Retail in Indiaby Udit Jain on June 20, 2007
There is a huge opportunity in this space. However, 100 percent FDI is not allowed for foreign companies. The foreign company needs a joint venture partner. Cold storage is a joint partner with Food World. Here again there are issues that need to be considered. The first one is the products on the shelf: fresh fruits and vegetables, the pulses and oils, and also the processed foods. Since the processed food segment is small and the products are expensive, the retail gets limited to urban elite. Secondly since the cold chain is virtually non existent, procurement of quality supplies from the farmers and selling them quickly is important. The net result is that you are entering a market with dominant players and differentiation is important.
It presents very low barriers of entry for global players and has tremendous market size in both Urban and Rural areas. It provides excellent potential for foreign players with a growth potential of 20-40 percent as in China.
When 100 percent FDI is allowed, several international retailers will enter the Indian market and the retail will go turbulent. This has happened in other controlled markets such as China, Eastern Europe, and South East Asia. There is a huge opportunity for international retailers to open retail stores in the southern or Eastern India. They can move in a cluster with a food manufacturer and a cold chain operator so that the risk is spread.