In November of 2011, the Government of India approved 100 percent foreign direct investment in multi-brand retail, only to put the decision on hold a few days later.
THIS REPORT CONTAINS ASSESSMENTS OF COMMODITY AND TRADE ISSUES MADE
BY USDA STAFF AND NOT NECESSARILY STATEMENTS OF OFFICIAL U.S.
GAIN Report Number: IN2059
Post: New Delhi
India's Food Retail Sector Growing
Dhruv Sood & Priya Jashnani
In November of 2011, the Government of India approved 100 percent foreign direct investment in
multi-brand retail, only to put the decision on hold a few days later. Much of the subsequent
discussion focused on the effects the decision to delay implementation would have on foreign
investors, farmers and the traditional retail sector. Largely absent from the discussion were the
Indian firms that are investing and expanding the modern retail sector. There are now an estimated
3,000 modern retail outlets in India, up from 200 in 1995. While these firms face challenges ranging
IN2059 – India’s Food Retail Sector Growing Page 1
from a complex and costly supply chain to high real estate costs, many have expanded their
operations. This report discusses some of the issues the industry faces and establishes a baseline of
the number of modern retail stores in India for the purpose of gauging future growth in the industry.
Foreign Direct Investment in Multi-Brand Retail on Hold
The Government of India’s December 7, 2011 decision to put its approval of Foreign Direct Investment
(FDI) in multi-brand retail on hold attracted considerable media attention. The decision would have
allowed foreign retailers to invest in the retail sector subject to certain provisions (See IN1208 for
additional details). The decision was expected to lead to the entrance of multinational retailers that sell
food and non-food items into the retail sector. Some of these firms are already operating in India under
a “cash and carry” or wholesale format that can only be patronized by other businesses and qualified
If multi-brand FDI in the retail sector is eventually implemented, it will likely lead to an infusion of
foreign capital and expertise that is expected to accelerate the development of the retail sector.
However, development of the sector is already underway as India’s homegrown multi-brand retailers
expand their operations in a variety of retail formats such as hypermarkets, supermarkets and gourmet
stores. This sector is expected to expand with or without the approval of FDI in multi-brand retail.
While many reports have estimated the dollar value of retail food sales in the ”modern” retail sector, this
report attempts to establish a baseline of the number of “organized” or modern retail outlets in India as a
means of gauging future growth. In the future, FAS India plans to conduct annual surveys of the
number of outlets in an effort to estimate the pace at which the industry is growing.
Single Brand Retail
In January 2012, The Government of India approved 100 percent (FDI) in single brand retail. The
notification states that for proposals involving FDI beyond 51 per cent, firms will have to source at least
30 per cent of their products from small and cottage industries in India that have a maximum investment
in plant and machinery of $1 million. The riders proposed in the notification state that stores should
carry a single brand and be sold under the same brand internationally. Single brand retailing would
cover products that are branded during manufacturing and the foreign investor should be the owner of
FDI in Retail Timeline
IN2059 – India’s Food Retail Sector Growing Page 2
The following timeline highlights the evolution of the FDI policies over the past 20 years.
July 1991 FDI up to 51 percent allowed in certain sectors.
January 1997 FDI up to 100 percent allowed in “cash and carry” format with automatic
February 10, 2006 FDI up to 51 percent allowed in single brand retail with government approval.
November 24, 2011 FDI up to 100 percent in multi-brand retail approved
December 7, 2011 FDI up to 100 percent in multi-brand retail put on hold.
January 10, 2012 FDI up to 100 percent allowed in single brand retail
Lots and Lots of Small Stores
The food retail industry in India has traditionally been highly fragmented and is often described as
being “unorganized” or part of the “unorganized” sector. There are an estimated 12-15 million outlets,
including push carts, wet market and kirana stores, selling food and related items. The retail food sector
is dominated by small (50-200 square foot) kirana stores which are well-distributed throughout urban
and rural areas. These outlets provide employment for millions of Indian workers whose interests are
represented by several trade groups. Much of the opposition to FDI in multi-brand retail has been
rooted in a concern that kirana store owners and workers would be displaced by larger retail formats.
However, others have noted that kirana stores have advantages such as convenient locations, lower real
estate costs, and services such as free delivery and store credit that should help them to compete with
larger retail chains.
Exporters who are interested in the Indian market should not discount the traditional kirana stores as an
outlet for their products. Larger Indian cities (there are 53 cities with at least a million residents) have at
least a few stores that carry imported food products and the number of traditional stores that carry these
products is growing as awareness and the supply of imported products increases. Some importers are
distributing their products in as many as 10,000 stores, the majority of which are kirana stores.
The Recent Emergence of Modern Retail
Prior to the mid-1990s, there were an estimated 200 modern grocery stores operating in India. These
were typically chains in south Indian cities (mainly Bengaluru) that were not much larger than kirana
stores. These stores were distinguished by their emphasis on a more modern self-service shopping
environment that offered a range of products. A few cities also had cooperative stores that were owned
by consumer societies. However, the Indian market was dominated by kirana stores and government-run
food distribution outlets supplying essential commodities. The emergence of larger chains and stores
began around 2005 and the sector has since grown to nearly 3,000 modern retail outlets across India.
While many retailers are expanding and opening new stores, profitability continues to be an issue for
many as factors such as high real estate costs, high capital borrowing costs, shrinkage, high debt levels,
training of qualified staff and a costly supply chain add significantly to operating costs. A discussion of
factors affecting the development of the sector follows.
The Availability of Processed Foods: Indians have traditionally preferred fresh ingredients procured
at frequent intervals from neighborhood stores and street vendors. In general, the supply of processed or
IN2059 – India’s Food Retail Sector Growing Page 3
packaged foods was limited and quality was lacking. However, as multinational and Indian corporations
have invested in the sector over the past 10-15 years, the availability and quality of processed foods has
increased, providing a greater variety of products to sell in retail outlets. Nevertheless, modern retailers
indicate that there is still plenty of opportunity to increase the breadth and quality of processed foods.
Supply Chain: India’s supply chain is multi-layered and expensive and has often lacked an emphasis
on product safety and quality. Modernizing and streamlining the supply chain are two of the biggest
challenges facing the retail industry. Modern logistics firms are emerging to meet the needs of the retail
system, but there is still considerable work to be done, especially from a policy perspective where
varying state and city taxes, marketing regulations and policies that limit farm size all hinder growth in
the sector. Retailers still cite the timing and volume of product deliveries as major challenges in keeping
Shrinkage: Stores continue to face challenges arising from costs associated with unsold products,
products that are damaged by rough handling and products that are lost to theft along the supply chain.
Real Estate Costs: Stores face high real estate costs throughout India, but especially in larger cities.
Real estate can account for over 10 percent of retailer costs. The cost of establishing parking adds
significantly to the cost of expansion. Space for parking simply does not exist in some Indian cities and
some retailers are pursuing smaller neighborhood store formats that do not include parking. Where
possible, stores are often located in or next to shopping malls where parking is available. Stores are also
working to renegotiate leases, move from prime locations, and expand in smaller cities where real estate
costs are lower.
Borrowing Costs: Many chains are highly leveraged and borrowing costs in India are as high as 15
percent. Borrowing is further complicated because the industry is relatively new and banks do not have
an established risk profile on which to base lending rates which limits access to credit.
Car Ownership: While car ownership is on the rise, just four percent of Indians own cars which could
hinder development of a retail model based on large less frequent purchases and driving to an area
outside of a consumer’s own neighborhood.
Import Restrictions: India opened its market to imported food products just over ten years ago. Tariffs
on food are high and a number of import requirements effectively prohibit imports of certain food
products from some countries, including the United States. Better access to imported food products
would likely provide retailers with an improved supply and variety of retail products to augment the
availability of locally produced products. Nevertheless, imported foods can be found to some degree in
nearly every modern retail format as imports of consumer-ready foods increase.
Know How: Until recently, many Indians firms lacked the expertise to launch a modern food retail
chain. As multinationals and Indian firms have invested in the food processing sector and consumer and
business exposure to foreign retail has increased, industry understanding of how to adapt modern food
systems to the Indian environment has improved. Some chains have had to slow their expansion plans
to better focus on developing the “backend” of their operations, but all major retailers now seem to
recognize the importance of developing supply chains, inventory management and quality control
systems. While labor costs are relatively low, stores will also have to continually emphasize the
IN2059 – India’s Food Retail Sector Growing Page 4
training of their staffs at all levels to ensure that standards are met in a sector where staff turnover is
reportedly very high.
Demographic Trends: Indians have traditionally lived in large extended families where women were
charged with preparing cooked meals from fresh ingredients. However, rising urbanization (380 million
Indians now live in cities), more working women, and an increase in the number of nuclear families are
all trends that point to a greater emphasis on food convenience and healthy foods.
Appliances: As India’s economy has expanded in recent years, the quality and availability of
appliances has improved significantly. More Indians are likely to have refrigerators, enabling them to
safely store larger quantities of food items at home.
Foreign Direct Investment: Currently, foreign investors are limited to “cash and carry” or a wholesale
store format that limits sales to other businesses and approved non-retail buyers. Surprisingly, kirana
stores are major customers of cash and carry stores. The long delay in allowing foreign capital and
expertise in the retail sector has likely slowed development of the sector. Nevertheless, foreign firms are
actively engaged in developing the back-end of their cash and carry operations, working with farmers to
establish supply relationships, and streamlining the supply chain.
Economic Growth and Incomes: India’s economy has been growing at 7-9 percent annually for
several years. Given current growth projections, the Indian economy is expected to double in size over
the next 10 years. While incomes continue to be relatively low in India, continued economic growth is
expected to lead to shifts in food consumption patterns as lower-income consumer increase their food
intake and higher income consumers seek to diversify their diets.
Export Emphasis: For many years, Indian food processors have focused a significant part of their
marketing efforts on export markets and India continues to be a net exporter of agricultural products.
Over the past 20 years, the arrival of foreign multinationals in the food processing and restaurant sectors
has helped to alert Indian firms to the importance of the domestic market and the benefits of focusing
their marketing and distribution efforts on the Indian consumer.
Opposition: Given the number of jobs that India’s current retail system provides, some have opposed
the development of a more modern and efficient retail system over concerns that it would displace large
numbers of workers. While some groups have opposed the approval of FDI in multi-brand retail,
modern Indian modern food retailers have rarely been mentioned in the public and media debates about
the effects of a more modern retail sector on employment. Farm groups have generally voiced support
for the development of the sector. Modern food retail accounts for just two percent of retail food sales
and, while the sector appears to be growing rapidly, it seems unlikely that the sector will expand or
transform the retail sector as rapidly as it has in some other countries. Over the next 10 years, the
potential market for modern food retail could be 200 million consumers. Whether the modern retail
sector will expand to reach that many consumers remains to be seen, but it appears likely that traditional
retailers will continue to play a significant role in the food retail sector for years to come.
Current Size of Modern Food Retail
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Estimates of the dollar value of India’s retail sector vary significantly. A survey of 10 private estimates
indicates that the total (food and non-food) retail sector was valued at somewhere between $320 billion
and $550 billion in 2011. Differences may be due to variations in methodology, but an olympic average
of the ten estimates places the size of the retail sector at $450 million in 2011. Retail food sales are
estimated at $270 billion which equates to 60 percent of total retail sales and a $225 per capita annual
expenditure on food. The figure reflects the relatively high percentage of disposable income spent on
food as well as the estimated 800 million Indians who live in rural areas where on-farm consumption
and non-retail sales account for a significant percentage of food use. Estimates indicate that modern
grocery retailers managed to carve out an estimated one percent share of food retail sales in 2005 and
that share has increased to two percent in 2011 or $5.4 billion.
Sector Estimated Size in 2011
Total Retail (Food and Non-Food) USD 450 billion
Organized Retail (Food and Non-food) USD 27 billion (6% of total retail sales)
Food Retail (Modern and Traditional) USD 270 billion (60% of total retail sales)
Modern Food Retail USD 5.4 billion (2% of total food retail sales)
The food retail market includes the retail sales of all food products, both packaged and unpackaged,
as well as beverages (including retail sales of all alcoholic and non-alcoholic beverages).
Source - Analysis of Sector Reports
Modern Retail Segmentation
Store Format Store Size (sq ft.) Number of outlets
Grocery Store 500-3,000 1,947
Supermarket 10,000-30,000 408
Convenience Stores 1,000-1,500 324
Hypermarket 60,000-120,000 265
Gourmet Store 500-5,000 27
Source – Post Analysis
Estimated Number of Modern Retail Stores
C f ompany Store Chain Format Number o
Aditya Birla Retail More Grocery Store 575
Aditya Birla Retail More Megastore Hypermarket 12
Arambagh Hatcheries Limited Arambagh's Foodmart Grocery Store 31
Bharti Retail Easyday Stores Grocery Store 150
Bharti Retail Easyday Market Supermarket 10
Bharti Retail Easyday Hyper Hypermarket 1
IN2059 – India’s Food Retail Sector Growing Page 6
Dairy Farm International Foodworld Gourmet Store Gourmet 1
Dairy Farm International Foodworld Super Store Hypermarket 2
Dairy Farm International Foodworld Supermarket/ Supermarket 70
Express Retail Services Pvt. Big Apple Retail Grocery Store 65
Pantaloon Retail (Future Value Big Bazaar Hypermarket 161
Pantaloon Retail (Future Value KB's Fairprice Supermarket 135
Pantaloon Retail (Future Value Food Bazaar Grocery Store 135
Pantaloon Retail (Future Value Food Right Hypermarket 1
Pantaloon Retail (Future Value Food Hall Gourmet 1
Godrej Industries Nature's Basket Gourmet 18
The Heritage Group Heritage Fresh Grocery Store 72
Jubilant Group Total Hypermarket 5
K. Raheja Corp. Group HyperCITY Hypermarket 12
Kovai Pazhamudir Kovai Pazhamudir Nilayam Supermarket 34
Le Millennia Supermart Needs Supermarket Supermarket 17
Max Hypermarkets India SPAR Hypermarket 10
M.K. Retail Company M.K. Retail Supermarket 7
MyDollarStore MyDollarStore India Grocery Store 40
Namdhari's Fresh Namdhari's Fresh Grocery Store 20
Nilgiri Dairy Farm Nilgiris 1905 Supermarket 90
N Stores Food Retail Pvt. Ltd. N Stores Grocery Store 3
Nuts N Spices Nuts N Spices Grocery Store 16
Ratnadeep Super Market (P) Ratnadeep Supermarkets Supermarket 3
Reliance Retail Limited Reliance Fresh Grocery Store 592
Reliance Retail Limited Reliance Mart Hypermarket 18
Reliance Retail Limited Reliance Super Supermarket 17
RPG Retail Spencer's Hyper Hypermarket 30
RPG Retail Spencer's Grocery Store 220
Shri Kannan Departmental Shri Kannan Departmental Supermarket 25
Sugar and Spice India Pvt. Ltd Le Marche Gourmet 7
Tata Group (Trent) Star Bazaar Hypermarket 13
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Wadhawan Group (Smart Retail Smart Supermarket Grocery Store 28
Total - - 2,647
Source – Company Websites, Meetings with Retailers, Trade Publications
Modern Convenience Stores
Company Store Number of outlets
Bharat Petroleum In & Out 320
Godfrey Philips India Twenty Four Seven 4
Source - Company Websites
Cash and Carry Stores
Company Store Number of outlets
Bharti Wal-Mart Private Limited Best Price Modern Wholesale 12
Carrefour Group Carrefour Wholesale Cash & Carry 2
Future Group (Aadhar Retailing Limited) Aadhar Wholesale 1
Metro AG Metro 9
Total - 24
Source – Company Websites
Note: The above information has been sourced from the industry sources or through the company
websites. Therefore, USDA does NOT in any way endorse or guarantee the accuracy of the information
contained in the above table.
Aditya Birla Retail
Aditya Birla Retail Limited is the retail arm of the Aditya Birla Group, a large corporation with
interests in many sectors of the economy. The company established its food and grocery operations in
2007 with the acquisition of a supermarket chain based in southern India. Subsequently, Aditya Birla
Retail Ltd. expanded its presence across the country under the “More” brand with supermarket and
hypermarket formats. The chain operates 575 More supermarkets around India and 12 More
megastores in Mysore, Vadodara, Aurangabad, Indore, Bengaluru, Mumbai, Hyderabad, New Delhi and
Arambagh Hatcheries Limited
Arambagh Hatcheries Limited started as a poultry processor in the 1970s and began its food retail
operations in 2000 with Arambagh’s Foodmart. The company operates small grocery stores with a
typical area of 600-1,000 sq. ft. The chain has 31 stores, 24 in Kolkata and seven in other cities in
IN2059 – India’s Food Retail Sector Growing Page 8
Bharti Retail is a wholly owned subsidiary of Bharti Enterprises. The Company operates 150 Easyday
neighborhood stores, 10 compact hypermarket stores called Easyday Market and one hypermarket.
Stores are located in Punjab, Karnataka, Haryana, Rajasthan, Uttar Pradesh, Uttarakhand, Madhya
Pradesh, Delhi and Jammu & Kashmir.
Bharti Wal-Mart is a joint venture between Bharti Enterprises and Wal-Mart for wholesale cash & carry
and back-end supply chain management operations in India to serve small retailers, manufacturers,
institutions and farmers. The Company operates 12 cash and carry stores under the Best Price Modern
Carrefour opened its first wholesale cash and carry store in December 2010 in New Delhi. It currently
operates two stores in India.
Dairy Farm International
Foodworld is a part of the Dairy Farm International (DFI) Group. Previously known as Spencer's Daily,
it began in May 1996 as a division of Spencer & Co, a part of the RPG Group. In August 1999 it
became a separate company and currently operates 73 stores in Bengaluru, Hyderabad, Coimbatore and
Express Retail Services Pvt. Ltd.
Big Apple retail is a New Delhi based grocery store format retail chain. The chain is a unit of Express
Retail Services Pvt. Ltd. currently operating 65 stores across the capital.
Pantaloon Retail (India) Limited, is a large Indian retailer, which is part of the Future Group, and
operates multiple food and non-food retail formats. In 2010, the company separated its discount store
business, which includes the Big Bazaar hypermarket and the Food Bazaar supermarket businesses, into
Future Value Retail Ltd., a wholly owned subsidiary. Future Value Retail operates various food store
formats including KB’s Fair Price (low frills neighborhood convenience stores), Food Bazaar
(supermarket), Big Bazaar (Hypermarket) and specialty stores (Food Hall and Food Right). Future
Group, through its subsidiary Aadhaar Retailing Limited, launched its cash and carry business in India
through Aadhaar Wholesale in Gujarat in 2011 and currently has one store.
Nature’s Basket is a specialty food store, owned by a division of Godrej Industries. The chain has a
IN2059 – India’s Food Retail Sector Growing Page 9
supermarket store format operating small stores in premium residential neighborhoods. Nature's Basket
currently has 18 outlets across Mumbai, Delhi, Pune, Gurgaon, Hyderabad and Bengaluru.
The Heritage Group
Heritage Retail is a chain of retail stores promoted by Heritage Foods - the leading dairy brand in
South India. The Group operates 72 grocery store format chain in Andhra Pradesh, Karnataka and Tamil
In & Out Convenience Store
Bharat Petroleum operates 6,000 gas stations across India and launched its convenience store retailing
initiative in 2001 under the In & Out brand. Currently, there are 320 In & Out stores attached to gas
Jubilant Retail is a Bengaluru-based retail chain that operates five hypermarkets in Bengaluru under
the Total brand.
K. Raheja Corp. Group
Hypercity Retail is a subsidiary of the K. Raheja Corp and operates 12 hypermarkets in Amritsar,
Bengaluru, Bhopal, Pune, Ahmedabad, Ludhiana, Jaipur, Mumbai and Hyderabad. The first Hypercity
store opened in May 2006.
Kovai Pazhamudir Nilayam
Kovai Pazhamudir group is a leading retailer of fruits and vegetables in South India. Established in 1965
the regional supermarket chain has 34 branches spread over Tamil Nadu and Pondicherry.
Le Millennia (Needs) Supermarket
Needs Supermarket was established in the Delhi metro area in 2000 and operates 17 stores in and
Max Hypermarkets India
SPAR Hypermarkets are operated under a license agreement between the Dubai-based Landmark
Group’s Max Hypermarkets India Pvt. Ltd. and SPAR International. SPAR currently has 10 stores in
Bengaluru, Mangalore, Hyderabad, Coimbatore, Delhi, Pune and Gurgaon.
IN2059 – India’s Food Retail Sector Growing Page 10
METRO Cash & Carry started operations in India in 2003 and operates nine stores in Bengaluru,
Hyderabad, Kolkata, Mumbai, Ludhiana and Delhi.
M.K. Retail Company was established in 1927 and operates seven supermarkets in Bengaluru.
MyDollarStore India operates as a master franchisee in India for MyDollarStore Inc of USA. The store
follows the retail model of fixed price selling. MyDollarStore made its foray into India in 2004 and is
currently operating 40 stores across India.
Namdhari's Fresh (a unit of Namdhari's Seeds) is a grocery store chain, started in 2000 in Bengaluru and
now has 20 stores. The chain focuses on being a premium green grocer. The company offers high
quality fruits and vegetables for retail purchase along with other food products.
Nilgiris Dairy Farm
Nilgiris is one of the oldest supermarket chains in India with origins dating back to 1905. Nilgiris has
grown from being a dairy farm specializing in butter to a leading supermarket chain with 90 stores
spread across India’s southern states.
Nuts N Spices
The Chennai-based supermarket chain Nuts N Spices is a specialty food retailer, which came into
operation in 1999 and currently operates 16 stores around southern India.
N Stores Food Retail Pvt. Ltd.
N Stores is a regional supermarket chain. There are currently three stores operating in Bengaluru. The
stores are supported by a large packing and baking facility within the region.
Ratnadeep Super Market Pvt. Ltd.
Ratnadeep Super Market (P) Ltd. is a supermarket chain located in Andhra Pradesh that began in 1987.
The chain currently operates three stores in Hyderabad.
Reliance Retail Limited
IN2059 – India’s Food Retail Sector Growing Page 11
Reliance Retail, Ltd. is a subsidiary Reliance Industries. Founded in 2006 and based in Mumbai, it is
the second largest retailer in India and operates over six hundred food stores in three formats.
Established in 1996, Spencer's has become a popular destination for shoppers in India with 30
hypermarkets and 220 supermarkets in 35 cities.
Shri Kannan Departmental Stores
Shri Kannan Departmental Store (P) Ltd is a Coimbatore retail chain. It started its operations in 1985 in
Erode has established a very strong regional presence with 25 stores within the state of Tamil Nadu.
Sugar and Spice India Pvt. Ltd (Le Marche)
Marché Retail Pvt. Ltd has been in the food business for the past 20 years. From a small beginning
specializing in bakery, delicatessen and chocolates, the company has grown to a retail store chain for
gourmet foods in India. There are seven outlets in the Delhi metro area.
Tata Group (Trent)
Tata Enterprises’ Trent Hypermarket Ltd is a retail operations company that operates the hypermarket
format – Star Bazaar. Currently there are 13 hypermarkets operating across seven cities in India.
Twenty Four Seven Retail store
Launched in June 2005, Twenty Four Seven stores are round-the-clock convenience stores. Currently
the chain has four outlets in New Delhi. Twenty Four Seven has launched its first co-branded
convenience store in collaboration with Indian Oil.
Wadhawan Group (Smart Retail Pvt. Ltd.)
Smart is a chain of neighborhood food and grocery retail stores. Smart supermarket is owned by
Wadhawan Food Retail Private Limited (WFRL), a division of the Wadhawan group that has interests
in financial services, hospitality, real estate, retail and education. Smart supermarket, previously known
as S*Mart was acquired by WFRL in September 2007 and renamed Smart with a new logo. The chain
currently has 31 stores operating all over Bengaluru.
IN2059 – India’s Food Retail Sector Growing Page 12