‘Modern retail may hold the key to controlling food inflation’

Modern trade retailers are set to come to the rescue of spiralling food inflation. The Consumer Affairs Ministry recently called for suggestions from top retailers to contain the surge in retail prices. Given their advantageous sourcing capabilities, fruit and vegetable retailers are expected to help provide customers with more competitive prices.

Newly formed Freshkins, a vegetable retailer promoted by former employees of the Future Group and Reliance Retail, expects to rein in prices at its stores by directly sourcing from farmers. When vegetable prices surged in Mumbai, Freshkins was formed with the support of the Maharashtra State Agriculture Marketing Board.

K Radhakrishnan, Chief Mentor, Freshkins, said, “We did meet the Consumer Affairs Secretary recently to discuss ways to contain spiralling prices. With Freshkins, we will offer fruits and vegetables that will definitely be cheaper than the (rest of the) market as we are removing the middleman and sourcing directly from farmers.”

Set up with an investment of ₹15 crore, Freshkins will run on a franchise model with five stores initially in Mumbai, each measuring 250 sq ft.

Food inflation a concern “We expect to be a category killer with our prices. Modern trade can help in insulating prices to a certain extent and reduce wastage. After Mumbai, we are looking at Delhi,” added Radhakrishnan.

The rising cost of vegetables and fruits has been a growing concern for the newly appointed Modi Government. With potatoes and onions getting more expensive, it had recently brought the items under the Essential Commodities Act to discourage hoarding.

Though big retailers like Reliance Retail and the Future Group have been sourcing part of their supplies directly from farmers, organised fruit and vegetable retailing comprises a mere three per cent of the market. Most retailers have distribution centres and have adopted a hub-and-spoke model with cold chain facilities to service their stores.

Sumit Saran, Head of International Foods, Future Consumer Enterprises, said, “The future (in controlling prices) lies with modern retail, as it has the bandwidth and financial means to address issues related to structural sourcing, which is impossible for unorganised players.”

Market sources observed that reducing the control of the middleman with the proposed abolition of the APMC (Agricultural Produce Marketing Committee) or mandis, where farmers sell their produce directly, would also help in improving margins for big retailers in the fresh fruits and vegetables segment.

“The removal of the APMC Act is expected to benefit modern trade retailers with better margins as most of them are not profitable in the food and grocery formats,” confirmed Keith Sunderlal, CEO, SCS Group, an agri-business consulting company.

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