Organised grocery retailing can save Rs 1 lakh crore

Organised food retailing can increase rural incomes, reduce inflation and increase rural spending power, which would then boost the gross domestic product GDP growth rate. A CRISIL Research report on the retail food industry says the total avoidable supply chain costs in the Food 038; Grocery F038;G vertical, which accounts for 74 per cent of total retail sales in the Indian organised and unorganised sector, are about Rs 1,00,000 crore. About 57 per cent is due to avoidable wastage and 43 per cent due to avoidable storage and commissions costs.

The F038;G vertical comprises fresh fruits and vegetables, milk and milk products, fast moving consumer goods and food grains staples. Within this, staples and unprocessed fruits and vegetables account for 50 per cent of food retail, amounting to Rs 4,70,000 crore, the CRISIL Research paper says. The distribution costs increase due to the presence of several layers in the supply chain and, coupled with the movement of goods across different states or regions, lead to high wastage 8212; caused by inadequate transportation and cold storage facilities.

F038;G retail is projected to grow at a compounded annual growth rate CAGR of 37 per cent over the next five years compared with a CAGR of 26 per cent for organised retail. This will raise the share of organised retail in F038;G to 25 per cent Rs 44,800 crore of total organised retail, from 18 per cent. The study says organised retailing can generate total savings of over Rs 1,00,000 crore. These savings would accrue from lower supply chain costs, which can be passed on in the form of higher realisations to farmers, and through lower food prices to consumers.