Will UPA Govt Say NO ? - FDI in Multi Brand Retail Shops
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Oct 28, 2009, 5:11:37 AM10/28/09
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Govt plans to say 'no' to FDI in multi-brand retail :
http://economictimes.indiatimes.com/news/economy/finance/Govt-plans-t...
DELHI: The government plans to expressly clarify that foreign direct
investment (FDI) in multi-brand retail is no-go territory.
BJP to raise GST, FDI in retail issues in Parliament :
http://beta.thehindu.com/news/national/article39457.ece
BJP President Rajnath Singh, in his address, said the party will raise
issues in the forthcoming session of Parliament. Mr. Arun Jaitley
accused the government of opening up the retail market to foreign
players through backdoor. "The cash—and—carry policy of the government
was the first step in this direction," he said.
FMCG cos accuse big retailers of pushing own labels :
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
The tension between modern retailers and consumer product makers has
intensified, with the latter flatly turning down a renewed demand for
higher margins from the likes of Future Group, Reliance Retail and
Aditya Birla Group's More.
With a spate of contracts up for renewal in January, about 10 fast
moving consumer goods (FMCG) companies have ruled out higher margins,
accusing big retailers of pushing their own labels at the expense of
their established brands.
Retailers import more FMCG stuff :
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
Imported personal care and food products have started edging out
Indian-made ones on store shelves across the country as retail chains
such as Big Bazaar, Reliance Fresh, More and Spencer's look to extract
bigger margins from domestic producers.
Kishore Biyani sets `Future' target of Rs 30K cr sales from 30 mn sq
ft by `13 :
(indiaretailbiz.com) Kishore Biyani, Founder and CEO, Future group, is
quite fond of number 30 or similarly sounding 13. He has set the group
target of Rs 30,000 crore ($6.5 billion) in sales, from 30 million sq
ft by 2013.
Bharti-Walmart scans South and West for expansion; real estate prices
to play major role in final decision.
(indiaretailbiz) Bharti Wal-Mart Pvt Ltd, the 50:50 joint venture
between Wal-Mart Stores –the world's largest retailer– and Bharti
Enterprises– India's largest mobile service provider– is looking at
either the West or the South zone for expansion of its `Cash and
Carry' wholesale centres.
(In Detail)
Govt plans to say 'no' to FDI in multi-brand retail :
http://economictimes.indiatimes.com/news/economy/finance/Govt-plans-t...
DELHI: The government plans to expressly clarify that foreign direct
investment (FDI) in multi-brand retail is no-go territory, dashing
hopes of Indian retailers expecting that the new rules announced
earlier this year would allow them to bring in overseas partners and
capital.
The commerce and industry ministry wants to ensure that the
liberalised FDI policy does not lead to the unintended opening up of
multi-product retail, a sector closed to foreign investment now, an
official privy to the ministry's plan said.
The move is likely to stymie the plans of those such as Pantaloon
Retail, which is owned by the Future Group and operates the Big
Bazaar, Food Bazaar, Pantaloon and Home Town chains of stores.
Pantaloon Retail had initiated steps to restructure itself to take
advantage of the new norms for counting FDI in the hope that it would
be able to attract foreign investment. It was to have converted the
listed Pantaloon Retail into a holding company and distributed assets
and operations of the group among two subsidiaries.
Under the revised FDI policy announced in February, a joint venture
company in which the Indian entity has more than 50% stake and the
right to nominate majority of its directors will be deemed to be an
Indian company.
If such a joint venture makes investment in another company, the
entire investment in that company will be counted as Indian
investment. Under the earlier policy, downstream investment by such a
joint venture was counted as indirect foreign investment.
The new rules, it was argued, allow indirect entry into forbidden
sectors such as multi-brand retail through layered corporate
arrangements where initial foreign investment is kept below 50%.
"It will get clarified that the intent of the revised policy is not to
allow FDI into multi-brand retail where it has been prohibited," the
official said.
The ministry will also try and clarify how the revised FDI policy will
apply to the banking sector. A sticking point with the guidelines is
that investments by companies that are majority foreign-owned are
counted as foreign investment.
This has put banks such as the majority foreign-owned ICICI Bank in a
fix. India's largest private sector lender finds that the investments
it has made in areas such as insurance — the foreign investment limit
here is 26% — have been classified as foreign investment.
One of the solutions being considered is to exempt banks from the new
way of computing foreign investment based on who owns and controls the
investing company.
The government, however, is unlikely to exempt defence production,
where 26% FDI is allowed, from the purview of the liberalised FDI
policy, considering the safeguards already in place.
BJP to raise GST, FDI in retail issues in Parliament :
http://beta.thehindu.com/news/national/article39457.ece
BJP on Tuesday said that it will raise in Parliament the issue of
sharp rise in prices of essential commodities despite recession,
alleging it happened due to the "faulty policies of the Congress—led
UPA government". "The Central government is not concerned about
traders. Prices go down when there is recession as purchasing power
goes down. But India is an exception as here prices went up. Traders
are the worst affected by this," senior party leader Arun Jaitley said
at a rally of BJP's Traders' Cell. Party President Rajnath Singh, in
his address, said the party will raise these issues in the forthcoming
session of Parliament. Mr. Singh said the BJP-ruled states had asked
that traders' organisations be consulted before Goods and Services Tax
(GST) was imposed but the government is going ahead with it. He also
criticised the government for bringing back 3/7 Essential Commodities
Act, which he alleged gives powers to the authorities to carry out
raids on traders at will. "This is leading to victimisation of
traders," he said.
On the issue of FDI, Mr. Singh said his party was not against it but
the UPA government was allowing it unhindered in retail. He said the
government had washed its hands off the issue by saying this was an
impact of global recession. Mr. Jaitley accused the government of
opening up the retail market to foreign players through backdoor. "The
cash—and—carry policy of the government was the first step in this
direction," he said.
FMCG cos accuse big retailers of pushing own labels
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
MUMBAI/NEW DELHI: The tension between modern retailers and consumer
product makers has intensified, with the latter flatly turning down a
renewed demand for higher margins from the likes of Future Group,
Reliance Retail and Aditya Birla Group's More.
With a spate of contracts up for renewal in January, about 10 fast
moving consumer goods (FMCG) companies have ruled out higher margins,
accusing big retailers of pushing their own labels at the expense of
their established brands and not meeting the sales and expansion
targets as per the contracts.
"Modern retail today is not offering us the kind of throughput to
demand such margins. Also it doesn't help us when retailers promote
their own labels and competing brands at our expense," said Hoshedar K
Press of Godrej Consumer Products (GCPL).
FMCG sales from modern formats, which recorded a growth of over 30% in
the past two to three years, had dropped early this year mainly due to
closure of several retail outlets as part of a strategy correction by
retailers, with consumer demand in urban areas dropping dramatically
as the world slipped into its worst economic crisis since the 1930s.
"The scale-up (expansion of stores) in terms of outlets has not
happened, as was told to us in the initial contracts. Also, the
contribution of modern trade in terms of sales targets remains far
below projections," said an official at a leading Delhi-based FMCG
firm, requesting not to be named.
Things have improved since and retailers such as Future Group,
Reliance Retail and More have started expanding their operations on
the back of improved consumer sentiment in urban centres that is
helping high-end, high-margin products to stage a comeback.
And they have renewed their demand for higher margins from FMCG
companies. When contacted, Kishore Biyani, CEO of Future Group, said,
"Margins will always be an issue. Both sides have to mutually look at
ways of growing profitability."
Traditionally, modern retailers roughly operate on margins varying
from 10-15% while the traditional trade operates at around 10-12%,
depending on the product category. The face-off is expected to make
the two industries to continue working against one other's interest.
While retailers are giving higher visibility to private labels and
smaller brands that offer higher margins, manufacturers are helping
traditional grocers (kiranas) to use the best practices of modern
trade such as category layout and standardised units.
Retailers' own brands are 10-20% cheaper than established brands and
offer higher profit margins of over 40% than other brands. Aditya
Birla Retail's private labels include Feasters brand of biscuits,
fruit juices, noodles and pasta; Enriche shampoo, Kitchen's Promise
spices and Fresh-o-dent toothbrushes and toothpaste. Spencer's sells
private labels under the Spencer's Smart Choice while Future Group's
private FMCG brands include Fresh n Pure, Cleanmate, Tasty Treat,
Caremate, Sach.
Also, smaller companies such as Garden Foods, Capital Foods, Cremica,
Fena, Ghadi among others in the FMCG space are making rapid strides
and giving the bigger players a run for their money. Manufacturers, in
turn, are taking kiranas under their wing and helping them offer
better service, pricing and variety to take on competition from modern
formats.
Grocers are giving discounts on branded products like detergents,
shampoos, soaps, oil, atta and other grocery products from 5-20% by
collectively sourcing or aligning themselves with corporates like
Hindustan Unilever, P&G and others to be their `preferred suppliers',
who are adopting these stores and working with them to manage
inventory better. HUL's `Fast Forward' helps kiranas to completely
revamp and modernise their outlets, while Marico has tied up with
traditional retailers to launch revamped retail models called `Mera
Stores'.
"At the end of the day, the issue is just not about margins. It is
also about category management product visibility and eventually
better sales. There are issues over these aspects between the modern
retailer and FMCG companies," said Saugata Gupta, CEO of Marico.
Currently, traditional retail-grocers and chemists-constitutes over
95% of total sales in the country. Modern trade at just 3-5% of the
total national industry sales, had grown aggressively at over 35-40%
contributing to over 15-25% sales for most consumer goods companies
last year.
Retailers import more FMCG stuff
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
MUMBAI: Imported personal care and food products have started edging
out Indian-made ones on store shelves across the country as retail
chains such as Big Bazaar, Reliance Fresh, More and Spencer's look to
providing more value and variety to consumers and extracting bigger
margins from domestic producers.
Big retailers have increased global sourcing by tying up with vendors
in overseas markets to offer more options to consumers, top industry
officials said.
Future Group's Big Bazaar and Food Bazaar, Reliance Retail, Aditya
Birla Retail, Spencer's and Sankalp Retail's My Dollar Store, among
others, have started importing top consumer brands in huge numbers
from markets such as the US, UK, Thailand, Taiwan and west Asia.
These imported products in personal care categories such as shampoos,
skincare, cosmetics and soaps and foods such as pasta, chutney,
sauces, chocolates and beverages are estimated to offer 20-30% higher
profit margins compared to those sourced from the domestic market.
Together with private labels, or house brands, these imported products
also help the retail chains stock up empty shelves and offer product
variety.
The imports are estimated to have risen by over 40% in the last few
months as retailers seek fresh merchandise to woo consumers. "Margins
are always an issue between retailers and manufacturers. But we import
different pack sizes and brands that offer different values across
personal care, beauty and food categories. The margins on imported
products are far higher than any other product, including private
labels," said Kishore Biyani, CEO of the Future group, the country's
largest retail group.
The modern retailers, especially hypermarkets such as Big Bazaar, are
unhappy with the domestic makers of fast-moving consumers goods (FMCG)
for their inability to offer a larger mix of brands, more variants and
multiple pack sizes to stock at their sprawling stores.
"Getting in imported brands helps us not only strengthen our margins
but also offer options to consumers. Most of these imports are in the
nature of personal care products that have a longer shelf life
compared to food products," said Thomas Varghese, CEO of Aditya Birla
Retail that runs 640 supermarkets under More brand and five
hypermarkets.
As a result, global brands such as Enliven, Lander, Oxanda, Astonish
and Awesome from the US and Europe are now sharing shelf space with
domestic brands. Multinational firms such as Kraft that do not have a
strong direct presence in the country are happy as their brands get
ready outlets and crucial shelf visibility in a rapidly-growing
market.
However, Indian arms of multinational non-durables firms, faced with
erosion in market share and revenues, have taken steps to stop
retailers from importing products from their international portfolios.
Retailers import variants of top brands such as Sunsilk, Dove, Rexona,
Axe, L'Oreal, Maybelline, Garnier, Lancôme, Maggi and Pringles, among
others, from similar markets such as Taiwan, Thailand, China and west
Asia where the range is wide and margins significantly higher.
In a bid to block these imports, Hindustan Unilever, L'Oreal, Lancôme
Perfumes, Oakley Inc, Nivea and Mico, among others, have registered
several brands under notification No. 47/2007 of intellectual property
rights with the Customs that allows them to stop import of specific
products. Some FMCG makers have invoked the Intellectual Property
Rights (Imported Goods) Enforcement Rules, 2007, claiming loss of
business opportunity, unfair competition and product cannibalisation.
"I think imports are not merely done to improve margins. It is also a
move by retailers to offer variety in their merchandise. Today, the
focus is on win-win relationships between retailers and companies. It
is good to encourage consumption and grow a category," said Saugata
Gupta, CEO of Marico that owns brands such as Parachute and Saffola.
Kishore Biyani sets `Future' target of Rs 30K cr sales from 30 mn sq
ft by `13
(indiaretailbiz.com)
Kishore Biyani, Founder and CEO, Future group, is quite fond of number
30 or similarly sounding 13. He has set the group target of Rs 30,000
crore ($6.5 billion) in sales, from 30 million sq ft by 2013. Biyani
revealed the agenda for growth of his group, while delivering the
keynote address on 22nd October, 2009, at the 5th TiE-ISB Connect
2009.
The targets set by Biyani, though ambitious, are quite doable for the
group. They translate into annual growth rate of around 20 per cent
per number. It must, however, be said that this growth now onwards
will have to come from much bigger base. The targets will mean
doubling the group turnover from present Rs 15,000 crore to Rs 30,000
crore as well as doubling the occupied space from 14 million sq ft to
30 mn sq ft in a time span of less than 4 years.
According to Kishore Biyani India's consumption business market at
$350-400 billion is 35 to 40 per cent of the country's $1 trillion
total economy. Future group keeps track of consumption habits of
consumers belonging to different religions and communities on a
continuing basis. "We keep track of nine communities and observe what
they eat and consume," said Biyani.
TiE-ISB, billed as the country's most exciting annual networking event
for entrepreneurs and investors, was held at Hotel Marriot on the 22nd
and 23rd October, 2009 in Hyderabad. The theme for this year's event
was "The Crisis will pass….Will You, addressing real issues." TiE-ISB
Connect enables interaction of aspiring entrepreneurs, early-stage
ventures, and growth-stage ventures with potential investors,
successful entrepreneurs and mentors.
Bharti-Walmart scans South and West for expansion; real estate prices
to play major role in final decision
(indiaretailbiz) Bharti Wal-Mart Pvt Ltd, the 50:50 joint venture
between Wal-Mart Stores –the world's largest retailer– and Bharti
Enterprises– India's largest mobile service provider– is looking at
either the West or the South zone for expansion of its `Cash and
Carry' wholesale centres.
The JV has already launched its first C&C store under the brand name
of "Best Price Modern Wholesale" a few months ago. The store was
launched at Amritsar in Punjab state on the 30th May, 2009. The
company is also ready to launch its second store in December (perhaps
at Ludhiana– the home town of Mittals, Bharti group owners).
Walmart, though known for its big-box format stores, has been forced
to begin its operations in India with `cash and carry' format as the
current government policy guidelines do not allow setting up of front-
end, multi-brand, retail stores by MNC retailers in India. "After
north, the discussion is really south or west. We believe southern
markets are much more growth oriented", said Rajan Bharti Mittal,
Vice-
Chairman and Managing Director of Bharti Enterprises, while speaking
to reporters in Bangalore.
"Ecosystem (in the south) is far better than the north when the
company started operations there," said Rajan Mittal, adding,
"Hopefully, south will see some action from us. We have to be a pan-
India company." The prevailing real estate costs will, however, be an
important consideration in deciding on the South or the West. "we are
already looking at real estate pieces here in southern and western
parts (of the country). It (opening stores) depends on how real estate
plays its game," said Mittal.
Bharti- Walmart is planning to set up 10 to 15 cash and carry centres
across India by 2015.
http://economictimes.indiatimes.com/news/economy/finance/Govt-plans-t...
DELHI: The government plans to expressly clarify that foreign direct
investment (FDI) in multi-brand retail is no-go territory.
BJP to raise GST, FDI in retail issues in Parliament :
http://beta.thehindu.com/news/national/article39457.ece
BJP President Rajnath Singh, in his address, said the party will raise
issues in the forthcoming session of Parliament. Mr. Arun Jaitley
accused the government of opening up the retail market to foreign
players through backdoor. "The cash—and—carry policy of the government
was the first step in this direction," he said.
FMCG cos accuse big retailers of pushing own labels :
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
The tension between modern retailers and consumer product makers has
intensified, with the latter flatly turning down a renewed demand for
higher margins from the likes of Future Group, Reliance Retail and
Aditya Birla Group's More.
With a spate of contracts up for renewal in January, about 10 fast
moving consumer goods (FMCG) companies have ruled out higher margins,
accusing big retailers of pushing their own labels at the expense of
their established brands.
Retailers import more FMCG stuff :
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
Imported personal care and food products have started edging out
Indian-made ones on store shelves across the country as retail chains
such as Big Bazaar, Reliance Fresh, More and Spencer's look to extract
bigger margins from domestic producers.
Kishore Biyani sets `Future' target of Rs 30K cr sales from 30 mn sq
ft by `13 :
(indiaretailbiz.com) Kishore Biyani, Founder and CEO, Future group, is
quite fond of number 30 or similarly sounding 13. He has set the group
target of Rs 30,000 crore ($6.5 billion) in sales, from 30 million sq
ft by 2013.
Bharti-Walmart scans South and West for expansion; real estate prices
to play major role in final decision.
(indiaretailbiz) Bharti Wal-Mart Pvt Ltd, the 50:50 joint venture
between Wal-Mart Stores –the world's largest retailer– and Bharti
Enterprises– India's largest mobile service provider– is looking at
either the West or the South zone for expansion of its `Cash and
Carry' wholesale centres.
(In Detail)
Govt plans to say 'no' to FDI in multi-brand retail :
http://economictimes.indiatimes.com/news/economy/finance/Govt-plans-t...
DELHI: The government plans to expressly clarify that foreign direct
investment (FDI) in multi-brand retail is no-go territory, dashing
hopes of Indian retailers expecting that the new rules announced
earlier this year would allow them to bring in overseas partners and
capital.
The commerce and industry ministry wants to ensure that the
liberalised FDI policy does not lead to the unintended opening up of
multi-product retail, a sector closed to foreign investment now, an
official privy to the ministry's plan said.
The move is likely to stymie the plans of those such as Pantaloon
Retail, which is owned by the Future Group and operates the Big
Bazaar, Food Bazaar, Pantaloon and Home Town chains of stores.
Pantaloon Retail had initiated steps to restructure itself to take
advantage of the new norms for counting FDI in the hope that it would
be able to attract foreign investment. It was to have converted the
listed Pantaloon Retail into a holding company and distributed assets
and operations of the group among two subsidiaries.
Under the revised FDI policy announced in February, a joint venture
company in which the Indian entity has more than 50% stake and the
right to nominate majority of its directors will be deemed to be an
Indian company.
If such a joint venture makes investment in another company, the
entire investment in that company will be counted as Indian
investment. Under the earlier policy, downstream investment by such a
joint venture was counted as indirect foreign investment.
The new rules, it was argued, allow indirect entry into forbidden
sectors such as multi-brand retail through layered corporate
arrangements where initial foreign investment is kept below 50%.
"It will get clarified that the intent of the revised policy is not to
allow FDI into multi-brand retail where it has been prohibited," the
official said.
The ministry will also try and clarify how the revised FDI policy will
apply to the banking sector. A sticking point with the guidelines is
that investments by companies that are majority foreign-owned are
counted as foreign investment.
This has put banks such as the majority foreign-owned ICICI Bank in a
fix. India's largest private sector lender finds that the investments
it has made in areas such as insurance — the foreign investment limit
here is 26% — have been classified as foreign investment.
One of the solutions being considered is to exempt banks from the new
way of computing foreign investment based on who owns and controls the
investing company.
The government, however, is unlikely to exempt defence production,
where 26% FDI is allowed, from the purview of the liberalised FDI
policy, considering the safeguards already in place.
BJP to raise GST, FDI in retail issues in Parliament :
http://beta.thehindu.com/news/national/article39457.ece
BJP on Tuesday said that it will raise in Parliament the issue of
sharp rise in prices of essential commodities despite recession,
alleging it happened due to the "faulty policies of the Congress—led
UPA government". "The Central government is not concerned about
traders. Prices go down when there is recession as purchasing power
goes down. But India is an exception as here prices went up. Traders
are the worst affected by this," senior party leader Arun Jaitley said
at a rally of BJP's Traders' Cell. Party President Rajnath Singh, in
his address, said the party will raise these issues in the forthcoming
session of Parliament. Mr. Singh said the BJP-ruled states had asked
that traders' organisations be consulted before Goods and Services Tax
(GST) was imposed but the government is going ahead with it. He also
criticised the government for bringing back 3/7 Essential Commodities
Act, which he alleged gives powers to the authorities to carry out
raids on traders at will. "This is leading to victimisation of
traders," he said.
On the issue of FDI, Mr. Singh said his party was not against it but
the UPA government was allowing it unhindered in retail. He said the
government had washed its hands off the issue by saying this was an
impact of global recession. Mr. Jaitley accused the government of
opening up the retail market to foreign players through backdoor. "The
cash—and—carry policy of the government was the first step in this
direction," he said.
FMCG cos accuse big retailers of pushing own labels
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
MUMBAI/NEW DELHI: The tension between modern retailers and consumer
product makers has intensified, with the latter flatly turning down a
renewed demand for higher margins from the likes of Future Group,
Reliance Retail and Aditya Birla Group's More.
With a spate of contracts up for renewal in January, about 10 fast
moving consumer goods (FMCG) companies have ruled out higher margins,
accusing big retailers of pushing their own labels at the expense of
their established brands and not meeting the sales and expansion
targets as per the contracts.
"Modern retail today is not offering us the kind of throughput to
demand such margins. Also it doesn't help us when retailers promote
their own labels and competing brands at our expense," said Hoshedar K
Press of Godrej Consumer Products (GCPL).
FMCG sales from modern formats, which recorded a growth of over 30% in
the past two to three years, had dropped early this year mainly due to
closure of several retail outlets as part of a strategy correction by
retailers, with consumer demand in urban areas dropping dramatically
as the world slipped into its worst economic crisis since the 1930s.
"The scale-up (expansion of stores) in terms of outlets has not
happened, as was told to us in the initial contracts. Also, the
contribution of modern trade in terms of sales targets remains far
below projections," said an official at a leading Delhi-based FMCG
firm, requesting not to be named.
Things have improved since and retailers such as Future Group,
Reliance Retail and More have started expanding their operations on
the back of improved consumer sentiment in urban centres that is
helping high-end, high-margin products to stage a comeback.
And they have renewed their demand for higher margins from FMCG
companies. When contacted, Kishore Biyani, CEO of Future Group, said,
"Margins will always be an issue. Both sides have to mutually look at
ways of growing profitability."
Traditionally, modern retailers roughly operate on margins varying
from 10-15% while the traditional trade operates at around 10-12%,
depending on the product category. The face-off is expected to make
the two industries to continue working against one other's interest.
While retailers are giving higher visibility to private labels and
smaller brands that offer higher margins, manufacturers are helping
traditional grocers (kiranas) to use the best practices of modern
trade such as category layout and standardised units.
Retailers' own brands are 10-20% cheaper than established brands and
offer higher profit margins of over 40% than other brands. Aditya
Birla Retail's private labels include Feasters brand of biscuits,
fruit juices, noodles and pasta; Enriche shampoo, Kitchen's Promise
spices and Fresh-o-dent toothbrushes and toothpaste. Spencer's sells
private labels under the Spencer's Smart Choice while Future Group's
private FMCG brands include Fresh n Pure, Cleanmate, Tasty Treat,
Caremate, Sach.
Also, smaller companies such as Garden Foods, Capital Foods, Cremica,
Fena, Ghadi among others in the FMCG space are making rapid strides
and giving the bigger players a run for their money. Manufacturers, in
turn, are taking kiranas under their wing and helping them offer
better service, pricing and variety to take on competition from modern
formats.
Grocers are giving discounts on branded products like detergents,
shampoos, soaps, oil, atta and other grocery products from 5-20% by
collectively sourcing or aligning themselves with corporates like
Hindustan Unilever, P&G and others to be their `preferred suppliers',
who are adopting these stores and working with them to manage
inventory better. HUL's `Fast Forward' helps kiranas to completely
revamp and modernise their outlets, while Marico has tied up with
traditional retailers to launch revamped retail models called `Mera
Stores'.
"At the end of the day, the issue is just not about margins. It is
also about category management product visibility and eventually
better sales. There are issues over these aspects between the modern
retailer and FMCG companies," said Saugata Gupta, CEO of Marico.
Currently, traditional retail-grocers and chemists-constitutes over
95% of total sales in the country. Modern trade at just 3-5% of the
total national industry sales, had grown aggressively at over 35-40%
contributing to over 15-25% sales for most consumer goods companies
last year.
Retailers import more FMCG stuff
http://economictimes.indiatimes.com/news/news-by-industry/services/re...
MUMBAI: Imported personal care and food products have started edging
out Indian-made ones on store shelves across the country as retail
chains such as Big Bazaar, Reliance Fresh, More and Spencer's look to
providing more value and variety to consumers and extracting bigger
margins from domestic producers.
Big retailers have increased global sourcing by tying up with vendors
in overseas markets to offer more options to consumers, top industry
officials said.
Future Group's Big Bazaar and Food Bazaar, Reliance Retail, Aditya
Birla Retail, Spencer's and Sankalp Retail's My Dollar Store, among
others, have started importing top consumer brands in huge numbers
from markets such as the US, UK, Thailand, Taiwan and west Asia.
These imported products in personal care categories such as shampoos,
skincare, cosmetics and soaps and foods such as pasta, chutney,
sauces, chocolates and beverages are estimated to offer 20-30% higher
profit margins compared to those sourced from the domestic market.
Together with private labels, or house brands, these imported products
also help the retail chains stock up empty shelves and offer product
variety.
The imports are estimated to have risen by over 40% in the last few
months as retailers seek fresh merchandise to woo consumers. "Margins
are always an issue between retailers and manufacturers. But we import
different pack sizes and brands that offer different values across
personal care, beauty and food categories. The margins on imported
products are far higher than any other product, including private
labels," said Kishore Biyani, CEO of the Future group, the country's
largest retail group.
The modern retailers, especially hypermarkets such as Big Bazaar, are
unhappy with the domestic makers of fast-moving consumers goods (FMCG)
for their inability to offer a larger mix of brands, more variants and
multiple pack sizes to stock at their sprawling stores.
"Getting in imported brands helps us not only strengthen our margins
but also offer options to consumers. Most of these imports are in the
nature of personal care products that have a longer shelf life
compared to food products," said Thomas Varghese, CEO of Aditya Birla
Retail that runs 640 supermarkets under More brand and five
hypermarkets.
As a result, global brands such as Enliven, Lander, Oxanda, Astonish
and Awesome from the US and Europe are now sharing shelf space with
domestic brands. Multinational firms such as Kraft that do not have a
strong direct presence in the country are happy as their brands get
ready outlets and crucial shelf visibility in a rapidly-growing
market.
However, Indian arms of multinational non-durables firms, faced with
erosion in market share and revenues, have taken steps to stop
retailers from importing products from their international portfolios.
Retailers import variants of top brands such as Sunsilk, Dove, Rexona,
Axe, L'Oreal, Maybelline, Garnier, Lancôme, Maggi and Pringles, among
others, from similar markets such as Taiwan, Thailand, China and west
Asia where the range is wide and margins significantly higher.
In a bid to block these imports, Hindustan Unilever, L'Oreal, Lancôme
Perfumes, Oakley Inc, Nivea and Mico, among others, have registered
several brands under notification No. 47/2007 of intellectual property
rights with the Customs that allows them to stop import of specific
products. Some FMCG makers have invoked the Intellectual Property
Rights (Imported Goods) Enforcement Rules, 2007, claiming loss of
business opportunity, unfair competition and product cannibalisation.
"I think imports are not merely done to improve margins. It is also a
move by retailers to offer variety in their merchandise. Today, the
focus is on win-win relationships between retailers and companies. It
is good to encourage consumption and grow a category," said Saugata
Gupta, CEO of Marico that owns brands such as Parachute and Saffola.
Kishore Biyani sets `Future' target of Rs 30K cr sales from 30 mn sq
ft by `13
(indiaretailbiz.com)
Kishore Biyani, Founder and CEO, Future group, is quite fond of number
30 or similarly sounding 13. He has set the group target of Rs 30,000
crore ($6.5 billion) in sales, from 30 million sq ft by 2013. Biyani
revealed the agenda for growth of his group, while delivering the
keynote address on 22nd October, 2009, at the 5th TiE-ISB Connect
2009.
The targets set by Biyani, though ambitious, are quite doable for the
group. They translate into annual growth rate of around 20 per cent
per number. It must, however, be said that this growth now onwards
will have to come from much bigger base. The targets will mean
doubling the group turnover from present Rs 15,000 crore to Rs 30,000
crore as well as doubling the occupied space from 14 million sq ft to
30 mn sq ft in a time span of less than 4 years.
According to Kishore Biyani India's consumption business market at
$350-400 billion is 35 to 40 per cent of the country's $1 trillion
total economy. Future group keeps track of consumption habits of
consumers belonging to different religions and communities on a
continuing basis. "We keep track of nine communities and observe what
they eat and consume," said Biyani.
TiE-ISB, billed as the country's most exciting annual networking event
for entrepreneurs and investors, was held at Hotel Marriot on the 22nd
and 23rd October, 2009 in Hyderabad. The theme for this year's event
was "The Crisis will pass….Will You, addressing real issues." TiE-ISB
Connect enables interaction of aspiring entrepreneurs, early-stage
ventures, and growth-stage ventures with potential investors,
successful entrepreneurs and mentors.
Bharti-Walmart scans South and West for expansion; real estate prices
to play major role in final decision
(indiaretailbiz) Bharti Wal-Mart Pvt Ltd, the 50:50 joint venture
between Wal-Mart Stores –the world's largest retailer– and Bharti
Enterprises– India's largest mobile service provider– is looking at
either the West or the South zone for expansion of its `Cash and
Carry' wholesale centres.
The JV has already launched its first C&C store under the brand name
of "Best Price Modern Wholesale" a few months ago. The store was
launched at Amritsar in Punjab state on the 30th May, 2009. The
company is also ready to launch its second store in December (perhaps
at Ludhiana– the home town of Mittals, Bharti group owners).
Walmart, though known for its big-box format stores, has been forced
to begin its operations in India with `cash and carry' format as the
current government policy guidelines do not allow setting up of front-
end, multi-brand, retail stores by MNC retailers in India. "After
north, the discussion is really south or west. We believe southern
markets are much more growth oriented", said Rajan Bharti Mittal,
Vice-
Chairman and Managing Director of Bharti Enterprises, while speaking
to reporters in Bangalore.
"Ecosystem (in the south) is far better than the north when the
company started operations there," said Rajan Mittal, adding,
"Hopefully, south will see some action from us. We have to be a pan-
India company." The prevailing real estate costs will, however, be an
important consideration in deciding on the South or the West. "we are
already looking at real estate pieces here in southern and western
parts (of the country). It (opening stores) depends on how real estate
plays its game," said Mittal.
Bharti- Walmart is planning to set up 10 to 15 cash and carry centres
across India by 2015.
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