New Supermarket Chain in India

The Financial Times yesterday carried this announcement, on the expansion of the empire of supermarkets in India.

India opens western-style supermarkets

By Jo Johnson in New Delhi

India’s national capital region will enter the modern retailing era today, with the opening of the first recognisably western-style supermarkets in this sprawling conurbation of 15m people.

At a preview of one of three stores that will open in Noida, a satellite city of Delhi, prices of key vegetables were about half those of other grocers in the capital, a big draw in such a cost-sensitive market.

Reliance Industries plans to open 100 Reliance Fresh stores in the capital by April as part of a proposed $5-$7bn (£2.5-£3.6bn) investment in a “farm-to-fork” supply chain that will force radical change on one of the largest and most inefficient sectors of the Indian economy.

In the latest phase of its breakneck roll-out of supermarkets ahead of the arrival of foreign-backed retail rivals, Reliance will today open nine pilot supermarkets in Noida, Gurgaon, Faridabad and Ghaziabad, four booming suburbs. It opened its first store in Hyderabad last September and now has 46 in operation.

With an average of 5.5 stores per 1,000 people, India has the highest retail outlet density in the world. But almost all of the 12m “mom and pop” stores that account for 98 per cent of the $300bn industry’s sales lack access to capital and technology.

The pace of the planned store roll-out is unprecedented, with Reliance aiming to “carpet” 100m sq ft and achieve $25bn in sales by 2010, according to Raghu Pillai, president and chief executive of Reliance Retail.

Wal-Mart Stores late last year announced a joint venture with Bharti Enterprises that will see it enter the Indian market as a wholesaler. Foreign supermarket retailers are barred from India under the country’s foreign direct investment rules.

Conscious of the political backlash it will face if it is seen to be putting small shopkeepers to the wall, Reliance yesterday said its business would be “inclusive” and that it would allow existing “mom and pop” stores to buy from it at wholesale prices.

Promising to create 500,000 jobs in three years, Mr Pillai said the industry’s rapid growth would leave room for modern retailers to co-exist with family-run operations. Reliance plans to open stores in 784 cities and towns and 6,000 smaller towns.

At the Noida store, onions were on sale for Rs13 (15p) per kilo and garlic for Rs81 per kilo, compared with Rs24 and Rs150 respectively at Allied Fruit, a family-run store in Khan Market, a shopping area in south Delhi popular with expatriates and wealthy Indians. “These are fabulous prices,” said Jai Bendre, Reliance Retail’s foods marketing head.

Reliance is also breaking new ground by pricing many products to the second decimal place, a selling-point for customers whose average shopping basket costs just Rs150. A pot of Chulbuli Imli, a confection made out of tamarind, for example, was priced at Rs23.52.

The emergence of potentially deflationary forces in the retail sector will be welcomed by the Reserve Bank of India at a time when inflation has broken out of the central bank’s comfort range, crossing 6 per cent.

With money supply and bank credit growth of 20.4 per cent and 30.2 per cent (ahead of targets of 15.5 per cent and 20 per cent), economists expect the RBI to lift the repo and reverse repo rates 25 basis points to 7.5 per cent and 6.25 per cent tomorrow.