References:
1. India’s Market Opportunities for Imported Fresh and Processed Food, Bulletin 4770
ISN 1833-7236 May 2009. Department of Agriculture and Food , West Australian
Trade Office - India. Prepared by Madras Consultancy Group, Chennai.
2. India Market Overview, Food export marketing Forum 2009.
3. India Report Retail Food Sector, 2006. USDA Foreign Agricultural Service. Santosh K
Singh, Holly Higgins, US Embassy, New Delhi.
4. Report on Food Industry in India, Indo-Italian Chamber of Commerce and Industry,
Mumbai
5. Opportunities in India: Imported Food Segment. Austrade (Australian Government)
Post in India
6. Retail Report, IndiaRetailing.com. http://www.indiaretailing.com/retail-report.asp
7. Imported Food Market India, http://www.slideshare.net/abhibhatt/imported-food-
market-india-presentation
8. Articles on Retail Trade, IndiaRetailBiz.com
9. Food Retail: Eating with the world, India Today, July 2006.