FoodWorld: Pioneering Organized Food Retailing in India
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Case Code : BSTR051
Case Length : 14 Pages
Period : 1990 - 2003
Organization : RPG Group
Pub Date : 2003
Teaching Note :Not Available
Countries : India
Industry : Food Retailing
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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The Private Brand Initiative
Having built up sizeable brand equity amongst the masses, it seemed to be natural for FW to tap the private brand initiative. Ever since its inception, FW used to sell products like rice and pulses under the brand name FoodWorld.
FW had also launched a sub-brand, 'Great Taste' for its own products, which was dropped later and the company decided to use the FoodWorld brand only. In May 1998, FW decided to introduce a new range of health food and herbal beauty products. However, as by now, customers had started associating the name 'FoodWorld' with grocery products, the company decided to sell the new range under the brand name 'Natures Bounty.' FW's private brand initiative remained rather limited, until 2001, when the portfolio was expanded to include a large number of products under the FoodWorld label. It was considered by industry observers the biggest such initiative ever undertaken in India...
Using Technology For Success
Much before it started its operations, RPG had identified technology as one of the crucial areas for success. This was one of the primary reasons that it did not start FW until a suitable technology partner (Dairy Farm) was identified. RPG noted that item-by-item inventory control would be critical for the success of FW.
So it invested in state-of-the-art cash registers and bar code scanners. At that time, there were no established norms for bar coding in India, so an entirely new bar-coding system was designed and implemented. In December 2001, FW decided to use the Internet and became the first Indian retailer to opt for the reverse auction mechanism for plastic carry bags in association with the leading Indian Internet Service Provider (ISP), Sify. FW usually procured 15 tonnes of plastic carry bags per month. To make the reverse auction process more viable, the quantity was increased to 45 tonnes(three month's requirement). The lowest bid that FW received was Rs 66 per Kg against the Rs
73 per Kg that it was paying at that time...
The Road Ahead
By the end of June 2002, FW had established 81 supermarkets in Chennai, Bangalore, Hyderabad and Pune. More than 1,500 employees served over 600,000 customers per month (refer Exhibit I for FW's presence in India). The focus on private labels resulted in the success of 'Natures Bounty' and 'FoodWorld' brands, together accounting for about 22% of its sales by 2002. New stores were being opened regularly with the latest store opening in early-2003, in Hyderabad. Having stabilized to a great extent by February 2003, FW had begun experimenting with varying retail formats...
Exhibit I: Foodworld - Presence in India (2002)*
Exhibit II: Key Players in the Indian Food Retail Industry (2000- 2001)