Organized Agribusiness Retailing

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Indian economy is considered to be one of the fastest growing economies in the world. The rural economy being the foundation, requires a strong push in terms of technology and innovation. The basic and serious concern of policymakers in India is to double the farm income within next five years and to achieve a minimum of 4% annual growth in farm output in order to sustain high overall growth in GDP.
In order to achieve this, the focus should be on developing the marketing infrastructure needed for agricultural commodities which have constraints like seasonality and perishability. This will help in realizing the national objective of doubling farmers’ income and thereby growth and also increases the standard of living of constituents of the bottom of the pyramid. Therefore, a special attention is needed on organized retailing of the country’s rural economy which is contributed by farm sector.

Modern retail scenario in India

In India, diffusion of organized retail or supermarkets accelerated in the new millennium after a slow start in the late 1990s and has brought both opportunities and concerns for the farm sector. The country’s retail market which is estimated to be of size US $600 billion in 2015, is projected to double to the US $1 trillion by 2020 recording a long-term annual growth of 12% (BCG-RAI 2015). Modern retail comprises 10% as of now and it is likely to reach 15% by 2020 and it is growing at a pace of 20% per annum compared to 10% of traditional retail. When we look at the e-tail scenario, it has shown an unprecedented growth over the past few years and is expected to grow at 50% per annum.
Nevertheless, the question is that how much food & agribusiness sector contribute to the retail sector. There were 2395 food and grocery stores in organized retail in India by 2014. The share of food & grocery is currently low at about 2-3% in the modern retail and even low in e-tail market in spite of many start-ups booming in this sector.

Food retail chains in India

In India, the concept of food retail chains (FRC)/organized food retailing started in the 1990s with the advent of international formats of retailing, especially with the emergence of FRCs, such as ‘Foodworld’, ‘Nilgiris’, ‘Fabmall’, ‘Apnabazaar’, etc. the higher standards demanded by the supermarkets translate into higher demand for labour, which smallholders have in abundance. This factor coupled with the prospect of high returns provides strong incentives for farmers to sell in supermarkets. Food grains procured from the wholesalers at the APMC yards are cleaned, sorted, graded and packed at godowns of the retail chains. These retail chains then repack the commodities under private labels. These retail chains through their consolidation center strictly maintain the supply of quality produce by providing information on good agricultural practices. Quality control is maintained at consolidation centers. Then supermarkets pack the produce and they brand it as private label brands which increase perceived value in minds of consumers and thus fetch a fairly good price.

The way ahead

The food policy of the country for a long time focussed on increasing production and distributing at a low cost to fight poverty. Marketing of food products has not been given significant consideration in the policy formulation except restricting the movement across states. The government can encourage innovative institutions such as small producer companies (SPC) to empower the smallholders and facilitate their participation in the supermarket-driven marketing channel which will act as a tool for strengthening and the bargaining power of smallholders also enhancing the rising power of retail behemoths. The government should strengthen and help the traditional retailers in modernizing and standardizing their business to provide better services to farmers as well as consumers. With the help of support from state bodies, policies should be focussed more on marketing particularly retailing so as to achieve the objective of doubling farmers’ income.

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