New Future for fruit & vegetables

NEW DELHI: Kishore Biyani’s Future Group is making a vigorous push to increase its share in the fruit and vegetables business, a category that has traditionally been an Achilles heel for the country’s largest retailer.

The group behind supermarket chains such as Food Bazaar and Big Bazaar is forming a specialised entity that will set up and manage an efficient supply chain for fruits and vegetables (F&V), marking a shift away from the outsourced model it has followed so far.

“Globally, F&V sales for most retailers is about 10% and we want to take it to that level. Within a year, we want to definitely hike the billing share of fruits and vegetables to 8-10%,” Mr Biyani, chief executive of the Future Group, told ET.

Fruit and vegetables currently account for 3-4% of total supermarket sales for the group, which expects to end the fiscal in June with retail sales of 9,200 crore.

A team headed by S Radhakrishnan, a 15-year veteran of the retail trade, will manage the new company and own an equity stake in it. Mr Radhakrishnan helped set up the Food World chain for RPG Group's Spencer Retail and was head of Reliance Retail's value format businesses until the beginning of this year.

Mr Biyani is betting that by putting in place new sorting and grading technologies, better cold storage and aggressively cutting out middlemen, he can bring down the prices of fruits and vegetables by about 15-20% across categories. "The efficiencies created by this exercise will be passed on to the consumer," he observed.

He declined to reveal how much he was investing in new company or what stake the new management team will have.
The Future Group now outsources retailing of fruits and vegetables to vendors, who are allowed to use space in its shops in exchange for a share of their revenue.

Mr Biyani’s move to take direct control of the fruits and vegetables business brings to focus the challenges faced by organised retailers in selling fresh and perishable goods. India lacks a network of cold storages and refrigerated trucking facilities that can efficiently transport fresh fruits and vegetables from a farm to the shop-floor while retaining its freshness.

Smaller, unorganized ‘kirana’ stores sell fruits and vegetables to most of the country’s population, but the extensive network of middlemen and high levels of wastage mean that the price paid to farmers is only a fraction of the retail price.

The organised retail trade relies heavily on APMC ‘mandis’ and agents to source the bulk of its stock of fruits and vegetables. Among the large ones, Reliance Retail procures the most from farmers – about 50% of its daily need of 700 tonne, a company official said.

Future Group has a separate company that handles its dry vegetables supplies as well, but the new entity will have independent profit and loss responsibilities as well.

It will rent out space from Future Group’s stores and separately branded counters will handle sales of fruits and vegetables.

“The new company will have end-to-end responsibilities. That way the back-end won’t be able to blame the front-end and vice-versa for poor produce or sales performance,” a person familiar with the initiative said.

F&V is also a unique category in terms of customer loyalty, Mr Biyani said.

“If a customer can find fresh vegetables in our stores around the season, he will keep coming back.”