Dr David HughesEmeritus Professor of Food MarketingEmeritus Professor of Food Marketing

Agri-Business Forum

13th International Economic Forum of the Americas/ Conference of Montreal

Montreal, Quebec, Wednesday, June 20th, 2007

The Global Food Market and The Global Food Market and Developments in the Modern Developments in the Modern Food Industry in IndiaFood Industry in India

Migration to the PolesMigration to the Poles

GlobalHigh TechNew and ImprovedReady-to-EatFast FoodFuel FoodJust MeLow PriceGood For YouAll YearLarge-ScaleOpen Supply Chain

LocalHigh TouchTraditionalNatural/UnprocessedSlow FoodStory FoodFriends/FamilyPremium PriceNaughty but NiceSeasonalCraft-scaleClosed Supply Chain

Per Capita Consumption of Selected Food Per Capita Consumption of Selected Food Groups, India and ChinaGroups, India and China

Kg Per CapitaKg Per Capita

Rice Wheat Maize/Corn

Oilseeds ‘Land’ Meat

Fish Butter & Cheese

Vegs. Fruit Sugar

India 91 75 11 13 7 6 1 66 36 10

China 108 107 138 18 61 8 3 234 28 18

Source: Adapted from “Asian Agrifood Demand Trends and Outlook to 2010”, Department of Foreign Affairs and Trade, Fed . Gov. Australia, 2004

Share of Supermarkets in Food Retail - USAShare of Supermarkets in Food Retail - USA

0102030405060708090

100

1940 1950 1960 1970 1980 1990 2000 2010

%%

U.S.U.S.

Source: Reardon et al, 2005

Share of Supermarkets – Western EuropeShare of Supermarkets – Western Europe

0102030405060708090

100

1940 1950 1960 1970 1980 1990 2000 2010

%

U.S.U.S. FranceFrance

Source: Reardon et al, 2005

Share of Supermarkets – “First Wave of Share of Supermarkets – “First Wave of Supermarket Diffusion”Supermarket Diffusion”

0102030405060708090

100

1940 1950 1960 1970 1980 1990 2000 2010

%%

U.S.U.S. FranceFrance

Chile, Korea, Chile, Korea, Taiwan, Taiwan, Mexico, Mexico, Philippines, Philippines, ThailandThailand

Source: Reardon et al, 2005

Share of Supermarkets – 2Share of Supermarkets – 2ndnd & 3 & 3rdrd Waves Waves Supermarket DiffusionSupermarket Diffusion

0102030405060708090

100

1940 1950 1960 1970 1980 1990 2000 2010

%%

U.S.U.S.Indonesia, China, Indonesia, China, Vietnam, IndiaVietnam, India

Source: Reardon et al, 2005

Emergence of Modern Retailing Emergence of Modern Retailing

• Pace of supermarket penetration accelerating in emerging markets, but, one size does not fit all (and not all public and/or private enthusiastic)

• In any country, waves – first, in big cities, then secondary cities, then rural towns

• Processed foods and non-food grocery first, then, meats, dairy, fruit and last into vegetables

• Impetus is, often, significant FDI from major international players, and/or “retaliation in first” domestic investment

Source: T. Riordan (2007), Hughes D

Emergence of Modern Retailing Emergence of Modern Retailing

• Supply chains modernise – from top end to mass market – through– National, regional, global sourcing networks– “Preferred supplier” systems– Direct purchase and specialised wholesalers– Private quality standards

• All the above have substantial implications for food industry players, in particular, smaller-scale businesses (not least small-scale farms)

Source: T. Riordan (2007), Hughes D

Who Are The Global Retailers?Who Are The Global Retailers?

RankRank RetailerRetailer BaseBase Global StatusGlobal Status1 Carrefour France

Leading global retailers

2 Wal*Mart USA

3 Tesco UK

4 Metro Group Germany

5 Ahold Neths

6 Auchan France

7 Seven&I Japan

Leading international retailers

8 Aldi Germany

9 Groupe Casino France

10 Costco USA

11 Delhaize Belgium

Source: IGD, 2006

Major Players in the Indian Modern Grocery Major Players in the Indian Modern Grocery Sector, Late-2006Sector, Late-2006

CompanyCompany FaciaFacia FormatFormat Store NumbersStore Numbers

Subhiksha Subhiksha Discount 600

Margin Free Margin Free Discount 257

Trinethra Trinethra Supermarket 170

RPG Spencer’s Hyper/Super

Supermarket 125

Reliance Retail Reliance Fresh Supermarket 120

Pantaloon Big/Food Bazaar Supermarket 108

Dairy Farm Foodworld Supermarket 50

Nilgiri’s Nilgiri’s Supermarket 36

Sabka Bazaar Sabka Bazaar Supermarket 27

Leading Food Retailers in China, 2006Leading Food Retailers in China, 2006

CompanyCompany Ownership/HQOwnership/HQ Sales Sales

Billion YuanBillion Yuan

Lianhua State owned Shanghai 44.0

China Resources Vanguard Hong Kong 37.9

Carrefour France 24.8

Wumart Private Beijing 23.1

Suguo State owned Nanjing 22.3

Beijing Hualian State owned Beijing 21.2

Nonggongshang State owned Shanghai 19.6

Source: China Chain Store & Franchise Association, 2007

Leading Food Retailers in China, 2006Leading Food Retailers in China, 2006CompanyCompany Ownership/HQOwnership/HQ Sales Sales

Billion YuanBillion Yuan

RT - Mart Taiwan 19.6

Wal*Mart USA 15.0

Shanghai Hualian State owned Shanghai 15.0

Xinyijia (A. Best) Private Beijing 14.3

Trust-Mart Taiwan 14.0

Lotus Thailand 13.5

Metro Germany 9.4

Tesco UK 9.3

Source: China Chain Store & Franchise Association, 2007

Fish market Sicily, ItalyNovember

2005

British are “exceptionally slow of imagination and wanting in taste” when it comes to food. “As a rule, the Englishman’s dinner is plain and monotonous to a degree. The cook knows nothing of proportion in seasoning his food; little of variety, and has a rough slovenly touch”!

Indian Tourist to the UK1896

It’s not whether , it’s whenIt’s not whether , it’s when??Development of the Modern Food Grocery Sector in IndiaDevelopment of the Modern Food Grocery Sector in India

• Huge young population and growing• Real GDP growth rate high and resilient• Rapid urbanisation• Broadening of the middle class• Retail industry pundits invariably rank India as

No. 2 to China on modern retail development potential

• International retailers congregating at the borders

Source: UN (2002),IFPRI

1950 1960 1970 1980 1990 2000 2010 20200

1

2

3

4

5

6

7

8Billions

Developed countries

Developing countries

World Population, 1950-2020World Population, 1950-2020

Source: UN (2002),IFPRI

1950 1960 1970 1980 1990 2000 2010 20200

1

2

3

4Billions

rural

urban

Urban and Rural Population in Developing Urban and Rural Population in Developing Countries, 1950-2020 Countries, 1950-2020

It’s not whether , it’s whenIt’s not whether , it’s when??Development of the Modern Food Grocery Sector in IndiaDevelopment of the Modern Food Grocery Sector in India

But:But:• Fresh food purchase preference and lack of

modern fresh food supply chains provides a buffer for wet markets and traditional retailers

• Extended families and servants reduce convenience advantage of modern retailing

• Penchant for regulation embedded in Indian public sector DNA

• Farmers and small-scale retailers do have political clout and resist modern sector incursion

Source: Accenture in Coca-Cola RRC, The Fresh Imperative in Asia, 2005

Principal Fresh Food Shopper Segments in Principal Fresh Food Shopper Segments in Selected Major Asian Urban CentresSelected Major Asian Urban Centres

27

41

824

Quality Seekers

Authority SeekersEasy Life Seekers

Value Seekers

Shopper Segments and their Preferences: Shopper Segments and their Preferences: Traditional versus Modern RetailTraditional versus Modern Retail

49

6458

50

32

51

3642

50

68

0

10

20

30

40

50

60

70

80

Overall QualitySeekers

Valueseekers

AuthoritySeekers

Easy LifeSeekers

Traditional Wet Markets Modern Retail

Source: Accenture in Coca-Cola RRC, The Fresh Imperative in Asia, 2005Note: Sampled Asian consumers stated % of weekly Fresh Food expenditure

% o

f w

eekl

y ex

pend

iture

Supply Chain Constraints Characteristic of Supply Chain Constraints Characteristic of Developing CountriesDeveloping Countries

• Consumer mistrust, often reflecting variable/low quality, of processed foods

• Very poor wholesale market infrastructure (cool store, packing, grading, etc.)

• Wastage very high (20-40%)• Traders dominate chain with little pricing

transparency evident• Quality produce not rewarded with producer

premiums• Fragmentation from production to end of supply

chain

Ideal:Ideal: ShortFastTransparentSeamlessCollaborative

Too Often:Too Often: ComplexPrice-drivenConfrontationalDisjointedOpaque

What Sort of Supply (aka Value) Chain?What Sort of Supply (aka Value) Chain?

Final ThoughtsFinal Thoughts

•

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