Kishore Biyani’s Future Group is making a vigorous push to increase its share in the fruit and vegetables business, a category that has traditionally been an Achilles heel for the country’s largest retailer.
The group behind supermarket chains such as Food Bazaar and Big Bazaar is forming a specialized entity that will set up and manage an efficient supply chain for fruits and vegetables (F&V), marking a shift away from the outsourced model it has followed so far.
Globally, F&V sales for most retailers is about 10% and Mr Biyani wants to take it to that level. Within a year, he wants to hike the billing share of fruits and vegetables to 8-10%.
Fruit and vegetables currently account for 3-4% of total supermarket sales for the group, which expects to end the fiscal in June, 2010 with retail sales of 9,200 crore.
Mr Biyani’s move to take direct control of the fruits and vegetables business brings to focus the challenges faced by organised retailers in selling fresh and perishable goods.
India has one of the most fragmented produce-supply chains on the planet. Industry experts estimate more than 30% of all fresh produce is lost or spoils before it reaches the market. On average, goods pass through six or seven middlemen before a consumer can buy it, resulting in tortuous journeys, big markups and poor quality.
In 1966 the government introduced a law that banned farmers from dealing directly with retailers and forced them to sell through licensed middlemen, called mandis. The law, was aimed to give farmers a fair and consistent price. But over the years it grew into a monster, gaining layer upon layer of intermediaries, none of whom added any value to the fruits and vegetables they traded even as they added on their own margins.
India lacks a network of cold storages and refrigerated trucking facilities that can efficiently transport fresh fruits and vegetables from a farm to the...