India’s Food and Grocery retail market offers one of the largest opportunity areas for business. The food and grocery category will continue to grow at about 15 per cent per annum over the next five years, and will dominate the overall retail market.
As per the findings of the 2016 edition of the India Food Report, the food and grocery retail market is expected to reach Rs 109,00,000 crore by 2025, with a growth rate of 15 per cent per annum. A large part of this growth will be driven by inflationary price increase, and the balance by demand growth led by increasing population, increasing incomes and thereby higher spend on foods and lastly urbanization, which is changing food habits.
IMAGES Research finds that the penetration of modern organised retail in food is currently one of the lowest at 1.6 per cent. However, this is also expected to change dramatically over the next decade as organized retailers penetrate the markets deeper. By 2025, organised retail is expected to capture at least 3.2 per cent of the food & grocery market and be worth INR 340,000 crore, growing at a CAGR of 22.5 per cent from current levels. Convenience seems to be the biggest driver of visitation to the hitherto small category of modern format stores – the fact that all categories and brands are available under one roof. While “location convenience”, “customised services” and “easy goods return/exchange facilities” drive a customer towards kirana stores, “product choice”, “efficient store- management” and “value-enhancing services” attract customers towards modern retailers.
Local kirana stores and street hawkers will however continue to dominate the food and grocery market with a 90 per cent plus share, even in 2025. Although, consumption is on the rise and most formats of retail are proliferating in important developing markets, yet the penetration of large format modern retailing in India has not even crossed the 10 per cent mark.
Looking into the future, the Indian market will be unique in its own way and will be a medley of extremes. The unorganised, organised and online players will co-exist in the Indian retail ecosystem and will expand the market for each other, as all have unique strengths and the sector is large enough to accommodate all participants. It is expected that unique partnership models will emerge as the retail market matures and this partnership will further push the sector growth.
Early signs of this are already visible as e-grocers aggregate orders and pass them on to brick and mortar grocery stores nearest to the consumer, for local delivery.
To a large extent this co-existence will be driven by the consumer who will not shun one channel for the other and will seamlessly switch between channels. The consumer approach to channel selection will thus be “inclusive” and not “exclusive”.
The shopper is moving seamlessly between the physical and digital world, and the mobile is fast becoming the central processing unit of her life! She is buying more and more food online – grocery buying on the internet has grown by 14 per cent over the past two years. Over all, F&G e-tailing is the fastest growing category in India.
In India, the online market stands at about at 1 per cent of the total retailing market but considering that the country’s tech-savvy, young generation has made India the third-largest country in terms of internet users, the growth in electronic commerce may happen more rapidly than expected. The e-tailing sector is booming on the growing internet user base, which was projected to cross around 400 million users by 2020.
E-tailing in India has the potential to reach USD 20-30 billion by 2020. A major contributor for the growth of e-tailing is the Indian urban population; Mumbai, Delhi and Kolkata ranked among the top three cities in India respectively with the maximum number of internet users.
The shopping style of Indian customers is changing fast and it is expected that in the next 10 years, around 30–40 per cent of the total retail in top 75 cities of our country will be done through online.