Friday, October 06, 2006

Food retail is the segment of choice in India

The Telegraph writes about the food retail industry in India. With several industry heavyweights entering the food retail segment, agri-retail is the latest hot sector. Companies such as Reliance, Bharti, Mahindra & Mahindra, Godrej, Ballarpur Industries, DSCL, Tata Group and Bharti’s FieldFresh have all made mega plans for the segment. Global giants Wal-mart, Carrefour and Tesco are also extremely keen to enter this food retail segment, which is estimated to be worth approximately Rs. 9.9 lakh crore, of which the organized food segment is estimated to be worth Rs. 10,000 crore.

With FDI regulations requiring global retailers entry only in single brand retail, the available options are either a cash-and-carry model or a franchise agreement. While companies such as Shoprite and Magnet have entered into franchise agreements, Metro operated via a cash-and-carry system and Carrefour announced last week that it will also be entering the Indian market using this system.

Bharti invested Rs. 250 crore to supply fresh vegetables for export to Europe and West Asia from its 4,200 acres of leased land in Punjab. Reliance has reportedly invested Rs. 4,000 crore to set up its agri-business plan in Punjab and Haryana, leasing more than 900 acres of land in Punjab alone. The company is also creating similar systems in West Bengal and Maharashtra.

Pantaloon’s Big Bazaar and RPG’s Spencers’ are both creating such systems to source products such as fresh fruits and vegetables, food grains and processed foods directly from farmers. Rakesh Mittal, Vice-Chairman of Bharti Enterprises emphasizes the potential of the sector, adds “This opportunity in agriculture is an opportunity which is larger than telecom, which is larger than IT.”

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