India's Future Group wants to increase its share of the country's fruit and vegetable market, a category in which it has traditionally struggled.
The group behind the Big Bazaar hypermarket and Food Bazaar supermarket chains is forming a specialised entity to manage its supply chain for fresh produce, a job that has been outsourced up until now.
Fruit and vegetables currently account for 3-4 per cent of total supermarket sales for the group, which expects to end the financial year in June with retail sales of Rs92bn (US$1.98bn).
'Globally, fruit and vegetable sales for most retailers is about 10 per cent and we want to take it to that level. Within a year, we want to definitely hike the billing share of fruits and vegetables to 8-10 per cent,' the group's chief executive Kishore Biyani told India's Economic Times.
The new entity will be headed by S Radhakrishnan, who will manage the company and own an equity stake in it. Mr Radhakrishnan is a retail-industry veteran who helped set up the RPG Group's Food World chain, and was Reliance Retail's value format business chief until earlier this year.
Mr Biyani hopes this new model will help his company reduce fresh produce prices by 15-20 per cent, by implementing new sorting and grading technology, better cold storage and cutting out middlemen.
'The efficiencies created by this exercise will be passed on to the consumer,' he said.
This move by Future Group shows the difficulties faced by large retailers in selling fresh produce in India.
Because the country suffers from a lack of cold storage and refrigerated trucking services to maintain a fresh supply chain, most of India's fruit and vegetables are sold in smaller stores or wet markets.
According to Mr Biyani, fresh produce is a unique product category when it comes to maintaining customer loyalty.
'If a customer can find fresh vegetables in our stores around the season, he will keep coming back,' he said.
Meanwhile, Reuters have reported the Future Group is investigating joining forces with an overseas retailer, and is looking at an initial public offering for its investment arm, Future Ventures.
Mr Biyani said the group was speaking with foreign retailers but did not identify any specifically, although there have been reports French retailer Carrefour is one of the contenders.
'There is a lot of speculation about a lot of players and one of the names that comes up is Carrefour, but that doesn't mean that we are tying up with them,' he said.
Carrefour has said it plans to open its first cash-and-carry outlet in India in early 2010, and because Indian law states multi-brand retailers cannot sell directly to the public, a partnership is necessary for the French firm to join the bourgeoning Indian market.
US giant Wal-Mart has cash-and-carry outlets with India's Bharti Enterprises, Germany's Metro Group has wholesale stores, while Tesco has joined forces with the Tata Group.
It has also been reported that Future Ventures will file papers in the next 30-45 days for an initial public offering.
'We are going to look at rural retail opportunities out of that company,' Mr Biyani said.
He did not say how much the company hoped to raise from this float, but last year said the group wanted to raise Rs10bn (US$215.8m) from the sale of shares.
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