Cold Chain Industry India

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Cold Chain Industry

z

Avalon Perspectives

2007
The Sun Rises on the Cold Chain Industry : The Impact of Organized Retail

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Raison d’être In the backdrop of the modernization of Indian retail and the existing structure of the cold chain industry in India, this paper attempts to answer two questions – one, to what extent will the demand for cold chains rise in India; second, will this demand be met captively by retailers or will it be an opportunity for independent service providers to flourish? This paper brings together studied opinions, field research, published inputs, expert views and indigenous analysis on the subject. Will the Demand for Cold Chains in India Rise to be Significant? The Key Driver of Cold Chain Demand: The Growth of Organized Retail India is one of the fastest growing economies in the world. This rapid growth is expected to continue, and India has been predicted to emerge as the third largest economy by 2050. Economic boom has also led to rise in the prosperity level of its populace; disposable incomes have gone up. India today has a billion plus population which is richer, younger and more aspirational. Winds of change blowing across this fast growth land Organized Retail Share, 2015 are heralding many more changes. The retailing 100% scene in India is poised for some significant 90% 80% structural shifts. Traditionally, India has had a very 70% 60% 80% large and fragmented retail market, with only 3% of 97% 50% the market being organized in 2005; however, this is Unorganized 40% Organized 30% set to change. Numerous organized players such as 20% Reliance, Bharti, Godrej, Aditya Birla Group, are 10% 20% 3% 0% joining the incumbent retailers - Future Group, Trent, 2005 2015 Shoppers Stop etc. The who‟s who of international Organized retailing is expected to grow at an explosive rate a retailing are also in various stages of rolling out their result, its share isof 25% annually until 2015. As20% expected to climb from 3% to of the total retail market India strategies. The Indian organized retail market is poised to explode with growth. This segment is expected to grow at 25% annually for the next 8 years and take its market share to 20% by 2015. Food is by far the largest segment in the retail market (66% of the total market), and the least penetrated by organized retail (1%). It is hence but natural that organized players wanting to establish themselves in the $250 bn Indian retail market will target this segment

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Total Value of Indian Retail Market by Segment, 2005 : $250 bn Footwear Health 1% Electronics Entertainment 1% 3% 3% Books & Music Consumer 1% Durables 3% Catering 4% Furtniture 4% Jewellery 5%

Share of Organized Retail in India by Segment, 2005 Title Food 1 Jewellery 2 Entertainment 3 Health & Beauty Catering Mobile Phones Furniture Consumer Durables 6
6 6

99 98 97 94
94 94

The penetration of organized retailing in perishable foods is even lower than 1%

7 8 10 14 25 40

93 92 90 86 75 60

Organized Unorganized

Clothing 9%

Books & Music
Food 66%

Clothing Footwear Watches 0%

20%

40%

60%

80%

100%

Source: Images Yearbook, CII Report

Modern retailers would also need to stock food produce, especially Fruits & Vegetables (F&V), in their stores with a strategic intent. F&V is a relatively low value high purchase frequency category. It is used strategically by retailers to attract high footfalls in a store, which in turn leads to various high-margin “impulse buys” by the customer. However, for this to occur, the F&V must be of good quality and must appeal to the customer. The quality level of F&V can be directly correlated with its supply chain, since quality is impacted significantly by the type of sorting & grading of the produce, packaging of the produce and level of freshness of the produce at the time of sale. The question then arises - what kind of a supply chain is required to...
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