An Overview of Fruits and Vegetables' Retail Supply Chain Models in India

An Overview of Fruits and Vegetables' Retail Supply Chain Models in India

Saurav Negi (University of Petroleum and Energy Studies, India) and Neeraj Anand (University of Petroleum and Energy Studies, India)
DOI: 10.4018/978-1-4666-9894-9.ch010
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Abstract

India is the second largest food producer in the world. Various high temperate Fruits and Vegetables (F&V) are widely grown in Himalayas and Terai region of India. They are important to the various retailers in the plain areas across all the seasons. It has gained its credibility for providing sustainable income, nutritional security and for providing employment opportunities by retailing, both in rural and urban areas. As the population is increasing, demand for fresh F&V are also increasing day by day, but at the same time various issues are hindering the growth of retail sector. This chapter presents an overview of F&V retail supply chain in India as it plays a very vital role in the growth of Indian economy, and is also directly related to the health and happiness of the customers. The different types of retail supply chain models which are currently followed by Indian F&V retail formats/retailers (traditional or unorganized retailers and modern or organized retailers) and various issues related to the retail supply chain of this sector are also discussed in this chapter.
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Introduction

The Indian food retail sector is still in its nascent stage and the economic liberalization policies and globalization had ignited India’s economy for faster growth. The Indian industrial growth and liberalized economic policy attracted various global players to India (Saxena & Sahay, 2000). Despite of all these drivers Indian food retail sector is at the crossroads today. A shift between modern and traditional retail sector is apparent, especially in Fruits and Vegetables retailing.

Fruits & Vegetables retailing in India is gradually renovating with organized players revisiting their supply chain model at every step of the value chain from farm to fork, in order to restructure it. They are reinventing their logistics and distribution strategies to improve the business and increase the shelf life of the products.

Modern retailing is gaining impetus in India. The trend has picked up pace in food and grocery sector which is the largest category, comprising almost 60 percent of total retail (Bhagat, 2014). Unlike other food segments, the modern/organized retailing in Fruits and Vegetables sector has been a slow mover. The economic liberalization in 1991 flagged the way for organized retailers in Fruits and Vegetables. The entry of organized retailer player like Big Baazar and Food Bazaar (Future Group), Reliance Fresh, More (A B Group), Heritage Fresh, Safal (Mother Dairy), Nature’s Basket (Godrej), etc. have paved the way towards enhancing the organized retailing of fresh produce. But still in India, the major market in retailing of Fruits and Vegetables has been chunked out by unorganized retailers like conventional vendors, hawkers, and peddlers. Operating through Mandis, small roadside kiosks, or pushcarts, they continue to be fiercely competitive and hold over 96 percent of F&V retail (Bhagat, 2014). On the other hand, the extent of modern retail is only up to 3-4 percent of the total fresh retail in India.

The Fruits and Vegetables (F&V) sector has been a driving force in stimulating a healthy growth trend in Indian agriculture. Given the rising share of high value commodities in the total value of agricultural output and their growth potential, this segment is likely to drive agricultural growth in the coming years (ASSOCHAM, 2013). Fruits and Vegetables sector plays a unique role in India’s economy by improving the income of the unorganized retailer in rural and urban areas as well as organized retail companies. Retailing of these produce plays a vital role in the prosperity of a nation and is directly linked with the health and happiness of the people.

F&V sector is perhaps the most profitable venture of all the retailing activities as it provides ample employment opportunities and scope to raise the income of the fresh retailers as well as farming community. It also has tremendous potential to push the overall economy’s growth.

According to National Horticulture Board, India’s contribution in the world production of F&V is about 12.6% and 14% (NHB, 2013). China has the highest share with 21.2% of world’s fruit production and 49.5% of world’s vegetables production followed by India and Brazil. The country wise production and percentage share of F&V has been shown in Figure 1 and 2.

Figure 1.

Percent share of leading fruit producing countries (2012-2013)

Source: Indian Horticulture Database, NHB, 2014.
Figure 2.

Percent share of leading vegetables producing countries (2012-2013)

Source: Indian Horticulture Database, NHB, 2014.

Key Terms in this Chapter

Functional Food: A functional food is a food given an additional function (often one related to health-promotion or disease prevention) by adding new ingredients or more of existing ingredients.

Cold Chain: A cold chain is a temperature-controlled supply chain. An unbroken cold chain is an uninterrupted series of storage and distribution activities which maintain a given temperature range. It is used to help extend and ensure the shelf life of products such as fresh agricultural produce, seafood, frozen food.

Commission agents: It is also known as commercial agents. They work as middlemen between vendors and buyers.

Mandis: The wholesale Fruits and Vegetables market in South Asia.

Distribution Center: A distribution center for a set of products is a warehouse or other specialized building, often with refrigeration or air conditioning, which is stocked with products (goods) to be redistributed to retailers, to wholesalers, or directly to consumers.

Consolidation Centre: Regional small scale stocking points used by some retailers to consolidate loads from large numbers of smaller suppliers.

Contract Farming: Contract farming involves agricultural production being carried out on the basis of an agreement between the buyer and farm producers.

Disposable Income: The amount of money that households have available for spending and saving after income taxes have been accounted for.

Unorganized Retailers: The traditional formats of low-cost retailing, for example, the local corner shops, owner manned general stores, paan/beedi shops, convenience stores, hand cart and pavement vendors, etc.

Auctioning: An auction is a process of buying and selling goods or services by offering them up for bid, taking bids, and then selling the item to the highest bidder.

Organized Retailing: Trading activities undertaken by licensed retailers, that is, those who are registered for sales tax, income tax, etc. These include the publicly traded supermarkets, corporate-backed hypermarkets and retail chains, and also the privately owned large retail businesses.

Logistics: Logistics is the management of the flow of things between the point of origin and the point of consumption in order to meet requirements of customers.

Value Chain: A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.

Shelf Life: The length of time a product may be stored without becoming unsuitable for use or consumption.

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