Supermarkets set for Indian boom

28 November 2011

NEW DELHI: Competition among major supermarket chains like Wal-Mart, Tesco and Carrefour is due to intensify in India, as the country's government loosens restrictions on foreign firms in the sector.

Overseas chains will now be able to own up to 51% of any new "multibrand" retail joint ventures they form in the country, having been restricted solely to creating wholesale partnerships with local firms.

"I think it will redefine the way consumers shop in India, but more importantly the way supply chains in India run," said Raj Jain, CEO of Wal-Mart's wholesale joint venture with Bharti.

"Wal-Mart has been in India for over three years now, and we can use the same supply chain that we have set up to expand our business here," he said. "That's what we've been working for all this time."

According to Technopak Advisors, the consultancy, annual Indian retail sales currently stand at $470bn, of which $27bn is taken by "modern" outlets. These figures are pegged to hit $675bn and $85bn respectively in five years' time.

Tesco, the UK supermarket group, argued the government's decision represented "good news" for shoppers and business in India, but added more details were required on any possible conditions.

Carrefour, the French hypermarket chain, also "welcomed" the move. According to Subhodip Bandyopadhyay, Carrefour WC&C India's director, IT and organisation, wider changes may also result.

"Watch out for a lot of investment in the e-commerce space," he said. "Whether it's Tesco, Wal-Mart, Metro or Carrefour, we've all been waiting for e-commerce. Now we can go B2C [buisiness-to-consumer] and potentially reach 100m customers."

Thomas Varghese, CEO of Aditya Birla Retail, a major Indian retail group, was also optimistic about the potential benefits of the change in official policy for both local and overseas operators.

He said: "For all domestic retailers in the country, this will make available capital apart from domain knowledge. For international retailers, it will open up a $1.6tr market growing at 8-9% so it's a big business opportunity for all of them as growth has slowed down for all of them."

However, Metro, the world's fourth largest retailer, reported that it had "no plans" to roll out its Real or MediaMarkt Saturn brands in India, and will instead "continue to invest" in its cash and carry operations.

Elsewhere, the Indian government has also ruled that single-brand retailers such as Nike and Zara can control a 100% stake in their Indian operations, a figure that was pegged at 51%, which could also stimulate greater investment in this area.

Data sourced from Reuters, Financial Times, Wall Street Journal; additional content by Warc staff