Spar International is in talks with retailers in the India as part of a bid to grow its store network in the country.
The symbol retailer, which already has stores in seven Indian cities under a deal with Dubai-based Landmark Group, is in discussions with potential new partners to open more outlets.
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Dr Gordon Campbell, MD of Spar International, confirmed talks were underway but declined to name the potential partners. He said Spar was looking at opening smaller supermarkets in India, as opposed to the large-scale hypermarkets it already operates.
“In India it’s difficult to get sites for larger hypermarkets. Retail estate is expensive and they don’t have the road infrastructure to build out of town,” he said.
Spar and Landmark opened their first store in India in 2007. The venture with Landmark was Spar’s second attempt at operating stores in the country. The same year, Spar and former local partner ended a venture in Mumbai that had been in place for three years.
Spar and Landmark operate outlets in seven cities including Bangalore, Mangalore and Hyderabad. It opened its first store in New Delhi in January.
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By GlobalData“We have been operating in India for five years and we have so far developed ten Spar hypermarkets. We have developed a modern retail chain and the stores have been very well received by the customers,” Campbell said.
“What is interesting about India is the modernisation of food retail is at an early stage and it’s hugely attractive because it has a billion people. Economic activity is largely centred in eight major cities and these cities offer an ideal opportunity for the development of modern retail.
“Food retail in India is operated by 30m family-owned stores and the structure is largely traditional. We see a great opportunity to help retailers modernise and expand their business.”
However, Campbell also spoke of the problems in the country’s supply chain. Analysts estimate around 40% of food produced in India does not reach the market because the supply chain is undeveloped.
“We have a lot of knowledge and we have the expertise to develop the retail sector as well as distribution. For example, we have worked with our partners in China and opened four large distribution centres over the last two years,” Campbell said.
Nevertheless, Campbell emphasised the “great growth opportunities” in India. “The market is at an early stage of development and the middle class consumer is growing rapidly and the shopping facilities are not there for them. The challenge is infrastructure in terms of roads and the wider supply chain.”
Despite government attempts to open the market, foreign direct investment in multi-brand retail is still not allowed in India. Dr Campbell said that Spar’s approach of working with local partners has allowed it to prosper in a country where Wal-Mart Stores and Tesco, although they have wholesale operations, have wider ambitions.
He said: “We are not investing capital, we’re going into countries where there is an opportunity to develop modern retail with partners who wish to develop this business.
“The advantage of working with regional retailers as we do with Russia and China and all over the world is they know the market, and they know the conditions in terms of acquiring sites and understanding the retail market.
“Our local partners will have a supply chain they can build on. They have a relationship with with growers and suppliers.
“The other advantage is they will also be familiar with climactic conditions. In Russia its extremely cold in winter and extremely hot in summer. It’s about local knowledge. They know how to source the products that are needed, recruit people and train staff.”
