After food and grocery stores, Mukesh Ambani’s Reliance Retail is giving a big push to its non-veg retail chain, Delight, by launching new stores and products, say sources in the know.
The reason: Non-veg products deliver margins upwards of 20 per cent, compared with the 10-15 per cent margins in food and grocery retailing. Also, data show that 75 per cent Indians above 15 years of age are non-vegetarians.
Early last year, Delight stores faced protest from fishermen when its stores were opened in Andhra Pradesh. But the company has moved on and opened over 100 stores in Chennai, Bangalore and Mumbai, among other places, sources say.
Delight Proteins, the formal name of this subsidiary, plans to open 50 new stores in the next three months and over 500 by the end of this calender year. By the end of 2010, it plans to open 1,000 stores, sources say.
Delight has also set up a research and development laboratory for non-veg products and is looking at launching semi-processed foods and ready-to-eat and ready-to-cook variants in fish and meat, to drive higher volumes, sources say. “Non-veg has good business potential and margins are over 20 per cent. Besides, the store size is around 200 sq ft, which is why the company can scale it up quickly,” said a source.
When spoken to, a Reliance Retail spokesperson said: “Our pilots in states like Punjab, Haryana, Delhi, Maharashtra, Andhra Pradesh, Orissa and Karnataka have received good response. We will strengthen our presence in these states and explore other markets.” He did not comment on the company’s store plans as well as products.
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“The percentage of revenues from Delight is very small. It can account for up to 10 per cent of Reliance Retail’s total revenues after a couple of years,” said a source.
As noted earlier, the big majority of Indians eat non-veg food. But few organised chains operate in this space due to the delicate supply chains and processing involved. Though the Godrej group has a first-mover advantage with its Real Good products, very few chains, such as Spencer’s, Spinach and Hypercity, sell non-veg products.
Though Delight shares banking operations with food and grocery chain Reliance Fresh (of Reliance Retail’s 950 stores, 700 are Reliance Fresh) and hypermarket RelianceMart, it has a completely different set of supply chains, cold storages and processing units. “Initially, the company planned 5,000 stores, but it has scaled this down, given the delays related to real estate and the ongoing slowdown. When Reliance Fresh has 1,000 stores, Delight will clock a similar number,” sources said.
To succeed, say analysts, such chains should have a clear differentiation from local stores and markets. “The success of these shops depends on the differentiation compared with the shops in the locality. They cannot depend on raw products and should sell semi-processed and ready-to-cook food,” said Purnendu Kumar of Technopak Advisors.