Market Speaks: Indian Food Retail Sector Growing 15% Annually

capital market | Mumbai | January 11, 2018 17:19 IST

Market Speaks: Indian Food Retail Sector Growing 15% Annually

As per the latest report of United States Department of Agriculture (USDA), Indias food and grocery (F&G) retail business is estimated at US $380 billion out of which the modern food retail sector is valued at two percent of the total market. The F&G retail sector is dominated by traditional trade formats like neighborhood shops or kirana stores, which hold about 98 percent of the total market share. Modern trade formats like supermarkets and hypermarkets are stepping up to fulfil the needs of consumers and the market is reportedly growing at 15 percent per annum and is estimated to double in the size by 2020.

A Euromonitor report on Indias food retail industry projects steady upward growth of hypermarkets and supermarkets by 15 percent and 12 percent, respectively in 2016. This growth has been riding on the sudden demonetization in November 2016, which led to a consumer shift away from cash purchases at kirana shops towards electronic payment options first at organized retailers, but has since returned back as the small shops enrolled in electronic payment programs or allowed e-wallet transfers.

The retail market for imported foods has grown slowly though developments over the past few years indicate a growing number of professional, brand-oriented importers and an increase in the number of modern retail outlets and hotels wanting to carry imported products. Unique labeling requirements, ongoing non-tariff trade restrictions, recently implemented GST, a weaker rupee, and a slow-to-develop distribution infrastructure continue to complicate the import process. As Indias modern retail sector develops, it will become an increasingly important vehicle for introducing imported food product to consumers before moving those products to the traditional retail sector. India now has several 24-hour food networks and cooking competition shows are popular on television. So much so that retail management has indicated that shoppers enter stores and look to repeat menus and recipes from shows aired the previous evening. Increased exposure to foreign foods and the opportunity to consume them is expected to bring growth in the sector. Imported nuts and fruits feed easily into Indias traditional retail channels.

An estimated 90 percent of imported fresh fruit is sold in roadside stands and open markets. Imported packaged and consumerready foods are found primarily in a small number of gourmet grocery stores that specialize in imported foods, in the imported foods sections of larger store formats, and in thousands of small neighborhood stores. While the modern retail sector is expected to become an increasingly important means of selling imported foods, Indias traditional retail system will remain an important way of reaching consumers for years to come.

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