The Changing Face of Organized Retail It's Potential
29
t e c h n o p a k The Changing Face of Organized Retail & It's Potential Impact on Packaging Industry Harminder Sahni Technopak Advisors September 1 st , 2006
Transcript of The Changing Face of Organized Retail It's Potential
Microsoft PowerPoint - Packaing industry - Technopak.pptThe
Changing Face of Organized Retail
&
Harminder Sahni Technopak Advisors
Size of the retail opportunity in India…
The Retail opportunity in India is estimated as US $ 300 Bn.; ranked amongst the top 10 globally
GDP US 804 Bn
(60%)
(40%)
Only 3% of the total market
Hence size of the untapped opportunity is huge
Organized Retail
2006
t e c h n o p a k
However, growth in this sector likely to happen at a rapid pace…
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0
5 10
Organised retailing in India at the point of inflection
Technopak Analysis
t e c h n o p a k
Increased demand for better shopping experience Growing incomes Younger Profile Increasing exposure and awareness levels Changing role of women and children in decision making process
All drivers in place to propel growth in the retail segment …
Demand-side factors
t e c h n o p a k
Supply-side factors
Improved Sourcing Options Quality product from Indian producers who are already supplying to world-class retailers Global sourcing increasingly viable due to liberalisation of tariffs Product proliferation driven by manufacturers
Increased interest among corporates Large Indian business houses bullish on activity in the retail sector International players keen on India entry
Increased supply of Retail Real Estate Over 600 malls being planned across the country by 2010
All drivers in place to propel growth in the retail segment …
t e c h n o p a k
As a result, various categories are likely to shape up in the future as follows…
Food & Grocery likely to emerge as huge opportunity
100%427 9.0%100%300
5%23 18%4%12Others
1%3 17%0.6%2Recreation
3%12 12%3%8Medical Care and Health Services
6%24 12%5%15Jewellery & Watches
4%16 15%3%9Furniture
6%24 15%5%14Consumer Durables & IT
2%7 15%1%4Furnishings
2%7 11%2%5Footwear
8%33 11%7%21Apparel
5%23 11%5%15Personal Care
60%256 7.0%65%195Food, Beverages and Tobacco
% Share -
2010
Hypermarkets now and ahead …
Store in Bangalore by end 2006, 50 stores over next 5 years
1HypermarketMumbaiHome Care Retail India – Magnet
Set up distribution centers in Delhi, Mumbai, Hyderabad, Kolkata, Chennai
2Cash ‘n CarryBangaloreMetro Cash ‘n Carry
3 stores by 2008; enter cash ‘n carry format
1HypermarketMumbaiShoprite
220 stores by 201035HypermarketVishal Megamart
to establish a network of 55 hypermarkets across India, by 2015
1HypermarketMumbaiShoppers Stop- Hypercity
80 stores by 2008; 225 stores by 2010 30+Hypermarket21Big Bazaar
Two more stores planned- in Mumbai and Bangalore
2HypermarketAhmedabadStar India Bazaar
* Estimate Figures of key players
t e c h n o p a k
Supermarkets likely to increase…
11Supermarket5Tru Mart
-44SupermarketSouth IndiaFood World
Reliance Retail
Across Delhi, Bangalore, Andhra Pradesh & Mumbai. 600 stores by year end
164SupermarketTamil NaduSubhiksha
30Supermarket15Nilgiri’s
35Supermarket14Food Bazaar
40SupermarketsGujaratAdani Group
* Estimate Figures of key players
t e c h n o p a k
Such changes in the retail environment in India are likely to drive growth of several ancillary & support industries in the coming
years; one such Industry would be the packaging Industry
t e c h n o p a k
Contribution of packaging in the F&G Sector…
Depiction of a typical cost split
Prod uc
Indexed Numbers (Estimates)
t e c h n o p a k
Impact on the packaging industry as a result of growth of organized retailing…
Example of Milk – evolution across retail formats
Modern Format with aseptic
Loose milk at traditional Milk Dairy
t e c h n o p a k
Factors driving growth in the packaging Industry in India…
High consumer acceptance & usage of packaged milk
Technopak Analysis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coff ee
Che es
e Milk
sh ak
es Kho
ya / m
av a
Others Condensed milk UHT milk Milk powder Bottled Milk Packet Milk Cow Milk
Buffalo Milk Toned milk
With changing lifestyles, RTE category has been evolving
16% penetration in Nuclear families
Growing acceptance of processed & convenient food
Technopak Analysis
Consumer expectations have increased
Lifestyle changes, i.e. presentation and aesthetics is important
“Package graphics and presentation quality figure as the most powerful influences in
purchasing decision”
[Source : Point of Purchase Advertising Industry in the US (POPAI )]
Hence packaging can play a greater role in facilitating impulse purchase of such items
t e c h n o p a k
Factors driving growth in the packaging Industry in India…
Carrying and Storage Ease
easy-pour in the juices
oil refill pack segments
shampoo sachets with zip locks
Health consciousness, hence consumer wants to see the nutritional benefits on the packaging; ISO certifications etc.
packaging reflects upon the quality of the product
Environment Factors
Type of packaging will also undergo a change, driven by eco-friendly initiatives
t e c h n o p a k
Factors driving growth in the packaging Industry in India…
With larger retailers getting into supermarket and hypermarket formats, private labels are likely to emerge in a big way. Hence, packaging can help -
In providing an identity to the private label brand; act as a communication tool with the consumer
Prove to be an important aspect of the marketing strategy
t e c h n o p a k
Projected size of the Industry as organized retail grows
Signifying a huge opportunity
INR Cr1,600 Incremental Opportunity in Packaging arising from private labels in India
USD Bn0.4 Incremental Opportunity in Packaging arising from private labels in India
USD Bn6.0Share of private label in organized retail in F&G
20%% share of private label in organized retail
USD Bn30.0Share of organized retail in F&G
INR Cr~70,000 Packaging spend on the F&G segment
USD Bn15Packaging spend on the F&G segment
~6%Ratio of Packing cost to MRP
USD Bn256Retail contribution of F&G
Scenario 2011
Estimate Figures
Technopak Analysis
Importance of packaging in modern retail…
“The number of brands/variants on display in a hypermarket format is
in excess of 1,700 on average”
[Source : Point of Purchase Advertising Industry in the US (POPAI )]
…can help create a distinct visual impression on the consumer that is instantly identifiable to the brand
t e c h n o p a k
Importance of packaging in modern retail…
“50% of the purchases inside hypermarkets are impulse……
shoppers typically spend only a few seconds to actively compare
different products”
Technopak Analysis
t e c h n o p a k
Importance of packaging in modern retail…
“Shoppers typically spend 10-20 seconds making their purchase decisions” –
Given this reality, the first challenge is clearly to be seen and considered — hence consistently create an opportunity for sale
…with private label sharing the same shelf space as several brands, its packing will have to be competitive so as to
drive customer attention and purchases
t e c h n o p a k
In addition, several inherent advantages can accrue to retailers in the form of…
Shelf life of products can be increased as a result of new and innovative packaging techniques
E.g. : in case of milk, aseptic packaging technology can increase the shelf life of milk by 6 months
Will also help in unitising the commodity
For better and efficient costing
New packaging technology can prove to be an effective tool in hedging the risk associated with uncertainties in demand & supply -
By having a longer holding period for perishable items
t e c h n o p a k
In addition, several inherent advantages can accrue to retailers in the form of…
Especially in the rural sector in India, the distribution channel is typically long; with the transit time being as high as 1-2 months
Company C & F Stockist Retailer
Wholesaler
Sub
Stockist
Super
Stockist
Proper packaging can help avoid contamination, not only at the front end, but at every stage of the value chain –
especially in case of perishables such as Milk, Oil, F&G – hence reducing wastage across the supply chain
Technopak Analysis
t e c h n o p a k
While there is likely to be big opportunity in packaging as a result of organized retail growth, none-the-less there are several
challenges which need to be managed…
t e c h n o p a k
Current state of the Industry…
Largely dominated by the Small Scale Sector in India
limited scale
limited capabilities
Need-gap…
However over the next five years,
Packing requirements are likely to increase
Top few players in the F&G category likely to contribute to large part of the market
t e c h n o p a k
Implications…
With the large size of retailers, these players will require large size vendors to be able to cater to the collective packaging needs
Hence the packing players will have to invest in
upgrading technology
increasing scale
Implications…
Given this scenario, two options may emerge:
this industry is likely to witness consolidation. i.e. small number of large players to be able to handle large capacities
in order to protect the smaller players, institutional support in favour of supporting and forming clusters may also be useful, i.e. hosiery cluster in Tirupur
technopak
Harminder Sahni
2nd Floor, Tower D Global Business Park MG Road Gurgaon 122002 (National Capital Region) India Phone : +91 124 414 1111 Fax : +91 124 414 1112
801, 8th Floor The Estate 121, Dickinson Road Bangalore 560 042
Phone : +91 80 512 33388 Fax : +91 80 512 33399
3RD Floor, AP Cooperative Bank Building, Masabtank, Hyderabad – 500004
Phone : +91 40 30602137 Fax : +91 40 30602150
www.technopak.com
&
Harminder Sahni Technopak Advisors
Size of the retail opportunity in India…
The Retail opportunity in India is estimated as US $ 300 Bn.; ranked amongst the top 10 globally
GDP US 804 Bn
(60%)
(40%)
Only 3% of the total market
Hence size of the untapped opportunity is huge
Organized Retail
2006
t e c h n o p a k
However, growth in this sector likely to happen at a rapid pace…
0
100
200
300
400
500
600
700
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 0
5 10
Organised retailing in India at the point of inflection
Technopak Analysis
t e c h n o p a k
Increased demand for better shopping experience Growing incomes Younger Profile Increasing exposure and awareness levels Changing role of women and children in decision making process
All drivers in place to propel growth in the retail segment …
Demand-side factors
t e c h n o p a k
Supply-side factors
Improved Sourcing Options Quality product from Indian producers who are already supplying to world-class retailers Global sourcing increasingly viable due to liberalisation of tariffs Product proliferation driven by manufacturers
Increased interest among corporates Large Indian business houses bullish on activity in the retail sector International players keen on India entry
Increased supply of Retail Real Estate Over 600 malls being planned across the country by 2010
All drivers in place to propel growth in the retail segment …
t e c h n o p a k
As a result, various categories are likely to shape up in the future as follows…
Food & Grocery likely to emerge as huge opportunity
100%427 9.0%100%300
5%23 18%4%12Others
1%3 17%0.6%2Recreation
3%12 12%3%8Medical Care and Health Services
6%24 12%5%15Jewellery & Watches
4%16 15%3%9Furniture
6%24 15%5%14Consumer Durables & IT
2%7 15%1%4Furnishings
2%7 11%2%5Footwear
8%33 11%7%21Apparel
5%23 11%5%15Personal Care
60%256 7.0%65%195Food, Beverages and Tobacco
% Share -
2010
Hypermarkets now and ahead …
Store in Bangalore by end 2006, 50 stores over next 5 years
1HypermarketMumbaiHome Care Retail India – Magnet
Set up distribution centers in Delhi, Mumbai, Hyderabad, Kolkata, Chennai
2Cash ‘n CarryBangaloreMetro Cash ‘n Carry
3 stores by 2008; enter cash ‘n carry format
1HypermarketMumbaiShoprite
220 stores by 201035HypermarketVishal Megamart
to establish a network of 55 hypermarkets across India, by 2015
1HypermarketMumbaiShoppers Stop- Hypercity
80 stores by 2008; 225 stores by 2010 30+Hypermarket21Big Bazaar
Two more stores planned- in Mumbai and Bangalore
2HypermarketAhmedabadStar India Bazaar
* Estimate Figures of key players
t e c h n o p a k
Supermarkets likely to increase…
11Supermarket5Tru Mart
-44SupermarketSouth IndiaFood World
Reliance Retail
Across Delhi, Bangalore, Andhra Pradesh & Mumbai. 600 stores by year end
164SupermarketTamil NaduSubhiksha
30Supermarket15Nilgiri’s
35Supermarket14Food Bazaar
40SupermarketsGujaratAdani Group
* Estimate Figures of key players
t e c h n o p a k
Such changes in the retail environment in India are likely to drive growth of several ancillary & support industries in the coming
years; one such Industry would be the packaging Industry
t e c h n o p a k
Contribution of packaging in the F&G Sector…
Depiction of a typical cost split
Prod uc
Indexed Numbers (Estimates)
t e c h n o p a k
Impact on the packaging industry as a result of growth of organized retailing…
Example of Milk – evolution across retail formats
Modern Format with aseptic
Loose milk at traditional Milk Dairy
t e c h n o p a k
Factors driving growth in the packaging Industry in India…
High consumer acceptance & usage of packaged milk
Technopak Analysis
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Coff ee
Che es
e Milk
sh ak
es Kho
ya / m
av a
Others Condensed milk UHT milk Milk powder Bottled Milk Packet Milk Cow Milk
Buffalo Milk Toned milk
With changing lifestyles, RTE category has been evolving
16% penetration in Nuclear families
Growing acceptance of processed & convenient food
Technopak Analysis
Consumer expectations have increased
Lifestyle changes, i.e. presentation and aesthetics is important
“Package graphics and presentation quality figure as the most powerful influences in
purchasing decision”
[Source : Point of Purchase Advertising Industry in the US (POPAI )]
Hence packaging can play a greater role in facilitating impulse purchase of such items
t e c h n o p a k
Factors driving growth in the packaging Industry in India…
Carrying and Storage Ease
easy-pour in the juices
oil refill pack segments
shampoo sachets with zip locks
Health consciousness, hence consumer wants to see the nutritional benefits on the packaging; ISO certifications etc.
packaging reflects upon the quality of the product
Environment Factors
Type of packaging will also undergo a change, driven by eco-friendly initiatives
t e c h n o p a k
Factors driving growth in the packaging Industry in India…
With larger retailers getting into supermarket and hypermarket formats, private labels are likely to emerge in a big way. Hence, packaging can help -
In providing an identity to the private label brand; act as a communication tool with the consumer
Prove to be an important aspect of the marketing strategy
t e c h n o p a k
Projected size of the Industry as organized retail grows
Signifying a huge opportunity
INR Cr1,600 Incremental Opportunity in Packaging arising from private labels in India
USD Bn0.4 Incremental Opportunity in Packaging arising from private labels in India
USD Bn6.0Share of private label in organized retail in F&G
20%% share of private label in organized retail
USD Bn30.0Share of organized retail in F&G
INR Cr~70,000 Packaging spend on the F&G segment
USD Bn15Packaging spend on the F&G segment
~6%Ratio of Packing cost to MRP
USD Bn256Retail contribution of F&G
Scenario 2011
Estimate Figures
Technopak Analysis
Importance of packaging in modern retail…
“The number of brands/variants on display in a hypermarket format is
in excess of 1,700 on average”
[Source : Point of Purchase Advertising Industry in the US (POPAI )]
…can help create a distinct visual impression on the consumer that is instantly identifiable to the brand
t e c h n o p a k
Importance of packaging in modern retail…
“50% of the purchases inside hypermarkets are impulse……
shoppers typically spend only a few seconds to actively compare
different products”
Technopak Analysis
t e c h n o p a k
Importance of packaging in modern retail…
“Shoppers typically spend 10-20 seconds making their purchase decisions” –
Given this reality, the first challenge is clearly to be seen and considered — hence consistently create an opportunity for sale
…with private label sharing the same shelf space as several brands, its packing will have to be competitive so as to
drive customer attention and purchases
t e c h n o p a k
In addition, several inherent advantages can accrue to retailers in the form of…
Shelf life of products can be increased as a result of new and innovative packaging techniques
E.g. : in case of milk, aseptic packaging technology can increase the shelf life of milk by 6 months
Will also help in unitising the commodity
For better and efficient costing
New packaging technology can prove to be an effective tool in hedging the risk associated with uncertainties in demand & supply -
By having a longer holding period for perishable items
t e c h n o p a k
In addition, several inherent advantages can accrue to retailers in the form of…
Especially in the rural sector in India, the distribution channel is typically long; with the transit time being as high as 1-2 months
Company C & F Stockist Retailer
Wholesaler
Sub
Stockist
Super
Stockist
Proper packaging can help avoid contamination, not only at the front end, but at every stage of the value chain –
especially in case of perishables such as Milk, Oil, F&G – hence reducing wastage across the supply chain
Technopak Analysis
t e c h n o p a k
While there is likely to be big opportunity in packaging as a result of organized retail growth, none-the-less there are several
challenges which need to be managed…
t e c h n o p a k
Current state of the Industry…
Largely dominated by the Small Scale Sector in India
limited scale
limited capabilities
Need-gap…
However over the next five years,
Packing requirements are likely to increase
Top few players in the F&G category likely to contribute to large part of the market
t e c h n o p a k
Implications…
With the large size of retailers, these players will require large size vendors to be able to cater to the collective packaging needs
Hence the packing players will have to invest in
upgrading technology
increasing scale
Implications…
Given this scenario, two options may emerge:
this industry is likely to witness consolidation. i.e. small number of large players to be able to handle large capacities
in order to protect the smaller players, institutional support in favour of supporting and forming clusters may also be useful, i.e. hosiery cluster in Tirupur
technopak
Harminder Sahni
2nd Floor, Tower D Global Business Park MG Road Gurgaon 122002 (National Capital Region) India Phone : +91 124 414 1111 Fax : +91 124 414 1112
801, 8th Floor The Estate 121, Dickinson Road Bangalore 560 042
Phone : +91 80 512 33388 Fax : +91 80 512 33399
3RD Floor, AP Cooperative Bank Building, Masabtank, Hyderabad – 500004
Phone : +91 40 30602137 Fax : +91 40 30602150
www.technopak.com
