“Modern Grocery Retail” & the Emerging-market consumer : A complicated courtship | McKinsey

In some “Emerging Markets”, the response to “Modern Grocery” formats has been tepid. What’s a Modern-Grocer to do ??

20 years ago, Modern Grocery Retail appeared poised to conquer every consumer market in the world. Ambitious European grocers, having blanketed their home countries with Supermarkets and Hypermarkets, began setting their sights on growth both within and beyond the continent. They held particularly high hopes for China, India, and other emerging markets, where fast-rising consumer spending seemed to presage an unprecedented demand for gleaming new stores with large assortments, wide aisles, and bright lighting.

In the 1990s, the term “modern grocery retail” was essentially a proxy for a small group of multinational grocers including Ahold, Aldi, Auchan, Carrefour, Costco, Lidl, Metro, Tesco, and Walmart…It was widely presumed that these retailers’ entry into any market would lead to the demise of the traditional trade—the family-owned grocery chains, small independent stores, and informal merchants that at the time accounted for the vast majority of grocery sales in emerging markets. The prevailing expectation was that although there would be local differences due to cultural specificities, in every country the retail landscape would eventually consist of a combination of modern formats: full-line supermarkets and hypermarkets, convenience stores, and discounters..

These assumptions have been proved wrong. Global grocery giants are struggling to grow profitably in many emerging markets… whereas, Traditional trade has proved remarkably resilient…And the market and channel structures taking shape in individual emerging economies are distinct from one another, following no obvious pattern.

Why did this happen? What, if anything, did multinational grocers do wrong? And what does it mean for the future of modern retail in emerging markets?

The Hypermarket’s shortcomings:

To understand the disparity between early expectations and the current reality, it’s useful to examine the roots of the two quintessential modern-trade formats: the supermarket and the hypermarket. The hypermarket in particular—whether in its European form (in which food anchors a massive selection of nonfood items) or its North American one (the “supercenter,” which represents the successful injection of food and grocery into a general-merchandise discount store)—was widely regarded as unbeatable. By offering tens of thousands of products in an immense building just outside or on the edge of a town or city, a hypermarket could operate at a level of productivity that other grocery formats struggled to match. Hypermarket operators passed on these efficiency gains to consumers in the form of lower prices, which served to reinforce hypermarkets’ advantage.

In their first forays into other developed markets abroad, major retailers relied heavily on the hypermarket format. When French retailers Auchan, Carrefour, and Promodès opened hypermarkets in Spain during the first years of Spanish economic reform, they quickly captured a large fraction of that country’s overall grocery sales and dictated the market structure that remains in place to this day.

Expansion across Europe was an exciting growth prospect, but even more enticing to retail leaders and investors was the growth potential of emerging markets. Over the years, that potential has become even clearer: by 2025, we expect emerging markets to account for $30 trillion in consumer spending, or nearly half of global consumption.

When multinational grocers entered emerging markets, they again relied on the grocery formats that were working so well in the developed world. But, in retrospect, it’s clear that the countries in which the hypermarket prospered had several characteristics in common: good road networks and high or fast-rising car-ownership rates, a large middle class that enjoyed decent wages and stable employment, and a high proportion of rural and suburban households with enough room at home to store groceries bought in bulk. Also, those markets had grown to maturity at a time when many women didn’t return to work after having children and therefore had time during the day to drive to and from the store. The hypermarket format draws heavily on consumers’ time, ability to travel, and storage capacity…

In Emerging Markets, retailers encountered an entirely different context. Consumers were less affluent and lived in urban areas; many didn’t own a car, couldn’t afford to travel to and from a relatively far shopping destination, had no room at home to store purchases, or all of the above..

A new respect for localism:

Further complicating matters, emerging markets weren’t just different from developed markets; emerging markets also differed from one another in nontrivial ways. That was true in the 1990s and it remains true today. Based on our research—which involved in-depth study of the retail sector in ten developing countries in Asia, Eastern Europe, and Latin America, as well as interviews with more than 20 local retail and consumer experts and analysis of channel-growth data in these markets—we’ve developed a perspective on the factors that have hampered the growth of modern trade in emerging markets.

On both the demand side (what customers want from retailers) and the supply side (the means by which retailers can deliver what customers want), different factors shape the retail ecosystem in each country. Together, these factors produce wide variability in the level of modern-trade development in countries around the world (Exhibit 1).

On the demand side, for instance, food-shopping habits have turned out to be largely localized and deeply entrenched. Emerging-market consumers tend to prepare their own meals and cook more than their peers in developed markets do, and they are accustomed to shopping at open-air market stands or small neighborhood grocery stores that offer a familiar selection of fresh food and household staples. They don’t necessarily perceive customer service at modern retailers as superior to that of the traditional trade. Customers of India’s kirana stores—small, family-owned retail shops in or near residential areas—already benefit from personal service from the store owner, free home delivery, and credit and cash rebates if they remain loyal..

On the supply side, a big factor is the informality of traditional trade: many small retail businesses rely on unpaid labor from family and friends, pay no rent because they own their storefronts, and don’t pay corporate taxes. Modern retailers cite this informality as a major challenge when competing with local retailers. A European hypermarket chain found that its considerable operating-cost advantage from better sourcing and supply-chain processes was canceled out by the fact that it was paying taxes while local competitors were not..

Another major factor affecting modern trade is public policy. India’s restrictions on foreign direct investment have limited the growth of modern retail there; in China, by contrast, city governments are assessed on the level of economic activity and foreign investment they attract, which makes them biased toward supporting modern trade. As a result, modern-trade penetration in China’s largest cities has grown significantly over the past 15 years..

A further supply-side factor in emerging markets is the fragmented supplier base, which places a natural limit on the benefits of scale. A retailer can’t source products as efficiently as it would in a mature market because it must buy from a complex network of regional and local entities. And even retailers with a national buying team won’t easily find national manufacturers who are eager to partner with them—a point we pick up on later.

Incumbent advantage is yet another powerful factor shaping retail ecosystems. Today’s market dynamics tend to become tomorrow’s market structure—so, for example, in markets in which a highly efficient wholesale system serves the traditional trade, it becomes much harder for modern grocers to gain a foothold. That said, wholesalers can also be vanguards of modernization. In Turkey, for instance, some Bizim Toptan stores have developed a substantial retail business. These wholesalers-cum-retailers illustrate the fact that ecosystems in emerging markets are partly shaped by players that can concentrate and coordinate a critical mass of what otherwise is a complex set of routes to market..

“Seven” strategic levers for success:

In parts of the world where the market structure is itself still in a formative stage, retailers need a bespoke strategy. Our research and experience suggest seven strategic levers that lead to success in emerging markets. These levers—having to do with delivering what consumers want, working effectively with other players in the ecosystem, and generating lasting productivity advantages—reflect perennial concerns for retailers everywhere, but they are especially critical in helping retailers secure a profitable future in the world’s fastest-growing economies.

The levers are by no means comprehensive. For one, they don’t touch on digital technology, which may well be just as important in emerging markets as in developed ones; indeed, rapid adoption of smartphone technology may allow emerging markets to leapfrog more mature markets and reconfigure the value chain farther upstream (for example, by giving smaller suppliers direct access to national and even global markets). Rather, we draw attention to areas that we believe require deliberate action in emerging markets-

1. Prioritize proximity.

2. Keep prices low—and make sure consumers know.

3. Obsess over productivity.

4. Make the business case to manufacturers.

5. Educate policy makers on the benefits of modern trade.

6. Consider partnering with the traditional trade.

7. Adopt a city-based strategy.

For any modern retailer, success in emerging markets isn’t guaranteed. Our research confirms the complexity and local specificity of market development and the degree to which it depends on initiatives taken not just by retailers but also by governments, manufacturers, wholesalers, and others in the local retail ecosystem. International retailers thus need to become experts at local tailoring. That said, operating in emerging markets still unquestionably requires excellence in core retailing competencies: marketing, merchandising, supply-chain management, and talent development, to name just a few…

Modern Retailers that excel in all these areas in the context of markedly different emerging-market structures will, in a sense, have conquered the world..!!

“Avoiding Hidden Margin Erosion” in Mid-Market Supply-Chain Operations | by: Brad Huff | Supply Chain Digital

According to the Middle Market Indicator (MMI), 85 percent of middle market executives cite the ability to maintain margins as a somewhat to highly challenging issue..

This should be no surprise, considering mid-market companies are squeezed between large and small cap businesses: they must streamline product manufacturing and delivery operations as much as larger companies, yet be as nimble as smaller companies. As a result, they have a unique set of challenges that make margin management even more critical..

Today’s combination of increasingly complex supply chain operations and the availability of more accessible/affordable technology means mid-market companies can and should take a deeper look into these areas as a means to maximise margins..

Mid-market supply chain operations explained

Hidden Planning and Forecasting Areas:

Mid-market companies often must focus so tightly on delivering quality products and services to their customers that investing resources into analyzing and fixing what appear to be minor supply chain issues might not seem practical or even feasible. It’s true that each of these less obvious areas does not cause significant margin erosion on its own; however, many mid-market companies can suffer from a number of combinations of these issues. When evaluated in that context, the impact on profitability can be noteworthy…

Evaluating materials based on landed cost instead of the item’s unit cost is a growing trend in planning and procurement. Materials planning based on landed cost allows companies to factor transportation and logistics costs into the contract item cost for more visibility into actual materials expense..

Forecasting is also an area that can impact margins. Without reliable forecasting processes and tools, a company can easily order the wrong quantity of materials. “Projecting heavy” unnecessarily consumes warehouse space, increases the risk of waste or loss, raises taxes, and impacts inventory turns. “Projecting light” drives up procurement and transportation costs, as well as increases the risk of materials run-out. Fortunately, there are a number of low-investment ways to increase accuracy, such as increasing collaboration with customers to gauge future demand, integrating marketing plans and projections to prepare for order spikes or lulls, or increasing forecast sharing and communication with suppliers via a collaboration portal or other automated workflow system..

Hidden Inbound and Receiving Areas:

Ordering and receiving inefficiencies, such as a lack of automation and collaboration in critical areas, play a quiet yet potentially large contribution to reduced profits. Automating workflow tasks between buyers and suppliers such as sending, receiving, acknowledging and approving purchase orders can enhance processing speeds by more than eighty percent while reducing costs by approximately 83 percent..

But the benefits go beyond the initial savings. Automation also increases purchase order throughput and allows you to focus efforts on quickly resolving issues that require human attention. Configurable workflow helps to ensure compliance so what is shipped always matches what is ordered. With simpler implementation and more user-friendly interfaces, these solutions can consolidate product and order communications to help minimize disputes as well as empower planners to better forecast demand..

Carrier and delivery windows:

According to Refrigerated Transporter, “Supply chain compliance is now a vital component of logistics transactions and supplier relationships.” Requiring fixed materials delivery windows from suppliers is a growing trend in supply chain management that impacts margin on both the buyer and supplier side..

In recent years, improvements have been made in receiving dock scheduling systems in an effort to help warehouse managers and supply chain professionals streamline operations and reduce unnecessary cost. As a result, more companies now require dock reservations for inbound orders, including financial penalties for suppliers who deliver off-schedule..

For example, in 2010, Walmart joined other retailers in imposing a penalty on suppliers that failed to deliver products within the company’s prescribed four-day window. Under the policy, suppliers whose products arrive at Walmart before or after that period face a three-percent penalty based on the cost of the goods..

Before the policy went into effect, Walmart requested delivery within the four-day period, but suppliers had no incentive to actually adhere to that schedule. Although it was not the first to adopt this policy, Walmart’s status as the world’s largest retailer prompted a domino effect that continues to affect supply chains to this day…as late/early delivery fees are now the norm for many industries..

Installing a functionally strong shipment collaboration solution can help to reduce and/or eliminate these less obvious/hidden logistics areas that eat into margin. These types of solutions allow order fulfillment thresholds such as delivery windows, order quantity, and carrier selection/mode to be configured and validated prior to shipment release..

Advanced Shipment Notices (ASNs) and package/container traceability are also typically included, along with pre-formatted, compliant labeling to further reduce receiving dock errors…As a result, all stakeholders across the buy side and the supply side have real time visibility for more accurate resource and materials planning through the rest of the supply chain..

“Understanding consumers” in a multi-channel world | by: Jason Nathan | Research

The Evolving behaviour set of #Customers in the world of #MultiChannelRetailing, is well documented and not always easy to follow…It’s easy to conflate the rapidly changing technology with analysis of those behaviours – while they are linked, they can and should also be thought of as apart…Let’s focus on the behavioural side…

How are these behavioural changes manifesting themselves? It makes sense to think back (briefly) to a shopping trip in the pre-internet age…#Shoppers, would take a predictable and linear path to purchase : making a list, looking for (or seeing) offers, going to a store, picking off the shelf, paying at checkout, going home and then consuming the products they had purchased…and then repeating..

In the multi-channel world, TWO Key Dynamics have changed : The path is non-linear…and different steps can and do occur on different channels…!!

If we consider a shopping trip today – a customer might log on to an account with a grocery retailer and add some items to a basket. Then, a couple of days later, receive an email with a set of offers which they activate on their half-built online basket. They might go in to store to have a look at some new products but decide not to buy them…and then buy them online…They may have an offer shared with them on social media….which they then use in a store (perhaps having found the nearest branch to them using their smartphone)…

Where to spend the Money ?

These non-linear paths and the increase in channels used by customers to shop, has commensurately increased both complexity and opportunity for both brands and retailers to divert and influence customers on those paths. The challenge for #Retailers, is that creating seamlessness in those paths costs money…The challenge for brands is that investment in media to influence those paths costs money…What both retailers and brands want to know is where to best spend that money…

More than ever before, the answer lies with an obsessive focus on the customer and the data their behaviours are generating. Retailers and brands are collecting and looking at data – lots of it – but often those data are used for specific ends. For instance, plenty of retailers will use the data for reviews to look at which products are winning, which products are in decline, but few retailers will capture and present this data to understand customers. Knowing, at the level of an individual, a pattern of review posting will be part of a set of indicators which will allow the retailer and brand to understand that customer’s propensity to purchase again and, maybe, when they would do so..

For instance, if we knew that a customer had posted two consecutive bad reviews of a product from a certain brand, could we use that to understand their likelihood to repurchase a product of that brand? And therefore, perhaps the generosity of the offer or the need to present NPD to that customer. And what could a retailer glean from a customer who had steadily posted a review every two months but was not doing so anymore ?

Retail Data :

Similarly, and specifically in the world of grocery and FMCG, retailers will capture the levels of substitutions and rejections in baskets composed of dozens of SKUs (stock keeping units) when they are delivered or collected. This will be done to optimise the supply chain and picking process. Again, how many retailers are looking at the data through the customer lens? Would a customer who had received 20% of their basket as substitutes three times in a row (and rejected half of those on each occasion) as against a customer who had received three consecutive perfect orders, be more or less likely to lapse ?

The challenge for retailers and brands is technical and commercial. Technically, linking their data assets to understand the multi-channel path to purchase is difficult – legacy systems built for specific ends and ambiguous data ownership structures are significant barriers to overcome. Moreover, in many cases the capture of the data at customer level may not even yet exist. Retailers and brands will need to ensure that their technology plans seek to plug these gaps in understanding..

A Greater Challenge :

Despite appearing to be easier, it may yet be that commercially, the challenge will ultimately be greater: customers will be more aware of the value of the data they are generating and expect to be compensated for it. For that compensation to be sensible, attribution of investment (always a challenge in marketing) will need to be tighter than ever. Was it the coupon on Facebook or the free sample at the Click and Collect point or the interrupt media on the app which activated that customer ? The data will exist but how will we cut it to understand the key to orientating the path to purchase ?

The next few years are likely to continue to present opportunity: technological innovation will lead to more data and more opportunities for customers to exhibit non-linear behaviours – some of which may yet prove even more disruptive in some sectors (such as peer-to-peer selling)..

Getting on top of the current behaviours and using existing data assets to do so will be one of the key differentiators which will define the retailers which win in this turbulent period.

In “Omni-channel Retail”, It’s Still About Detail | BCG

“As omni-channel retail increasingly moves from concept to reality, consumers are sending a clear message : Convenience is king…”

But the days when convenience could be defined solely in terms of drive times and the in-store experience are long gone. In today’s reality, “convenience” means letting customers decide when, where, and how to shop. They want to order anytime, anywhere, and from any device; to get their purchases in the store, at a separate delivery location, or through home delivery; to determine their own shopping and delivery or pick-up windows to fit their busy schedules; and to be able to return items at any of the store’s retail locations, hassle-free..

The Rise of Click-and-Collect Retail:

The emergence and growth of click-and-collect retail—which allows shoppers to order an item online and then go get it at a nearby store location or pick-up point—is evidence of the power of convenience in the omnichannel world. For many shoppers, the click-and-collect experience offers a more convenient mix of speed, quality, and flexibility than either traditional shopping or standard home delivery…

Already, 35 percent of shoppers who buy items online have used click-and-collect retail to pick up their purchases, and that proportion will increase to more than 75 percent of shoppers by 2017, according to retail researcher Planet Retail. Shoppers in France can pick up their groceries at more than 2,000 “click and drive” facilities. On the basis of our experience with leading retailers, we expect substantial growth in the use of such services.

Done right, click-and-collect retail can be a way for brick-and-mortar retailers to differentiate themselves from pure-play e-tailers by leveraging their existing store assets to offer fast delivery, low prices, and even greater convenience. That’s why many traditional retailers are eager to capitalize on this opportunity..

But click-and-collect retail can also pose real risks for retailers that fail to execute it flawlessly. A recent survey by market researcher E-consultancy.com found that as many as 60 percent of online consumers in the UK and U.S. said they would not shop at retailers that failed to deliver on their promises. This is as true for click and collect as it is for home delivery—particularly when it comes to apparel, a sector where customers expect to pick up the exact size and color they ordered and not a close substitute. In a hyper-competitive retail environment, an annoyed customer is likely a lost customer..

Supply Chain Imperatives:

So, for retailers that seek to make click-and-collect retail a core component of their omni-channel #RetailStrategy, many specific #Supply-chain capabilities are required. (See Exhibit 1)..All are important, but in our experience, it all begins with providing shoppers—and store associates—with accurate, real-time information on product availability…

One way to manage this critical capability in a click-and-collect retail environment is to deliver the customer order from a distribution center to the store, as UK retailer John Lewis does. Centralizing click-and-collect fulfillment in distribution centers concentrates and simplifies the inventory management challenges. But it also adds precious time to the order-to-pick-up cycle, putting off impatient customers who might simply buy the item elsewhere next time. And many retailers’ legacy distribution networks are ill equipped to fulfill customer orders from existing distribution centers, which are typically designed to pick large orders for stores.

For many retailers, then, a better solution is to pick click-and-collect orders from store stock. But getting the basics of in-store inventory management right presents a real challenge in terms of meeting customers’ expectations about availability. In our experience, a store’s balance-on-hand accuracy can be as low as 60 percent, which would be disastrous for click-and-collect customer satisfaction. Search online for “click and collect” for many big-name retailers, and you will see a slew of messages from customers describing poor experiences and products not being available when buyers turned up to collect them, even though the website had indicated that the goods were in stock. That’s why at Best Buy, for example, clerks physically doublecheck the availability of every item in every click-and-collect order in the stores themselves to overcome unreliable in-store inventory.

Why the poor performance? In support of their initial omnichannel offers, many retailers have chosen to focus first on building new infrastructure—pick-up points, distribution centers, delivery networks, IT systems, and even new stores. No doubt, these solutions can be critical components of a successful long-term omni-channel strategy, but getting the basics right, including in-store inventory, is often the most important first step to creating immediate impact and options for the future…

Back to Basics:

Best-in-class players focus on making in-store processes efficient, rigorous, and self-correcting; their processes are consistent with our six “golden rules” of inventory management. (See Exhibit 2.) No IT system can account for products mistakenly left in the back room, inaccurate distribution-center deliveries, removal of damaged goods from shelves that is not captured by the inventory system, check-out errors, and theft. These unavoidable issues, and their consequences, must be accounted for and captured, accurately, by the inventory system. This often needs to be done by a real person, properly incentivised and managed. Ideally, every touch of inventory at every point in the process should validate, correct, or improve inventory accuracy. In our experience, major retailers with such self-correcting systems and processes can achieve balance-on-hand accuracy of greater than 95 percent; at that level, the impact on items popular with customers is marginal…

Building such an approach, however, requires getting all the details right: understanding where errors occur, why they occur, and what solutions can be implemented consistently and effectively by store employees. In this endeavor, the devil really is in the details…

Eventually, emerging technologies will likely become a key part of the solution as well. Radio frequency identification, or #RFID, for example, has the potential to dramatically improve the accuracy of the information that supply chains depend on. Unfortunately, the ability to tag individual items economically and to scale up the technology to the needs of large retailers is still several years away. In-store cameras are a promising alternative for monitoring store stock, but they will require further developments in high-quality processing and image recognition if they are to make a difference. But even the most advanced technology will never entirely substitute for the disciplined in-store behavior needed to drive true inventory accuracy…

Thriving in an #OmnichannelRetail environment will require a host of different fulfillment capabilities. Retailers must design and execute the best possible customer service across all retail channels, build the infrastructure needed to ensure consistent pick-up and return processes, and continually capture and analyze the data needed to understand their customers and customers’ expectations of each channel so that stocking and flow strategies can be adjusted accordingly.

But that’s a longer-term goal. Near term, #Retailers, that seek to capture their fair share of the growth in click-and-collect shopping should focus first on getting the basics of stock accuracy right. Doing so will deliver near-term benefits to the #Bottomline and position them for success, no matter what #OmnichannelStrategy, they decide to pursue…

“Value of Packaging-Industry is INR`70,000 crore” Business in India | FnB News

The #FoodProcessing, sector probably is exclusive in respect of using the most varieties and forms of #Packaging & #PackagingMachinery….In a Interaction with Secretary-General, Institute of Packaging Machinery Manufacturers of India, spoke about the packaging industry in India and emerging trends. Excerpts :

What is the current value and growth of the packaging industry in India compared to the world?

The value of the packaging industry is estimated at Rs 70,000 crore. This however is very low compared to the global industry value placed at around US$600 billion. Of this, 20% is accounted by Asia region with Japan and China in the lead. The per capita consumption by spend is only one seventh of the world average clearly indicating the potential for the growth and opportunities for the packaging industries in the country..

What is the potential of packaging industry in India with respect to the food processing sector ?

As it is true of the situation in most countries, around 50% of the total packaging production is consumed by the food sector. The food sector probably is exclusive in respect of using the most varieties of package types and forms including machinery…!!

Does India rely on other countries for its food packaging needs ?

The food sector primarily caters to the domestic resources of packaging materials/packages.  Whereas they also source specific technologies and packaging machinery and system for higher ends and exclusive needs.

What are the recent developments in the food packaging industry of India?

The industry has witnessed considerable new trends moving from simple pre-packaging to vacuum packaging, gas flush packaging, CAP/MAP (Modified-Atmosphere Packaging / Controlled-Atmosphere Packaging), smart and intelligent packaging, retort and asceptic systems, barcoding and RFID (Radio-Frequency Identification) and various types of collation and unitisation are specific areas of interest.

What are the operations and challenges involved in food packaging?

Food packaging lines vary considerably depending on the product state, quantities required, variations in the product characteristics etc. The retail and consumer end needs like dosages and conveniences also play a role. FFS (form fill seal)-vertical and horizontal, thermoform-fill and seal, lined carton system, stand up and spouted pouches, flow wraps are typical in this industry.

What are the types of packaging formats used for various food products?

The varieties of packages vary from simple PP (polypropylene) bags to high barrier packages and  asceptic packages. Single layer polyolefin bags to pouches, 2-5 /7 layer flexible laminates, 2-9 layer multilayer films, thermoforms from PS (polystyrene), PVC (polyvinyl chloride), PET (polyethylene terephthalate), PP, PE (polyethylene)and co-extruded structures besides semi-rigid and rigid metal, glow, plastic formats are very common types of packages used by the food sector. These primary packaging media are supplemented by a group of ancillaries like labels, caps and closures, wads, and reinforcements. Developments in these areas are indeed very commendable like dosage caps, smart labels, security/tamper identification labels, coding and marking systems, child-resistant and elder-friendly caps.

How balancing of innovations and risks are important in the packaging industry with examples?

Innovations within the industry and value-added packages are specific areas where possibly the packaging industry has tremendous scope. Responsibility lies both between the package buyers and package suppliers. No doubt this is cost-oriented but soon will become an entity if the industry has to become more and more competitive. India being identified as a good source for development and supply has therefore necessarily to acquire the infrastructure and buildup as a good and dependable source of recognition, globally.

What are the challenges faced by manufacturers of food packaging?

Both package conversion and packaging operations are considered reasonably developed. The existing level, however, need to be constantly updated towards higher technology levels. Opportunities are open for improvements and new material and material combinations with higher functionality. It is equally true of the machinery sector in terms of versatility, ergonomics, eco-friendliness, reduced turnover time, pollution-free, easy changeover and multi-product oriented.

How food packaging plays a role in safety and health standards of food materials?

Food needs to be safe and nutritious. More scope exists and innovation opportunities are higher in packaging possibilities. Consider the global scene – the one point agenda is to save food and reduce losses and make food available to all irrespective of season, location and at uniform price. The FAO/UN (Food and Agriculture Organisation/United Nations) has estimated that about 1.3 billion tonne of food is wasted. Poverty alleviation and removal of famine is only possible if such waste is curtailed. The common enemy seems to be “mindset,” lack of education or importantly poor understanding of the benefits or inadequate convincing and persuasion.

Comment on how flexibility factor will change the future of food packaging industry :

Primarily the laws and regulations should be clear and this yardstick can have no tolerances.  Standards and specifications should be drawn up both in respect of materials and process and details  should appear on the packages. If the system needs to be effective monitoring at the manufacturing / processing sites may not be enough. Market samples should be drawn and quality inspection should be done. Any malpractices or shortcomings or deviations should be dealt with expeditiously with stringent punishments. This cannot be a mere fear complex but an effective baton.

What are the issues about which manufacturers of food packaging have to be cautious?

Primary issues related to package manufacturing are raw material quality, process of manufacturing   site conditions, machinery and system, quality of output and their conformity to requisite standards  and specification complying to statutory and other stipulations.

How Automatic Identification and Data Capture (AIDC) is important for the packaging industry from a consumer point of view?

Consumer safety, health and hygiene being the core of food, food processing and packaging all data right from procurement, in-site manufacturing and supply chain are extremely important and essential. Coding and marking-barcodes/RFID and AIDC are helpful tools in this direction.

With new food mix and products emerging, what is your message for manufacturers and traders involved in the industry?

Product mix – in-depth and width will have to expand. Substitutes and alternates and modifications are part of the game. They will continue to be on the anvil all the time. RTE (ready-to-eat), RTC (ready-to-cook), RTP foods are typical examples. This is irrespective of the food sector – meat and meat products, dairy, flour-based foods etc.

There can be no single answer for packaging needs of these. Also a given package cannot be the answer for all foods and all market conditions. Each product needs to be treated on its own merit considering its characteristics, shelf life, supply chain conditions. It also should be noted that “a package” is a good vehicle and guardian. It will keep the product as it is processed and packed, and therefore ”what is put inside” and “at what conditions” are equally important.

What are the new trends in raw materials used for packaging and how eco-friendly are they?

Lot of discussions are seen in respect of bio-friendly packages. They are debated under different heads. Commercialisation always is governed by availability and cost. These probably are the constraints. Possibly more inputs are needed. Polymeric and coatings( barrier) will find more applications.

What are the challenges and responsibilities in front of the new government to help the packaging industry?

The packaging industry has been under various constraints which affect its expansion and growth.  Most of the converting sector were under the reserved category. The shift in early 1990s clearly paved the way for their expansion and modernisation and over the last and half decade one could witness the sea change. The trend set in will continue. The country still processes a very low percentage (less than 5) of the fresh produce. The scope is indeed very large and would have large influence on the packaging sector. With the retail sector growing at a reasonable pace and shelf- ready packages becoming more popular / necessity the demand for packaging will also increase in a good pace. Although the changing lifestyle, small families, more working women, demand for more and more convenience packages have shown a direct impact on the packaging needs, the cost inputs for packages in a packaged food does not seem to encourage large-scale shift, yet…Having identified “food processing” as a priority sector and a large number of financially-assisted programmes put in place by the government, the momentum needs to be augmented…

The Foregoing could throw up quite a few measures-industrial and fiscal that the government could review : 

  • Encourage processing and packaging centres at the orchards level.
  • Create a part of above as exclusive export oriented.
  • Provide financial assistance for setting up state-of-art processing and packaging centres and review fiscal aspects.
  • Create and enlarge the cold chain supply systems.
  • Set up quality assist centres at processing & packaging centres with emphasis for those at orchard levels.
  • Review the contribution of cost of package to the final product selling price and the part of the duties and levies.
  • Given the current situation and needs – review the fiscal levies to reduce its impact on the final product pricing to increase volume of processed food packaging.
  • Encourage developments in source reduction and make packages more eco-friendly.
  • Encourage easily recyclable and reusable packages.
  • Introduce and expand returnable packages (deposit scheme).
  • Fiscal incentives for those falling under the above schemes.
  • Can the fiscal support include tax holiday system with built-in conditional aspect on steadily increasing volume of packaged foods.
  • Encourage R&D / Innovation in packaging and extend financial support for those bringing in advantages for the consumers adopting state-of-art technologies and materials.

Consider special incentives for SME (small and medium enterprises) sector in the above areas….

The underlying principle and aim should be “Food Safety,” Food Preservation & Packaging…best suited for Tropical Countries and those with Higher Storage & Distribution cost…Such developments in all Types of Packaging – across the cross-section – will add to the choice to meet varying market segments. Packaging food more securely with high productivity and extended shelf life are the technology endeavours today…!!

“Flipkart vs Amazon” : “How they Stack up in India” | VCCircle

” Amazon chief Jeff Bezos says that at the current scale and #GrowthRates, India is on track to be its fastest country ever to reach $1 billion in Gross Sales…”

The big daddy of #OnlineCommerce, in India hit a new milestone bagging a record $1 billion in Fresh #Funding…In less than 24 hours of this announcement, the one thousand pound Gorilla of selling things online, Amazon followed it up with $2 billion in Fresh Investment commitment in India…!!

Mind you, in the #ServicesBusiness, paying salaries to employees and adding human skill set are also considered investment and with both firms employing thousands, a good chunk of this money could be simply about paying wages (though Flipkart has said it’s looking much beyond using investors’ money to burn in existing operations)…Moreover, this could also include the imputed value of discounts to be offered to consumers…

Nevertheless, the numbers are huge and have just raised the decibel levels in the Indian #E-commerce, sector…Here we attempt to glance at how Amazon & Flipkart, are stacked against each other when it comes to India in terms of some comparable Metrics and other Features….!!

Products on offer:

Amazon claims that in just over a year it had pooled in vendors to offer as many as 17 million products on its site. It has not clarified whether this represents #StockKeepingUnits or #SKUs, but that is what it most likely means…#Flipkart, which has been in operations for almost seven years now, looks to be on a weak wicket here as its latest communication says it stocks over 15 million products. #Snapdeal is far behind with over 5 million products…!!

Indeed, what really matters is how much they are able to sell, but in terms of offering to the #Consumer, Amazon seems to have done a much better job and far quicker too..

#Amazon, does not share finer details about how many users it has in India ; so that one is not comparable…Flipkart, in contrast, says it has 22 million registered users clocking over 4 million daily visits and is delivering 5 million shipments a month, which in itself is huge…

Who Sells More ?

Flipkart said early this year it has hit the milestone of $1 billion #GrossRrevenue (#GrossMerchandiseValue or #GMV) run rate (which means based on monthly sales on its site it is set to cross $1 billion in GMV over the next 12 months (though its latest official communication erroneously says it has become the first Indian e-com firm to hit $1 billion in GMV)…

Amazon, though public listed, does not share India-specific numbers but its founder and chief Jeff Bezos has just said that at the current scale and growth rates, India is on track to be its fastest country ever to reach $1 billion in gross sales. It is estimated that it took it years to cross the revenue benchmark even in China, where it has been present since 2004 and another market dominated by local giants…But it would be fair to assume that Flipkart currently outsells Amazon..

Interest in Virtual World:

This one is somewhat superfluous but we look at it to get some additional insights. Rather than looking at Alexa (which is dismissed by many as not too accurate) or comScore (which we don’t have access to), we considered Google Trends to see how the two sites stack up against each other…

As the graph shows, Flipkart has been under the radar for over five years but really took off only three years ago and with momentary blips has been on an ascend. Amazon has been growing at about the same pace as Flipkart after its launch in June 2013… However, it seemed to have gained pace in April this year and surpassed Flipkart and though the gap has narrowed since then, it seems to have stayed at the top this month too.

Amazon Prime vs Flipkart first:

Not much of a comparison really, as Amazon Prime, the paid membership programme of Amazon, is not yet present in India. However, Flipkart has got a head start with launch of its own version of the premium membership last month. Though its benefits are limited to one vendor (more on that later), it manages to stand up against Amazon’s Fulfilled by Amazon service under which consumers are already getting free deliveries for majority of products sold on the platform.

Flipkart First (at present in a free trial period for randomly chosen members) is currently limited to free or subsidised delivery benefits for a section of its product assortment besides an early access to hot products.

Where the battle may be won, however, is other bling factor in terms of digital content strapped for free. Amazon already offers such content for its Prime members and early this year paid a bomb for a package of shows from HBO which now comes free to its premium members. It also offers movies, music on the go and free e-books for its Kindle users as part of the membership.

Flipkart has got the platform to redo this. But having tried and exited digital music store it would be a challenge for it to sew such content deals going forward…It remains to be seen by when Amazon would roll out Prime membership in India.

X-Factor:

One crucial thing in the e-com war could be the key vendor on the sites. In the case of Flipkart it is WS Retail, which used to be the in-house and sole seller through the platform before it turned a marketplace early last year. This firm is owned by an angel investor and employees of Flipkart, to comply with FDI norms. However, this is a key player for Flipkart….Although, the breakup of sales from WS Retail and other vendors is not in the public domain, it is estimated that the bulk of its sales are through this vendor (it also happens to be the partner for Flipkart’s run away hits like Motorola Moto series of handsets)…WS Retail also happens to be a key spoke in its Flipkart First offering, at least for now…

Amazon is still dependent on its third-party vendor base to sell in India. However, it has reportedly sealed an unconventional deal with Catamaran Ventures, the private investment arm of Infosys co-founder N R Narayana Murthy. Catamaran is holding a majority stake in a venture which is supposed to work at the back-end of operations for Amazon in India. However, this is seen as the first step for preparing groundwork for Amazon to start selling in India on its own as and when (as anticipated soon) multi-brand online retail is brought on par with offline retail in terms of FDI norms.

This could really pump up the activity for Amazon and take the competition right to the door steps of Flipkart….!!

Apparel:

Flipkart has strengthened its apparel vertical, one of the juiciest part in terms of margins by acquiring Myntra early this year. Although Amazon also has launched apparel section, Myntra provides a strong positioning and vendor base to Flipkart which can be important going forward.

Myntra remains a separate site but its chief is now involved in strategy making for Flipkart’s own apparel vertical and that can help the firm boost sales from this segment going forward.

To be fair, Amazon may well acquire a Myntra rival (say, a Jabong, for instance) to plug this gap that would be dependent on nifty deal structuring.

Reviews, #VendorServices, Fulfilment Centres:

One differentiator for Amazon globally is its enviable consumer reviews, which helps a prospective buyer to decide in their purchase decisions. Flipkart too has built a strong review database and in many cases has a far comprehensive review section compared with Amazon’s Indian marketplace.

If customer acquisition was key metrics to focus for Flipkart or for that matter any internet commerce firm to begin with including Amazon, now add vendor acquisition to it.

The future pace of growth for both be partly if not fully dependent on how fast they add sellers to their platforms. A factor determining this would be how smooth Amazon or Flipkart offer to get their products to the consumer. This would in turn be dependent on the fulfilment infrastructure and logistics services offered by the two firms. Both Amazon and Flipkart have their own logistics units unlike many other horizontal e-tailers in India and vendor addition could be based on who takes the minimum fee or cut from the sale of products on the site. This is where the money aspect comes in where the fresh funding announcement of Flipkart and additional investment by Amazon make them even-steven.

Meanwhile, Amazon has just announced FIVE New #FulfilmentCentres, in India which would take total such facilities to seven in the country…Flipkart has FOUR such Centres at present and is also looking to expand the number…!!

We will get more insight on how the two firms are performing a couple of months down the line. So watch out this space for their actual revenues and growth in numbers…!!

“Modern Supply-Chain”: “No-more a mere Support-Function” | by: Pradeep Chechani | ET Retail

Gone are the days when Supply-chain used to be Restricted to Warehousing & Logistics..However, even today, there are few Indian Retailers who continue to Restrict #SupplyChain, to its old form…In the process, they have failed to create a differentiating factor for themselves…!!

How can a #SupportFunction, such as Supply-chain create a Differentiating Factor..?? Arguably, its no longer a Support Function now….!! Lets see How Supply-chain is being able to create a #WinningFactor for a Retailer in its #NewAvatar…!!

The following are the Functions which have been put into the Supply-chain kitty in this #ModernEra :

Vendor Management: #SupplyPartner, is the mast of any Retailer-ship…Merchandise is the main reason why a customer walks into the store, converts into a purchase and repeats the process multiple times. Within this vendor evaluation is a big process. Tying up with the right kind of vendors will ensure that a retailer provides the merchandise to the customer on a continuous basis, in the right quality and at the right price. A vendor can do this seamlessly if he is involved in the strategic and tactical decisions and processes of a retailer…

Volumes can be channelized to select few vendors so it becomes mutually beneficial. All this obviously leads to cost savings mainly in the COGS (Cost of Goods Sold).. And the percentage savings in the COGS contributes directly to the bottom line. Biggest impact of savings comes from here…!!

Order Management: Supply Chain is better equipped to bring the order into the store in the right time. Close coordination with Merchandise Planning & Buying teams is required. Warehousing & Logistics and replenishment can be planned in a better way..

Quality Assurance: Entwined with the order management process, QA logically falls under the supply chain function. Product technocrats are required at Quality Control levels. A quality assured process ensures that there are minimum delays in the manufacturing cycle of a product. This works well for the suppliers as well. A scientifically implemented Supplier Relationship Management system ensures time savings topped up with cost savings as well…

Inventory Management:Traditionally, almost 30% of the working capital is invested in Inventory. Optimising inventory can reap huge benefits for a retailer in interest costs and cash flows. Auto Replenishments, Drop Shipments, VMI (Vendor Managed Inventory) are a few ways how better cash flow can be attained. For merchandise with fairly stable demand an auto replenishment model can implemented with auto orders being published on suppliers which meets the EOQ (Economic Order Quantity) and Delivery frequency. Drop Shipments are prominently used by ecommerce retailers where the vendor is issued an order once a sale is made. The inventory in this case lies with the vendor. VMI is an arrangement where inventory lies in the retailers premise but is managed by the vendor. These arrangements however are spearheaded in terms of negotiations by the merchandisers. Such kinds of push & pull supply chains are used for best utilization of inventory…

Reverse Logistics:As the volumes of modern retail is increasing, reverse logistics is becoming a big cause of concern. Retailers have started to dedicate space within their warehouses for this devil. One of the best preventive practices available here is RDDD (Revert, Divert, Dilute, Dispose) not necessarily in the same order. Where Revert stands for RTV (return to vendor), Divert is when a retailer can optimise the concerned inventory to other physical location, Dilute is where markdowns are made to sell this merchandise and Dispose when the shelf life has expired and the retailer has no other option but to dispose. However things like merchandise lifecycle, broken sizes, saleability, vendor agreements etc need to be thought through before implementation of the same…

Supply Chain for E-commerce businesses:#Ecommerce has opened a new set of challenges for modern supply chain…Supply Chain is a very critical part in this business and is still evolving to cater to Ecommerce business needs….Service which includes timeliness of delivery of the required product without any damage is one of the main factors for customer satisfaction…

Apart from the above factors the following pose a challenge to modern supply chain:

Courier: As & when the volumes on ecommerce are increasing this is becoming more & more challenging. First challenge is penetration into Tier C towns & rural India. Second challenge is reverse logistics. Almost 30% of deliveries get returned from the customers door itself. This also increases the probability to damage.

Customer Order Shipments: Ecommerce retailers require customer orders to be shipped from vendors. However this becomes difficult for a manufacturer who wants to focus on his core business that is manufacturing. As a result, consolidators are springing up who collate the inventories from various merchandise manufacturers/vendors. This gives respite to the ecommerce supply chain in terms of working capital and customer order shipments. However this increases the overall supply chain cost to some extent.

Just to summarise, there no rocket science to realise that #Modernisation, of supply-chain for a retailer can give an edge…..Coordinated #SupplyChain, will lead to timely order transmission and receiving merchandise in the right quantities & quality…. This will give a big boost to the sale…!!

Hence it is advised that due strategic importance should be given to this function….Specialists should be involved at early stages who can take supply chain and thereby the business to a different level altogether…!!