Gourmet game plan
Even as modern retail's impact expands, major retail firms are experimenting with various formats in the foods segment to draw an elite set of customers. In a bid to cater to medium-to-higher end consumer segments, gourmet retailing is a path many are now willing to take. Rachit Vats writes. Why it's a draw | Gourmet food retailbusiness Updated: Jun 13, 2011 01:17 IST
Even as modern retail's impact expands, major retail firms are experimenting with various formats in the foods segment to draw an elite set of customers. In a bid to cater to medium-to-higher end consumer segments, gourmet retailing is a path many are now willing to take.
Future Hall, the newest entrant from the Kishore Biyani-led Future Group is looking at adding 16 more stores in the next two years after its successful launch in Mumbai's premium mall destination - Phoenix Palladium. At Future Hall, customers can expect a twist - along with organic fruits, smoothies from Moshe's, Swiss truffles and camembert cheeses, they can also buy savouries, samosas, dhoklas and meals.
Nature's Basket, a division of Godrej Industries, is present in Mumbai and Delhi and plans to open 16 more outlets over the next two years to add to its current 14. It also plans to expand its presence to Bangalore. According to published reports, the chain saw close to 70% year-on-year growth last year.
"Gourmet retail is the function of the catchment area. Godrej's Nature Basket is the largest exponent of this. In its last four years of operations, it has not gone beyond 14 stores, as it is a specialised offering. A retailer cannot enter this segment by improving fit-outs and fixtures," said Thomas Varghese, chairman of CII's National Council of Retail.
While Nature's Basket believes that the smaller format is suitable for gourmet outlets since the segment is still nascent in India, Future Group thinks differently and is aggressive with its plans to open larger, hypermarket kind of gourmet stores.
For Future Group, Food Hall is a step towards a more specialised gourmet food store for premium consumer groups. The company is looking at premium catchment areas similar to that of its first store. The 10,000 sq ft store houses a live kitchen and a bakery, a dedicated fresh fruits and vegetables section and a separate area for dairy products, cereals and processed foods.
"Food Hall is for the customer who loves to experiment. We see this as an opportunity to capture consumption as consumers are ready for this kind of format," said Devendra Chawla, head - private brands and food services, Future Group. He believes the stores will turn profitable within 12 months of their opening. He said gourmet stores are more about high margins and good product portfolios that enable profitability in a shorter time frame.
"The market is ready for the next level of offering. There is a set of consumers that loves to experiment with food but has to buy from multiple specialist places. Food Hall brings it all under one roof," added Chawla.
Spencer's Retail is staying with the idea of gourmet sections within its existing stores rather than launching standalone gourmet outlets. "We think the market is not ready [for standalone gourmet stores]. Retailers such as the Future Group and Westside are still trying to figure out the nuances. Gourmet food stores need to be in upscale neighborhoods in metros. This makes the rentals high, making it difficult to earn money from them," said Mohit Kampani, chief - operations and merchandising, Spencer's Retail.
"Currently, gourmet is much more niche; it will take a long time for the scale to go up and prices to come down. About 67% of our shoppers belong to SEC A, way above our benchmarks. Our stores have high footfalls and lower rentals and operating costs. We have dedicated gourmet food stores in six cities operating from existing hypermarkets. Gourmet sales contribute 12.5% to our overall sales," added Kampani.
Tata's Westside has opened Gourmet West, offering a Italian, Japa-nese, Ind-ian and Chinese products, including cheese, meats and cold cuts, and a chocolate station, Cocoa West. Customisable cereals and chocolate bars; Chef Moshe's breads, sandwiches, salads, sauces and dips; cookies and cakes; wines; as well as organic foods make up its offerings. The food store is a section of the overall Westside store.
A while back, HyperCity shut its gourmet retail arm, GourmetCity. "There are many retailers who have opened and shut shop for gourmet food, including HyperCity. The concept was niche but as an organisation, we needed to focus on the expansion of our hypermarket business and we decided to exit the format. Some of the challenges in gourmet retailing were consistency in supply, restrictions on import of meat and fish products and lack of organised players," said Ashutosh Chakradeo, head - buying, merchandising and supply chain, HyperCity.
In its nascence, gourmet retail is obviously seeing experimentation with formats. "Most retailers are benchmarking us and some are experimenting with different formats. We are firm on our plans though and are not looking at large format stores at the moment," said Mohit Khattar, MD & CEO, Godrej Nature's Basket. "At present, gourmet retail caters to a small group of consumers looking for alternative cuisine. The market was already present in the metros, catering to the imported food requirement. We gave it an organised look"
A Tata Strategic Management Group report says consumer preferences are undergoing a shift, due to increased disposable incomes, changes in lifestyle, shift in age structure, increased number of working women and multi-cultural exposure. These would lead to increasing health consciousness in the future. Organic foods (besides wellness products) would be emerging opportunities in the years to come.
Meanwhile, HyperCity is watching the space with interest and is open to bringing its gourmet section back, if the right opportunity presents itself.