Showing posts with label Tesco. Show all posts
Showing posts with label Tesco. Show all posts

07 April, 2017

F for FDI in Food Retail

Much has been spoken and written about the opportunities and perils of allowing Foreign Direct Investment in Retail, especially in the Food & Grocery business. At the moment, only locally procured farm goods and other products manufactured in India can be sold in organized retail stores with FDI. Unfortunately, the top Food Retailers in India including the Future Group, Reliance Retail, RPG-SG led Spencers Retail, etc. do not have foreign investors. Most of the retail chains are reeling under heavy losses and have not been able to scale their businesses beyond existing geographies.


Carrefour and Auchan have shut shop while Walmart has severed it’s tie-up with Bharti Retail and is on it’s own for a while now. Tesco has always had a back-end arrangement with Tata Retail and it continues to be just that. And there is no news of any other international Food Retail chain getting into India in the near future. Interestingly, Amazon and homegrown start-ups Grofers and Big Basket have applied FDI proposals to FIPB for operating in the food & grocery space, perhaps in e-commerce, which is gaining ground every passing day.

Big Basket started operations in 2011, is well funded at the moment and works on an Inventory model in gross violation to existing FDI rules. BB has a warehouse where its products are purchased, sorted and stored. Customers order online/mobile apps and BB delivers the said products from their Warehouse to customers at their doorsteps. BB also procures products from local retailers for quicker delivery and for items that they do not carry. Needless to say, BB hasn’t made a single penny in profits and continues to mount losses.


Grofers started similarly as Big Basket and built ghost stores (outlets with products but no name board and consumer shopping) but then modified its business model to a Hyperlocal model where it currently picks products from neighborhood stores and delivers to customers.

Others like Peppertap, Zopnow, etc. have tried their best raising Investments but have failed to make a dent and have shut shop or have morphed in to delivery companies. Amazon Now currently operates only in Bangalore and is app-based. Customers order on the Amazon Now Mobile app and Amazon picks the products from The Future Group run Food Bazaar & Shopper’s Stop’s Hyperlocal format “Hypercity” Stores and delivers products to customers in a scheduled manner. This is the entity perhaps to whom the FDI license is being sought for.


Incidentally, I have been operating “Oyethere” which has a website and mobile apps on Android and iOS which are not only Hyperlocal but also Convenience formats. Customers can order products from our website or apps and we pick products from the nearest Retail outlet with which we have tie-ups and deliver to customers in 30-300 mins which is our Unique Selling Proposition (USP). We have been around for a year and half now with minimal investments and are on the verge of getting well funded shortly.

Food Retail is a hot space both offline & online Retail and we are playing a wait & watch game with what the Modi-Government is up to. Let’s hope for the best.

31 January, 2012

India: Starbucks Coffee–A Tata Alliance

 

SBUX

“We will look at expanding this partnership as a long-term relation... We are excited at building an enduring company that has a positive impact on India,” John Culver, President of Starbucks (China and Asia-Pacific), told reporters on Monday, 30th Jan 2012 at Mumbai, India. The company has signed a joint venture with the $ 80 Billion Tata Group, its first outing in India after waiting and watching the market for a long time now. Starbucks (Nasdaq: SBUX) operates over 17,000 cafes across 57 countries, with over 30% of them being outside the US (home) market. China has over 400 cafes since it opened in 1999. For the Tata Group, this is their second outing in the coffee business – earlier, they bought a 34% stake in Barista Coffee in 2001 which was later sold (in 2004) to the Sterling Group which later sold it to Lavazza of Italy (2007). “The joint venture with Starbucks is in line with Tata Global Beverages’ strategy of growing through inorganic growth focusing on strategic alliances in addition to organic growth,” R.K. Krishna Kumar, vice-chairman of Tata Global Beverages, told reporters.

(Suggested Reading: National Coffee Day)

The Indian coffee market has been well sought after for the past decade or so. Homegrown café chain Café Coffee Day has over 1,200 cafes across 140 cities in India and also has a presence in Pakistan, Austria and Czech Republic. The company, founded by serial entrepreneur VG Siddhartha and backed by Sequoia Capital and KKR among others has a deep rooted coffee heritage spanning over 130 years. The Coffee Day Group manages thousands of acres of coffee plantation in Chikmaglur, the coffee belt of Karnataka in the south of India and consumes most of its production for self-consumption and very little for exports (which was the other way around a decade ago). Barista Coffee, owned and operated by Lavazza from Italy comes a distant second with over 250 cafes across the country while Costa Coffee from the UK,  which has a JV with Devyani International, a Delhi based business powerhouse comes close with over 140 cafes. Apart from this, there are several regional players who occupy a sweet spot for themselves in their respective markets.

So, what is in it for SBUX and for the Indian consumers?

Well, for SBUX it is a large play on an untapped burgeoning coffee market in India. With over one-third of the entire population of 1.20 billion under the age of 35, there is no better market than ours for a café chain. With increasing earning ability and higher disposable incomes, Indian consumers want nothing but the best and hence there has been a mad rush by various apparel brands in the premium and high-end spectrum of the organized Retail Market. From McDonalds to Pizza Hut, Dominos and KFC, they are all here and have even tweaked their global menu, mostly for the first time to suit the Indian palette. So Starbucks has a ready market which is waiting eagerly to lap it up immediately. For the Indian consumer, there is a lack of differentiation today; they have been used so much to the CCDs and Baristas that they are eagerly looking forward to a change. With more consumers undertaking International travel on work and leisure, they get exposed to various facets and hence are expecting similar standards and offering.

CCD Cup

Starbucks’ entry has been a dogma for many years now. There was an aborted attempt in 2006 when it planned a JV with The Future Group. And thereafter, it has been slow. This time, they seem to have got the JV right. Rest, as they say needs proof of the pudding. Well, you can’t really go wrong with the Tatas, given the way TRENT has managed its relationships with Woolworths, Tesco and Zara. However, they wouldn’t have an easy task to establish themselves, here’s why;

  • Scalability – Delhi, Mumbai and Bangalore would contribute to over 1,200 cafes together, about three-fourths as many cafes in the country.To penetrate these markets wouldn’t be easy. And then to scale up. Well.
  • Real Estate – While more and more Malls are coming up in the top 10 cities, High Streets will continue to remain a favourite for SBUX and this is an area they will indeed find a huge challenge, in getting the best locations
  • Menu – While CCD has a more or less Indian menu (Read: suiting the local palette) no other café chain has done this – and would apply to SBUX as well
  • Pricing – This would remain the most important competitive advantage that CCD would score against SBUX and probably all others. Getting this right would be a key challenge, to say the least
  • People – To get high quality baristas and front-end staff is not going to be easy. With its rigorous process-driven approach, SBUX may find this as a problem but this is one that can be fixed sooner than the others above

(Suggested Reading: When Skill sets take over everything else!)

It’s now a matter of time that Starbucks would be all over, but probably not as ubiquitous as Café Coffee Day. There are neighborhoods, for example in Bangalore where CCD has half a dozen cafes within 3-4 sq. km. And this applies in Mumbai, Delhi, Hyderabad, Chennai, Kolkata, Pune, etc. as well. SBUX would probably take half the time (or probably lesser than) it took CCD to get as many cafes, but that’s still a long way ahead. It was announced yesterday that the first few cafes would come up at Delhi and Mumbai, which is a disappointment for me (living in Bangalore) but also strange that Bangalore has not been given its importance. Anyway, look forward to having a large café latte soon!

The above video has been shared from www.starbucks.com

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