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Walmart India mulls entry into processed food retailing after FDI rules changed

We are currently evaluating all the policy guidelines and we do not have an 'only food model' anywhere... It is not something we will jump into very quickly Krish Iyer, president & CEO, Walmart India

By: | New Delhi | Updated: September 22, 2016 7:04 AM
The government had in June announced 100% foreign direct investment (FDI) in trading of food products produced and manufactured in India. This is now permitted through retail trading including e-commerce under the approval route. The food processing sector has attracted .3 billion via FDI between April 2012 and December 2015.(Reuters) The government had in June announced 100% foreign direct investment (FDI) in trading of food products produced and manufactured in India. This is now permitted through retail trading including e-commerce under the approval route. The food processing sector has attracted .3 billion via FDI between April 2012 and December 2015. (Reuters)

Walmart India is evaluating an entry into the retailing of processed foods taking advantage of the government’s liberalised policy of allowing 100% foreign capital in the space, Krish Iyer, president and CEO, Walmart India, said on Wednesday.

“We are currently evaluating all the policy guidelines and we do not have an ‘only food model’ anywhere. So, we need to conceptualise, evaluate and come up with a model, which takes time,” Iyer told reporters on the sidelines of the India Retail Forum. “It is not something we will jump into very quickly,” he added.

The government had in June announced 100% foreign direct investment (FDI) in trading of food products produced and manufactured in India. This is now permitted through retail trading including e-commerce under the approval route. The food processing sector has attracted $5.3 billion via FDI between April 2012 and December 2015.

For Walmart India, food retail in the cash-and-carry business accounts for more than 65% of business, Iyer said. He also noted that resellers, particularly mom-and-pop stores, are the most important channel for Walmart. “Our e-commerce (business to business) experience has been good, and while we do not speak about the e-commerce sales, more than 50% of buying is digitally influenced,” he said.

The retailer runs 20 stores in the cash-and-carry format in nine states across the country. In the next five years, it is planning to add 50 more stores, taking the total to 70 as part of an omni-channel strategy.

“We continue to focus on Tier II and Tier III cities, and the opportunities here are as good as metro towns,” Iyer said, adding that availability of land is a challenge in metros. He added that the company is focusing on private labels as it fetches better margins. “At present 95% of our products sold are manufactured in India,” he said.

Meanwhile, food processing minister Harsimrat Kaur Badal told the The Wall Street Journal that British retailer Tesco had expressed its interest in running a retail food business in India. They have dabbled in selling products wholesale and are ready to enter the retail market through outlets that sell just local fresh produce and processed food, the minister said. “Retailers want to come to India as our markets and opportunities are too good,” she said in an interview.

WSJ reported Kaur recently met with retailer and food processor executives in the UK, including those from Tesco, J Sainsbury and Marks & Spencer. Many said they were exploring tie-ups with Indian companies to allow them to navigate complex local regulations to open stores and set up food-processing facilities, Kaur said.

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