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

1. The Global Food Market and Developments in the Modern Food Industry in India Dr David Hughes Emeritus Professor of Food Marketing Agri-Business Forum 13th International Economic Forum of the Americas/ Conference of Montreal Montreal, Quebec, Wednesday, June 20th, 2007

2. Global High Tech New and Improved Ready-to-Eat Fast Food Fuel Food Just Me Low Price Good For You All Year Large-Scale Open Supply Chain Local High Touch Traditional Natural/Unprocessed Slow Food Story Food Friends/Family Premium Price Naughty but Nice Seasonal Craft-scale Closed Supply Chain Migration to the Poles

3. Per Capita Consumption of Selected Food Groups, India and China Source: Adapted from “Asian Agrifood Demand Trends and Outlook to 2010”, Department of Foreign Affairs and Trade, Fed . Gov. Australia, 2004

5. Share of Supermarkets in Food Retail - USA % U.S. Source: Reardon et al, 2005

6. Share of Supermarkets – Western Europe % U.S. France Source: Reardon et al, 2005

7. Share of Supermarkets – “First Wave of Supermarket Diffusion” % • Chile, Korea, Taiwan, Mexico, Philippines, Thailand U.S. France Source: Reardon et al, 2005

8. Share of Supermarkets – 2nd & 3rd Waves Supermarket Diffusion % U.S. Indonesia, China, Vietnam, India Source: Reardon et al, 2005

9. 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

10. 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

11. Who Are The Global Retailers? Source: IGD, 2006

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

17. Leading Food Retailers in China, 2006 Source: China Chain Store & Franchise Association, 2007

18. Leading Food Retailers in China, 2006 Source: China Chain Store & Franchise Association, 2007

19. Fish market Sicily, Italy November 2005

23. 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 UK 1896

24. It’s not whether , it’s when?Development 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

25. World Population, 1950-2020 Billions 8 7 6 5 4 Developing countries 3 2 1 Developed countries 0 1950 1960 1970 1980 1990 2000 2010 2020 Source: UN (2002),IFPRI

26. Urban and Rural Population in Developing Countries, 1950-2020 Billions 4 rural 3 2 urban 1 0 1950 1960 1970 1980 1990 2000 2010 2020 Source: UN (2002),IFPRI

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

28. Principal Fresh Food Shopper Segments in Selected Major Asian Urban Centres Quality Seekers Value Seekers Easy Life Seekers Authority Seekers Source: Accenture in Coca-Cola RRC, The Fresh Imperative in Asia, 2005

29. Shopper Segments and their Preferences: Traditional versus Modern Retail % of weekly expenditure Note: Sampled Asian consumers stated % of weekly Fresh Food expenditure Source: Accenture in Coca-Cola RRC, The Fresh Imperative in Asia, 2005

30. Supply Chain Constraints Characteristic of Developing 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

33. What Sort of Supply (aka Value) Chain? Ideal:Short Fast Transparent Seamless Collaborative Too Often: Complex Price-driven Confrontational Disjointed Opaque

34. Final Thoughts

35. CONTACT POINTS: e-mail profdavidhughes@aol.com telephone numbers office +44(0)1600 715957 fax +44(0)1600 712544 mobile +44(0)7798 558276 www.profdavidhughes.com