Financial Daily from THE HINDU group of publications
Wednesday, Nov 16, 2005
Financial Daily from THE HINDU group of publications Wednesday, Nov 16, 2005 |
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Agri-Biz & Commodities
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Foods & Food Processing Marketing - Channels and Franchises `Lack of organised distribution chain affecting food sector' Our Bureau
Chennai , Nov. 15 THE absence of an organised distribution chain is a stumbling block for the food industry more than anything else, according to Mr Harsh Bahadur, Managing Director, Metro Cash & Carry (India). "Without a modern distribution chain there is no opportunity to produce value-added products. Where is the shelf space?" he asked, addressing the concluding session of FoodPro 2005, the conference on food processing industry. A typical retailer in India has about 500 sq ft space and stocks 600-1,200 products and there was no space for new products. Also, the traditional multi-tiered distribution from farmers through middlemen to retail outlets added cost to the customer and was not efficient. A modern distribution chain should be seen as a marketing infrastructure that would support agricultural growth, he said. China's food industry saw exponential growth after its distribution and marketing structure was modernised when its economy opened up. In India, the hurdles to modernisation continue and this could even have an impact on its economy, as production and distribution grow hand-in-hand, he said. India continued as a producer of raw materials and value-addition was low — only about 8 per cent of its food production and 2 per cent of fruit and vegetable produce was processed. It needed to change its distribution chain rapidly, Mr Bahadur said. Modern distribution chains with large retailers and wholesalers targeting different market segments exploit the market more effectively. In a developed market, there are gourmet outlets with niche products catering to the top end; super markets and hyper markets stocking a wide range of goods at low cost; discounters selling at lower prices; and warehouses for bulk sales. Such a system would mean more processed foods on shelves and a better deal for the producer of raw materials — the farmers. But this was not happening in the existing fragmented system, he said. Mr Marc Heinze of Metro Group Buying, the procurement organisation under Metro Group, AG, said for the 56-billion euros group the emerging markets were in Eastern Europe and Asia. Its growth was stagnant in developed markets including in its home in Germany and Western Europe, which are saturated, he said. It was looking at India as a supplier base. But initial experience shows that the suppliers and the distribution channels were small, which affected their efficiency. The distribution chain must be able to handle volumes and deliver quality. Dealing with an international group like Metro would give its suppliers access to 30 countries and their markets, he said.
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