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9, December 2006 Pragati Maidan, New Delhi.
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At the entrance of Mumbai hypermarket Food Bazaar there is a sign: `Fresh fruits and vegetables at mandi (farmers' cooperative) prices. Do not buy from general store.` It is not an empty promise. Food Bazaar, a part of Pantaloon Retail (India) Ltd., is matching prices by buying from farmers' cooperatives and wholesale markets, a model that new entrants are adopting as they rush to tap the growing market. `Large retailers are disadvantaged at the front-end compared to small shops as they have higher rentals and overheads, so they have to drive profitability through the back-end,` said Raman Mangalorkar, head of consumer and retail practice at AT Kearney. `Having an efficient way of sourcing, storing, moving and replenishing products is going to be very critical to profits.` Reliance Retail Ltd., a subsidiary of Reliance Industries, is investing $5.6 billion in stores, of which a fourth will be in its supply chain, while Bharti Retail Ltd. will spend $2.5 billion by 2015 and is firming up a venture with Wal-Mart Stores Inc. for back-end and cash-and-carry operations. ITC Ltd., the top cigarette maker, has a network of `choupals`, rural collection centres for grain, and is sourcing fruits and vegetables from farmers for its grocery stores. Already, small retailers, who control a lion's share of the market for food and groceries, are feeling the heat. `Earlier, people here would buy all their fruits from me, but now they come occasionally,` said Heera, a fruit vendor who sits among piles of fruit on gunny sacks on the side of a busy lane.
Date: 27-Apr-2007
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