SYNOPSIS

ON

A STUDY ON CONSUMER BEHAVIOUR ON RETAIL FOOD CHAINS

MASTERS OF BUSINESS ADMINISTRATION

(2008-2010)

Submitted To: Submitted By:

Mrs. RAMINDER KAUR SIRA HARDEEP SHARMA

Lect.(SMS) MBA-II(SEM-III)

Roll No. 3832 (C)

SCHOOL OF MANAGEMENT STUDIES

PUNJABI UNIVERSITY PATIALA

 SYNOPSIS
REVIEW OF LITERATURE
Monday, February 23, 2009
Consumer Behavior & Retailing In the Recession: Gauging the Mindset of the
'New Frugal American Shopper' In An 'All Retailers Are Discounters' Time

Beginning in about mid-2008 (to the present) Fresh & Easy Buzz first started to write regularly
about how consumers were beginning to trade down in terms of where they are shopping for
food and groceries (types of stores), how much they're spending, what they're buying and how
they're buying it, due to the then beginnings of -- and now full-blown -- the current economic
recession. This consumer trading down behavior has decreased dramatically from then to now.
It's our analysis it will continue all year and well into 2010 at the very least.

Among the recession-induced changes in consumer food and grocery shopping behavior we've
sited include: a shopper flight to discount food-grocery stores like Wal-Mart, Aldi, Sav-A-Lot
and similar price-impact-focused stores; consumers buying fewer prepared foods items and more
staples and basics for cooking at home; an overall decrease in the amount of money shoppers are
spending on food and groceries, particularly on premium, specialty, organic and impulse items;
shopping weekly sales more frequently and cherry-picking retailers advertised items; purchasing
more store brands if such items are cheaper than national brands; the dramatic increase in
consumer use of manufacturers' "cents off" coupons and retailer store coupons; and a number of
other indicators all pointing to the fact there now exists in large numbers what we call "the new
frugal American food and grocery shopper."
In our research we see this trading down at retail across the board. Some evidence:
There are more BMW's, Mercedes and luxury SUV's in Wal-Mart, Dollar Tree, Dollar General
and Costco parking lots than we've ever seen before, for example.

Goodwill stores are so packed and doing so much business that many are aggressively searching
for used product, and for the first time ever paying for it in some cases.

And when it comes to eating out, MacDonalds' sales are soaring (and dollar menu items selling
off the charts), while even mid-range restaurant chains like Applebees are struggling.
MacDonalds said last week it is shooting to open 1,000 new stores globally this year.

The small-format, hard-discount chain Aldi USA, which is based in Illinois and has nearly 1,000
stores in the southern U.S., Midwest, Mid-Atlantic and eastern regions of the U.S. is booming,
while higher-end grocers like Whole Foods Market is struggling, for example.

Aldi USA is doing so well in the bad economy that is entered the Florida market late last year,
building a distribution center there and the first of what it plans to be many stores.

This year Aldi USA is entering two brand new markets, New York State and Texas. Florida,
New York and Texas, along with California, happen to be the top food and grocery sales markets
in the U.S. in terms of total dollar sales. Aldi USA plans to open at least 100 new stores in the
U.S. this year.

Aldi USA also is getting ready to launch a major television advertising campaign in all of its
U.S. markets because it believes it can pull even more shoppers into its stores with what will be
retail brand-oriented ads that will tout Aldi's low-price and value model and message, depicting
it as the "perfect" grocery store for today's tough times. Read: money savings and value
everyday.

Just like upscale, specialty and premium-oriented grocers like Whole Foods Market, Bristol
Farms (Southern California) and Dean & Delucca loved the "go-go" mid-to-late 1990's, it
appears small-format, hard-discounter Aldi USA, which is the American division of Germany-
based Aldi International, is lovin' not so "go-go" 2009.
It's our argument that "all grocers are now discounters" in this seriously down economy. That
even includes upscale retailers like Whole Foods, which has been lowering prices in its stores,
promoting-discounting on price heavily, and even periodically offering store coupons good for
10%-25%-off purchases of $25, $50 and $100. Until last year Whole Foods was about as far
from a "discount-oriented" grocery chain as one could find in the U.S. At present, price and
value are the two key merchandising and promotional strategies at Whole Foods.

By "all grocers being discounters" we of course mean each in its own ways. Aldi is different
from Whole Foods, and Wal-Mart is different than both in its discounting behavior. But we do
mean that regardless of format or positioning, all grocers are today discounting. Some just aren't
doing it well. Others might not even know it is what they are doing.

High-end fashion retailer Saks has been regularly holding 50%-70%-off sales in its upscale
stores, for example. Department store chain Macy's appears to be offering nearly everything it
sells in its department stores on sale these days if you visit one of the stores. And even the super-
popular "Apple" stores (Apple computer) have started discounting Apple lap top computers,
iphones and ipods recently.

Time magazine has now discovered the dual consumer-retailer behavior change we've been
describing and writing about in Fresh & Easy Buzz. That duality is the combination of the "new
frugal American consumers" and the "all retailers are discounters" proposition, a result in the
main of the trading down behavior by so many consumers.

Time sought out Paco Underhill, the well-known consumer researcher, retail analyst and author
of the excellent book, "Why We Buy: The Science of Shopping," to, in Time's words,"gauge the
current mindset of the American consumer." Trying to do just that is fast-becoming the number
one activity of America's retailers right now.

Time magazine staff writer Sean Gregory talked to Paco Underhill, the founder and CEO of the
consulting firm Envirosell, about the "mindset" of today's cash-strapped, economic confidence-
lacking, job-insecure American consumer for a piece published in the magazine yesterday. We
suggest reading the story as your supplemental reading for the day. It's well worth the few
minutes it takes to read
Food Retail in India – Growth, Growth and More Growth

writer — Pooja Srivastava

ABSTRACT:
Retail is being hailed as India’s industry of the future, incited by the country’s huge urban
middle class population. Food and grocery is the second-largest segment of the retail industry
and the potential for new entrants in this segment is enormous, particularly in untapped markets
like rural and semi-rural areas. Growing at the rate of 30%, the Indian food retail is going to be
the major driving force for the retail industry. The paper on “FOOD RETAIL –AN EMERGING
FACET” maps out the Background of food retailing as well as current scenario catching up the
retail front, Up-and-coming multiple formats of food retail.

INTRODUCTION
The food industry is on a roller coaster ride as Indians continue to have a feast. Fuelled by– large
disposable incomes – the food sector is witnessing a remarkable change in consumption patterns,
especially in terms of food. Food retailing has come of age -- from a period when food items
were sold in small road side grocer shops & mandis, haats and bazzars by vendors to a stage
when food products (processed and groceries) are retailed through supermarket stores where
consumers can inspect, select and pick up the products they like in a comfortable ambience and
still pay a fair price for the product and the merchandise and sometimes even pay less than the
price they would have paid at the nearest food stores. Shopping for groceries is no longer a
strenuous and uncomfortable affair.

Instead, it is a pleasurable experience. From simple trading activity, food retailing is now
heading to the status of an industry. Imagine yourself walking through the air conditioned lanes
smelling fresh food and groceries, enjoying light music, experiencing five star ambiences and
above all buying food products (vegetables, spices and beverages) without bargaining with the
vendors. Food retail has surpassed the dominating apparel and accessories sector. "Contrary to
the belief that fashion is the largest segment of organised retail in India, food & beverages is the
major segment, worth Rs 8,97,000 crore," said Arvind Singhal, Chairman, Technopak, at the
Indian Retail Forum held in Mumbai. There is an old industry saying that “ customer is king”
Food retailers today will update that saying to “customers is the dictator” because of fierce
competition, new technology and business practices the market power of customer is strong and
growing stronger.

THE FOOD RETAIL TALE

Traditionally, Indians were used to buying their sugar, wheat, pulses, rice etc. from their
neighborhood baniya. The majority of food and food products were and still are retailed through
neighborhood kirana (baniya) stores. A typical kirana store has a retail area of 200 sq ft and sells
500 to 800 stock keeping units (SKUs). The kirana stores focus on dry food products because the
infrastructure for cold storage is lacking. The majority of fresh produce is sold from the carts of
traveling vendors. Such produce is deemed to be of low product quality, variety and hygiene.
This concept is still popular in B-class and II Tier cities of India and giving employment to
thousands of its inhabitants.

Initially the food retail format was seen in A-class cities like Mumbai, Delhi, Chennai which had
co-operative stores like "Apna Bazaar" in Mumbai and "Kendriya Bhandar" in Delhi. Both were
very successful and are operating many outlets in all strategic localities in the city. Escorts group
in the late eighties diversified into non-auto sectors by getting into agri business or food
business. It came out with first "Nanz" store at South Extension in Delhi in 1990.

The first visible sign of the change in food retailing was seen in mid-eighties. Around that time a
few new food stores were set up in all metro cities in India. Calcutta was the only exception
where it started a little later. At that time couple of leading food stores started operating such as
"Morning Stores" and "Modern Stores" in Delhi, "Nilgiri" in Bangalore, and “Food Land" in
Mumbai "Spencers Food Stores" in Chennai. Spencers were the first to tie up with a Singapore
based large retail chain -- "Dairyland" and had set up the food stores in Chennai. This was a
technology tie up. In Mumbai, Garware group during the late eighties had set up a large food
store, which is now reported to have been closed down.

Until the late 1990s, food retailing has been concentrated in the south of the country. Southern
India has been witnessing revolutionized activity in food retailing. It has thoroughly experienced
the food retailing in various formats such as the supermarkets, hypermarkets and neighbourhood
stores. These include Food World, Subhiksha, Nilgiris, Margin Free, and Big Bazaar. The reason
being that most entrepreneurs who started organised retail came from southern India and the cost
of real estate in the southern region was less than other regions (particularly north and west).
Since then, however, organised food retailing has emerged across the country, inspired by the
presence of high potential markets in the north, west and east as well as the success of some non-
food retailers and food services companies in these regions.

FOOD RETAILING – THE BUZZ WORD

Indian retail food industry has revolutionized shopping experience of Indian customers. Growing
at the rate of 30%, the Indian food retail is going to be and no doubt is the major driving force for
the retail industry. Food accounts for the largest share of consumer spending. Food and food
products account for about 50% of the value of final private consumption. This share is
significantly higher compared to developed economies, where food and food products account
for about 20% of consumer spending. Ireena Vittal, principal, McKinsey & Co in Food Forum
2008, said, "At US$ 175 billion today the food industry is likely to grow to US$ 400 billion by
2025. The percentage of income spent in households will drive growth in the food market. Indian
consumers are happy with store goods than branded goods and are very conservative on
packaged goods. There are 10 million street vendors in India, of which 6 million only sell food.
Currently, the retail food sector is US$ 70 billion and is expected to rise to US$ 150 billion by
2025. Food has the largest consumption in the Indian economy and will remain the single largest
category."

Modern state of the food retailing is not a demand led but the supply led one. Major spending on
food and increasing usage of out of home food consumption represent a significant opportunity
for food retailers and food service companies. Speaking in Food Forum India 2008, on the
government's role in the food retailing development, Dave said, "The retail stores need to
empower its stakeholders and deliver what the consumer wants. The vision for 2020 should be
appropriate extension network, implementation of appropriate practice at farmers' level and
infrastructure in the country."

There are various factors paving the way to revolutionizing food retailing in India. Among them
few are:

 Changing life styles and tastes

 Growing need for convenience
 Increasing disposable income
 Increasing numbers of working women
  Change in consumption patterns
 Higher aspirations among youth
 Impact of western lifestyle
 Plastic Revolution – Increased use of credit cards and debit cards

UP-AND-COMING FOOD RETAIL FORMATS

With the changing food consumption patterns, consumers need for convenience, choice and
value for money the set-up of retail format is changing. The Indian consumers do visit about
eight to ten outlets to purchase various food products, which make up the daily consumption
basket. These outlets include neighbourhood kirana stores, bakeries, fruit and vegetable outlets,
dairy booths and chakkies (small flour mills), which is very time-consuming and unproductive
way of shopping for food. With changing lifestyle there is growing scarcity of time, and
convenience in food shopping is emerging as an important driver of growth of one-stop retail
formats that can offer consumer 'value for time' in addition to 'value for money'. These are giving
an opportunity to various other retail formats:

A. Neighborhood Stores

In India about 90% of food purchases are made within a distance of 1.5 km from the customer's
home. This means that an organized retailer would need to have a 'neighborhood store' close to
customers in order to capture the share of wallet that is spent on food. These stores would cater
to the consumer's daily and weekly needs. The outlets closest to a neighborhood store in India
are 'Safal' outlets operated by Mother Dairy in Delhi, Margin Free in Kerala and Subhiksha.

B. Supermarkets

This format caters to the consumers' need for choice and variety. These needs translate into 'more
width' and 'more depth' in each category. These stores cater to the consumers in a catchment area
with a radius of 3 to 4 km and therefore need to be destination stores. A supermarket can cater to
the consumers' weekly, monthly and occasional needs. Examples of supermarkets already in
India are Food World, Trinetra and Nilgiri's.

C. Hypermarkets
Hypermarkets are essentially destination stores catering to the consumers' bulk shopping needs
in both food and non-food categories. The key added values for the customer are 'choice' and
'value for money' because products are sold at a discounted price. The hypermarkets model of
food retailing is new to India. Spencers (RPG), Big Bazaar (Pantaloons), Star India Bazaar.

D. Cash & Carry (C & C) Stores

These stores sell their products to their members only. The members are typically retailers and
institutions. The key added value is a wide range of products under one roof, available at
wholesale prices. Metro has started the first C & C store in India in Bangalore. The typical area
of a C & C store is 70,000 to 100,000 sq. ft. and both food and non-food products are stocked.

KEY DEVELOPMENTS IN FOOD RETAIL

The major development in food retail is consideration of Foreign Direct Investment (FDI) with a
limitation that all companies would have to meet mandated export obligations. Food processing
minister Subodh Kant Sahay told ET that “We are considering a proposal to allow FDI in food
retail. It should be in such a way that it would boost our agriculture. Our farmers must also get
benefits of economic liberalization”.

The government is also considering the opening up of the $330-billion retail market with
adequate provisions to protect neighborhood stores.

In every retail format food trade is growing. More and more corporate houses such as HLL, ITC,
Godrej and Reliance are already working into food retail. Huge increase is expected from the
corporate players, which will help grow the entire food retail sector. Dabur’s Amit Burman has
also forayed into food retailing. According to Amit "Food and beverages retailing is a very
attractive segment and with Lite Bite Concepts we are targeting Rs 1,000 crore sales in a couple
of years with around 200 outlets," Well-established players such as Subhiksha, Food Bazaar and
Spencer's Daily are also tapping into backward linkages, while trying to match their expanding
geographies with retail formats. Also, most food retail players have been region-specific as far as
geographical presence is concerned. Take the RPG Group's FoodWorld, Nilgiris, Margin Free,
Giant, Varkey's, all of which are more or less spread in the Southern region; Sabka Bazaar, Big
Apple has a presence only in and around Delhi; names such as Haiko and Radhakrishna
Foodland are Mumbai-centric; while Adani is Ahmedabad-centric.
Retailers' entrance in the unbranded food space

Modern food formats like Food Bazaar and Spencer's have their eye on the unbranded part of the
consumer's shopping basket. This constitutes as much as 60% of the total purchases and growing
sharply, says AC Nielsen estimates. Retailers are offering a package of convenience and
freshness, and have an edge over manufacturers that focus mainly on packaged conveniences.

Food retailers are offering 'live kitchen' formats, which offer on-the-spot home-style gravies, dal,
cooked rice and kneaded dough with options like grinding coffee fresh at store, idli batter,
paneer, curd and cut vegetables.

FOOD RETAIL AND ITS STEPPING STONES

The opportunities in food retail sector are as follows:

Rising Investment: There are strong opportunities in food retail as a result of encouraging
changes in consumer purchasing patterns, the availability of real estate and supply chain
development. Organised food retail presents a unique investment opportunity for corporates
looking to diversify. A good understanding of consumer, access to the right locations and the
ability to manage the supply chain efficiently will be critical success factors for the new entrant.

FDI Policy for Retail: Gates have been opened up for single brand retailers. In February 2006,
the door was opened to some extent when the government allowed 51% FDI by single brand
companies subject to government approvals.

Emergence Of Logistic Providers: The present lack of logistic support exposes the need for an
integrated logistic provider. As retail activity gathers momentum and large quantities of
perishables are sold in modern formats, the logistic service providers would have a crucial role to
play in bridging the supply gap. Retail players would also benefit from an efficient supply chain
inventory management.

CONCLUSION
The past 4-5 years have seen increasing activity in food retailing. Various business houses have
already planned for few investments in the coming 2-3 years. Though the retailers will have to
face increasingly demanding customers and intensely competitive rivals, more investments will
keep flowing in and the share of organized food sector will grow rapidly.
Organized food retailing in India is surely poised for a takeoff and will provide many
opportunities both to existing players as well as new entrants.

REFERENCES
• http://www.pfionline.com/review/review7/review7.html

•http://www.thehindubusinessline.com/catalyst/2003/06/19/stories/
2003061900010100.htm

• http://www.etretailbiz.com/feb2004/fRetail.html

• www.tata.com/trent/media/20031113.htm - 15k

• www.ficci.com/news/viewnews1.asp?news

• www.fnbnews.com/article/detnews. asp?articleid

• www.fnbnews.com/article/detnews. asp?articleid

Also, most food retail players have been region-specific as far as geographical presence is
concerned. Take the RPG Group's FoodWorld, Nilgiris, Margin Free, Giant, Varkey's and
Subhiksha, all of which are more or less spread in the Southern region; Sabka Bazaar has a
presence only in and around Delhi; names such as Haiko and Radhakrishna Foodland are
Mumbai-centric; while Adani is Ahmedabad-centric.

The unbranded part of the consumer's shopping basket, which constitutes as much as 60% of the
total purchases and growing sharply, say AC Nielsen estimates. Retailers are offering a package
of convenience and freshness, and have an edge over manufacturers that focus mainly on
packaged conveniences.

Food retailers are offering 'live kitchen' formats, which offer on-the-spot home-style gravies,
dals, cooked rice and kneaded dough with options like grinding coffee fresh at store, idli batter,
paneer, curd and cut vegetables.
INTRODUCTION

India with a population of 1.08 billion (growing at about 1.7 % per annum) provides a large and
growing market for food products. Food products are the single largest component of private
consumption expenditure, accounting for as much as 49% of the total spending. Furthermore, the
upward mobility of income classes and increasing need for convenience and hygiene is driving
demand for (a) perishables and non food staples and (b) processed foods. Also, eating out is a
booming practice in urban India and processed foods are accepted as alternative to the home
cooked food because of the convenience it offers. Multiple restaurant chains such as
McDonald’s, Pizza Hut, Dominos, Coffee day, Qwiky’s and Saravana Bhavan, Nirula’s, Kamath
and Sagar Chains are growing rapidly. However, the pace is slow in the food sector compared to
the other sectors such as IT and Pharmaceutical. There are no billion dollar players in India in the
food industry where as China and Philippines have several large players with sales exceeding US
$ 1 billion. In India, Pizza delivery and dine-in is a Rs 470 crore (Rs 4.7 billion) business and is
growing at the rate of 35 per cent per annum. The pizza delivery segment constitutes 40 per cent
of the overall market.

OBJECTIVES OF THE STUDY

 TO STUDY THE COMPARATIVE ANALYSIS OF DIFFERENT FOOD CHAINS

 TO KNOW THE CONSUMER PERCEPTION TOWARDS FOOD CHAINS

 TO STUDY THE CONSUMER PERCEPTION REGARDING THE LOCATION OF

FOOD COURT

 TO STUDY THE FUTURE OUTLOOK OF FAST FOOD INDUSTRY

MAJOR CATEGORIES IN FAST FOOD INDUSTRY

MAJOR FIRMS OPERATING IN INDIA

(A) McDonalds

(B) DOMINO'S PIZZA INDIA

(C) Barista

(D) Café coffee day

SWOT ANALYSIS OF INDIAN FOOD CHAINS

 Strengths

 Weaknesses

 Opportunities

 Threats
Scope of the study

Scope of my study will be Chandigarh(including Mohali &Panchkula)

Research Methodology

Research methodology is a systematic way to solve the research problem. It may be understood
as a science of study how research is done scientifically. The study will include research design,
method of data collection, sampling Plan.

Research design

Research design will be used Exploratory as well as descriptive.

Method of data collection

Data will be collected by both methods :primary & secondary

Primary data will be collected through questionnaire observation, personal and telephonic
interview.

Secondary data will be collected through internet books journal magazines and newspapers.

Sampling method:

Sampling method will be non probability convenient sampling.

Sample size:

Sample size will be drawn from the population using non probability convenient sampling

CONCLUSION

FINDINGS

SUGGESTIONS

BIBLIOGRAPHY