METRO Cash & Carry

Indian Success Stories

Harsh Bahadur
Managing Director

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 Agenda

 Status of Supply Chain in India

 Introduction to METRO Cash & Carry, India
 Success Story # 1 – Non-food
 Success Story # 2 – Food
 Success Story # 3 – Corporate buyer
 Organised Supply Chain Player

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 1 Status Of Supply Chain in India

Status of Supply Chain in India

• The Indian wholesale / retail system is fragmented and lengthy.

• The distribution system, which worked well at lower growth rates in a

“Shortage Economy”, now needs to be mordernised in terms of
 Structure
 Infrastructure

• The supply chain is ‘uni-dimensional’ with one-size-fits-all backend.

• Modern supply chain structures and systems imperative for rapid

economic growth.

• Current supply chain creates wastages and adds costs.

• Small and medium enterprises have difficulty in getting

– Sensibly priced inputs
– Distribution and marketing muscle

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 2 Introduction to Metro Cash & Carry

Introduction to METRO Cash & Carry, India

• METRO sees great opportunity in India for its Supply Chain Model.

• Earlier success in organising modern supply chains in China, Vietnam and

Eastern Europe lends confidence.

• METRO Cash & Carry operations were started in October 2003

 2 Distribution Centres in Bangalore.
 Investment of over Rs.200 crores (USD 43 million).
 220,000 SqFt (40,000 SqFt temperature controlled).
 18,000 food and non-food items.

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 2 Introduction to Metro Cash & Carry

Introduction to METRO Cash & Carry, India

• Targeted at and open only to business customers.

• Even as just our first anniversary comes up next month, there have

been some early notable successes.

• Three success stories relating to commonly used products, depicting

various facets of Supply chain, will be shared :

 Shoes
 Fruit juice
 Pork

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 3 Success Story #1

Success Story #1 – Shoes

• Market study revealed a definite need amongst small businesses
for decent looking shoes at affordable prices - uniforms.

• Studied the characteristics that would

need to be fulfilled.

• METRO worked with an unbranded

shoe manufacturer in Agra.
– Helped design appropriate basic footwear
– Sells at a never before price of Rs. 199/-

• Helped to make his supply chain more efficient.

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 3 Success Story #1

Success Story #1 – Shoes …

• The shoe manufacturer was a small scale industrialist.

• Turnover of previous year (pre-METRO) Rs 4.5 Crores (USD 1 million).

• Turnover after dealing with METRO Rs 6 Cr

(USD 1.3 m), an increase of 33% with
Rs 1.1 Cr (USD 0.25 m) coming from just
METRO – and the relationship is barely
10 months old.

• Costs of production reduced by 5%.

• Profitability increased from 8% to over 12%.

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 3 Success Story #1

Success Story #1 Shoes…

IMPACT
•A direct marketing link between SME and specific needs of a section
of business customers.
•An ability for SME to organise their
production and supply chain better as
most of the uncertainty and many costs
taken out of their system.
•Improved distribution amongst shoe retailers.
•Getting better educated in a management sense enabling:
 Management systems to become better.
 Setting up sample production centre.
 Improving the Packaging tremendously.
 Develop the ability to deal with some customers who were not approachable
in the past.

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 4 Success Story #2

Success Story #2 – Fruit Juice

• This Bangalore based SSI manufacturer produced bottled fruit juices,
with some bulk sales.
• His price was at a 28% discount over established players ….. and yet
– He did not have the distribution channel or the marketing muscle to
make an impact in the market place.
• Given the profile of METRO’s customers like
HoReCa & B&C class Retailers, we saw an
opportunity to promote a “budget”priced juice
brand.
• METRO worked with him to upgrade his
Quality and Packaging (Tetrapak).

 Result – Good quality juices being sold at affordable prices

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 4 Success Story #2

Success Story #2 – Fruit Juice

IMPACT

• Turn over before Metro Rs 6 Lacs per month, went up to Rs 11 Lacs

per month – a whopping 83% increase.

• Kept prices at same low levels even after making sizeable

investments in Tetrapak.

• Diversified into non-traditional juices.

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 4 Success Story #2

Success Story #2 – Fruit Juice

IMPACT
• METRO provided a crucial distribution outlet.
• SME Manufacturer able to survive and prosper.
• Affordable prices, encourage consumption of healthy beverage.
• B & C category retailers have increased sales.
• HoReCa have reduced input costs.
• Farmers now have an alternate shelf-life
extending route to sell his produce, thereby
getting better price realisation.

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 5 Success Story #3

Success Story # 3 –
A Renowned 5 Star Hotel

Background

• Were importing pork from Australia

 Expensive
 High stock because of lead time for import
 Uncertainty of supplies

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 5 Success Story #3

Success Story # 3 –
A Renowned 5 Star Hotel …
METRO’s intervention

• Studied current practices of the pork industry.

• Identified areas for improvement and worked

with selected piggeries.

• Breed
• Feed
• Hygiene / Veterinary care
• Slaughter
• Preservation
• Transport
• Storage
• Worked with the hotel to get local product acceptance.

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 5 Success Story #3

Success Story # 3 –
A Renowned 5 Star Hotel …
Current status

• The hotel approved METRO’s pork

products for its Bangalore outfit.

• After satisfying itself, discontinued

Australian imports and switched to

METRO’s pork for all India requirements.

• Based on ongoing dialogue and study,

customer has made changes to the logistics.

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 5 Success Story #3

Success Story # 3 –
A Renowned 5 Star Hotel …

IMPACT
• International standards of hygiene
and food safety introduced and
disseminated.

• Lower costs for large HoReCa Customers.

• Larger market for small farmers.

• Import substitution – possible export opportunity.

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 6 Organised Supply Chain Player

Organised Supply Chain Player

Initial Impact
• Direct linkages between customer and producer – both food and
non food.

• Enhanced distribution reach, especially for SMEs and Farmers.

• SMEs benefit from reduction in supply chain costs (both inputs and
distribution).

• SMEs benefit from access to technology and systems.

• Improvement in general level of quality (food and non-food), hygiene

and food safety.

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 6 Organised Supply Chain Player

Organised Supply Chain Player

Possible Further Impacts

• Major improvements in agricultural supply chain possible – Metro’s

international experience

 Reduction in wastage : Better realisation for farmers

: Lower consumer Prices

 De-layering of chain will reduce costs

– Margins
– Transaction Costs
– Transportation

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 Organised Supply Chain Player
Policy Imperatives
• Devise policies that:
 Encourage diversification of supply chains
 Encourage consolidation and de-layering
 Encourage creation of supply chain infrastructure

• Specific focus areas

 Agricultural marketing – Repeal / major modification of

APMC Acts needed urgently

 Adoption of international supply chain models

– Warehousing
– Wholesale Trading
– Retail

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