India Supermarket Industry Outlook to 2030

India Supermarket Industry Overview

• The India supermarket industry is valued at USD 40 billion in 2023 growing at a CAGR of 11% between 2018-2023 driven by increasing urbanization, rising disposable incomes, and changing consumer preferences.
• Key players in the market include Reliance Retail, Avenue Supermarkets (DMart), Spencer's Retail, and Amazon India. The Indian supermarket industry is characterized as fragmented as it comprises a vast number of players, ranging from large national chains to numerous regional and local players.
• In 2023, Reliance Retail was the largest supermarket chain in the country with over 12,000 stores across India, providing extensive reach and convenience to customers. This widespread presence ensures consistent footfall and higher sales volumes, supporting economies of scale and more efficient logistics.

India Supermarket Current Market Analysis

• The expansion of the supermarket sector in India has notably influenced various markets. The supermarket industry has had a profound impact on the Indian retail landscape. It has revolutionized the way consumers shop by offering a one-stop solution for groceries, household items, and personal care products.
• The Indian supermarket industry is predominantly dominated by urban regions, with significant contributions from metropolitan cities. Mumbai, as one of the largest cities in India hosts a variety of supermarkets and hypermarkets. DMart, Reliance Fresh, and Big Bazaar have a strong presence in this region.
• India is experiencing rapid urbanization, with a significant shift of the population from rural to urban areas. According to the World Bank, the urban population in India increased from 31.16% in 2011 to 34.93% in 2020, and it is projected to reach 40% by 2030.

India Supermarket Industry Segmentation

The India Supermarket Industry is segmented based on various factors such as Product, Distribution Channel, and Region.

By Product: The India Supermarket Industry is segmented by products into Fresh Produce, Packaged Food, Grocery Staples, Household and Personal Care, and Non-food Items. In 2023, the grocery segment holds the highest market share as it includes essential items that are frequently purchased by consumers. Supermarkets offer a wide variety of grocery products, catering to daily needs. The consistent demand for groceries ensures regular footfall in stores and stable revenue.

By Distribution Channel: The India Supermarket Industry is segmented by distribution channel into Offline Channels and Online Channel. In 2023, Hypermarkets dominate due to their ability to offer a vast range of products at competitive prices. They provide a one-stop shopping experience, which is highly valued by consumers. Their large format stores can accommodate extensive inventories, enabling bulk purchases and discounts, which attract cost-conscious shoppers.

By Region: The India Supermarket Industry is segmented into North, South, East, and West. West India stands out as the dominant region in the Indian Supermarket Industry due to its high level of urbanization and economic development. The region hosts the headquarters and numerous outlets of major supermarket chains like DMart and Reliance Fresh making it a central hub for the Supermarket Industry.

India Supermarket Industry Competitive Landscape

Reliance Fresh: Reliance Retail, one of India's largest retail companies, continues to make significant strides to expand and innovate. In 2023, Reliance Industries announced its intention to sell an 8-10% stake in Reliance Retail Ventures Ltd (RRVL) to fund further expansion, retire debt, and prepare for the IPO of its retail business.

DMart: DMart, operated by Avenue Supermarts Ltd, has been aggressively expanding its store network across India with over 350 stores across the country. In 2024, DMart has planned to open 40 new stores in several urban and semi-urban locations, enhancing its footprint significantly.

Spencer’s Retail: Spencer’s Retail has been integrating advanced technologies like AI-powered recommendation engine to enhance customer experience and operational efficiency. The company has adopted innovative solutions such as self-checkout systems, online shopping platforms, and personalized offers to stay competitive in the evolving retail landscape.

India Supermarket Industry Analysis

India Supermarket Industry Growth Drivers

• Urbanization and Growing Middle Class: The rapid urbanization in India has significantly increased the demand for supermarkets in the country. According to the Census of India, the urban population is projected to rise from 377 million in 2011 to 600 million by 2031. This urban shift is accompanied by the rise of a middle class with increasing disposable incomes, which leads to higher spending on groceries and household goods available in supermarkets. The rising disposable income among India's middle class has resulted in increased spending on supermarkets. World Bank data indicates that India's GDP per capita grew from $2,045 in 2018 to $2,202 in 2023.
• Technological Advancements and E-commerce Integration: The integration of technology in retail, such as the use of digital payment systems, self-checkout kiosks, and e-commerce platforms, is a major growth driver. The penetration of smartphones and the Internet in urban and rural areas has facilitated the growth of online grocery shopping. The number of online shoppers is expected to reach 500 million by 2030 from 150 million in 2020.

India Supermarket Industry Challenges

• Supply Chain Inefficiencies: The lack of cold storage facilities and poor logistics infrastructure leads to high levels of food wastage. According to the Ministry of Food Processing Industries, around approximately 30% of fruits and vegetables produced in India are wasted annually due to inadequate supply chain management.
• High Real Estate Costs: The cost of acquiring and maintaining retail space in prime urban locations is a considerable barrier. Real estate costs in major cities like Mumbai and Delhi are among the highest in the world. According to JLL India, retail real estate prices in these cities have increased by 9% annually, which affects the profitability of supermarket chains.
• Competition from Unorganized Retail: The Indian retail market is still largely dominated by unorganized retail, which includes local kirana stores and street vendors. These unorganized retailers have strong relationships with local consumers and operate with lower overhead costs. As a result, they often offer competitive prices that supermarkets find challenging to match.

India Supermarket Industry Government Initiatives

• 100% FDI in Single-Brand Retail: The Indian government has allowed 100% foreign direct investment in single-brand retail under the automatic route. This policy has encouraged global retailers to enter the Indian market, leading to increased competition and better services for consumers. As of 2023, several global retail giants have announced plans to expand in India due to this policy.
• Pradhan Mantri Kisan SAMPADA Yojana:This scheme aims to create modern infrastructure for the food processing sector, which directly benefits supermarkets by ensuring a steady supply of high-quality processed foods. The scheme has an outlay of Rs. 6,000 crore and is expected to benefit 20 lakh farmers and create 5 lakh jobs by 2025.
• Digital India Initiative: The Digital India campaign promotes digital payment systems, which are widely adopted by supermarkets for seamless transactions. The initiative has led to a significant increase in digital transactions, with UPI transactions reaching Rs. 17.39 lakh crore in November 2023.

India Supermarket Industry Future Outlook

The future outlook for the Indian Supermarket Industry is promising key factors and trends such as Continued Urbanization and Population Growth, Technological Integration and E-commerce Growth, and Government Initiatives and Policy Support.

Future Market Trends

• Omnichannel Retailing: Supermarkets will increasingly adopt an omnichannel approach to reach customers through multiple touchpoints. This will include integrating online and offline channels to provide a seamless shopping experience. Retailers using omnichannel strategies will see higher customer lifetime value compared to those using a single channel.
• Sustainability and Eco-friendly Practices: There will be a growing trend towards sustainability in the supermarket sector. As consumers become more aware of environmental issues, they will prefer retailers who adopt eco-friendly practices. Supermarkets will respond by reducing plastic usage, sourcing sustainable products, and implementing energy-efficient practices.