Walmart, the world's largest retailer, recently announced that it would sell $1 billion in food, sourced from one million small and medium farmers, by the end of 2015. In an email interview with Raghavendra Kamath, Walmart Asia’s President and Chief Executive Officer Scott Price outlines the retail giant’s sourcing plans for India. Edited excerpts:
In your $1-billion target, what will be India’s share?
Walmart has established country-specific commitments for its sustainable agriculture goals to support local farmers. Through its Direct Farm Programme in India, Walmart will partner with small and medium farmers to source 50 per cent of their fresh produce.
Now, how much do you source directly from Indian farmers?
In three years, our Bharti-Walmart joint venture (JV) has opened four cash-and-carry stores, for which we buy fresh produce from over 600 farmers. We will open another store in the next 30 days, and we expect 10-15 more in the next two years. We just announced a new goal to buy directly from 35,000 small and medium farmers in India by the end of 2015.
What kind of training do you impart to farmers to increase their yield and income levels?
We will work with these farmers on crop management and provide more direct market access for their produce. We will train them to grow food more sustainably, using less water and optimising the use of pesticides and fertilisers. By purchasing directly and helping these farmers operate more efficiently, we estimate they will see a 20 per cent increase in income.
In addition to these farmers, we provide training for workers in cities and rural communities as well. Two years ago, our Bharti-Walmart JV pioneered our first training center in a public-private partnership with the Punjab government. This was India’s first special skills training centre to help young people meet the requirements of the growing retail industry. We also opened a second training centre in collaboration with the Delhi government.
So far, more than 3,400 students have achieved a certification, and over 1,100 of those students have been placed in jobs. A third skills training centre in Bangalore will be opened in the next couple months. By 2015, we expect our skills training network to certify more than 40,000 students and place 14,000 of these students in jobs.
What are the biggest challenges in sourcing directly from farmers in India vis-a-vis the rest of Asia?
India is very unique. It has very different consumers, very different legislation, very different levels of economic development, social infrastructure and governmental management of the economy. India is a unique market because it has evolved as a wholesale network for several centuries.
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However, the biggest challenge is that there is no organised supply chain in India. Because of the lack of that supply chain, there is no forecasting, there is no understanding of how demand is. It’s largely a push-based system. So, I think getting that transparency across the supply chain will be very unique. The other thing is there is no refrigerated cold chain for fresh produce in India. So, almost 40 per cent of fresh produce gets wasted from farmland to the time it reaches consumers.
How will opening up foreign direct investment (FDI) in the Indian retail sector accelerate direct sourcing from farmers?
If FDI in retail is opened up, Walmart can contribute in many ways. First, there is a great opportunity to support Indian farmers and sustainable agriculture. Walmart can help to reduce waste and increase efficiency in the perishable food supply chain, where today 30 to 40 per cent of fresh produce in India doesn’t make it to the consumer. We also believe that by offering our expertise and technology, we can help increase food safety and quality, and meet the growing expectations of Indian consumers for better food hygiene.
Second, global retail giant can help to create opportunity for small and medium enterprises. Small and medium-sized food processors will be able to develop and sell more products, as they become part of our private label brand. And they will gain export opportunities beyond their country markets.
Third, we estimate that FDI in multi-brand retail can create 2.3 to 3 million jobs in India over the next five years. These will be good jobs that are very well suited to a young Indian population entering the workforce. They will enable workers to continuously improve their skills to grow and advance.
Lastly, FDI can make a real difference with inflation that has become a key economic concern for India. By our estimates, certain increases in FDI are likely to reduce India’s inflation rate by 50 to 70 basis points.
