Retailers eat into fruit exporters' pie

The country's fruit and vegetable exporters are feeling the pinch of the entry of retail majors such as Reliance, Subhiksha and Adani into their territory.

Exporters claim that domestic retail chains have eaten into their margins as they offer higher prices to farmers for their produce.

Exporters are forced to pay higher prices, leading to an increase of 10 to 15 per cent in their procurement cost.

However, processed food exporters have taken this as an opportunity to expand their business as they expect an increase of 5 to 7 per cent in domestic consumption.

"Retail chains such as Reliance Fresh, Subhiksha and Adani are offering better prices to farmers. We are left with no other option, but to match the prices being offered by the retail majors. This has eaten into our margins by at least 10 to 15 per cent," said Nitin Mathur, CEO, Locus.

Hyderabad-based Locus exports fresh fruits and vegetables globally, including to the European countries.

Agreeing with Mathur, Sushant Phadanis, a partner in Mumbai-based Essar Exports, said, "Earlier, farmers used to sell better quality of fruits and vegetables to exporters, anticipating higher price realisation. Now, they are getting better prices from retail majors such as Reliance and Subhiksha, which sometimes pay higher than the market price. We have to pay the same prices offered by the retail chains."

Phadanis added that they could not negotiate prices with importers as exporters had usually entered into 4 to 6 months' contracts and had to export at the prices decided in the contracts.

This was just the beginning and the situation would get worse in the future. Exporters would have to rework their strategy, if they wanted to survive the competition. The entry of retail chains into fruit and vegetable retailing had created a situation where the decades-long farmer-exporter relations were at stake, added Phadanis.

Meanwhile, the retail majors' entry into fruit and vegetable retailing has its advantages too. "The entry of retail majors in the agri-produce retailing will open up the domestic market. We expect 5 to 7 per cent growth in the domestic consumption of our processed foods," said Sandeep Nemani, director, Vimal Agro Products, Surat.

Nemani added that larger domestic markets would not cut exports as food processing companies would expand their facilities to maintain the demand-supply balance in the domestic retail sector as well as the exports market.

Both foreign and domestic consumers can also expect better quality now with the rising competition.

"With the entry of retail sector into agri produce, the country will have better infrastructure and supply chains. This will ensure that domestic and foreign consumers get the best quality of fruits and vegetables," said Ranjan Kedia of Radha Krishna Impex, a New Delhi-based exporting company.