India’s Farmers And Traders
Counter Wal-Mart By Competing
Jim Prevor’s Perishable Pundit, January 11, 2008
We’ve run several pieces regarding Wal-Mart’s effort to expand in India. These pieces include, Wal-Mart Franchise, Wal-Mart Eyes India For Future Growth and Wal-Mart In India Faces Tremendous Obstacles.
One of the problems Wal-Mart will confront is that the farmers and traders of India are deeply opposed. In fact, as this story explains, farmers and traders are now going into business to block Wal-Mart — and getting public subsidies to do so:
Farmers’ Superstores To Take on Wal-Mart in India
MUMBAI: Indian farmers and traders, opposed to the entry of private retail giants such as Wal-Mart, are building a chain of superstores as part of efforts to sell their products directly and stop prices being set by a few big players.
The effort is being backed by authorities in the western state of Maharashtra, which says infrastructure costs for the project could be subsidized.
”It’s a viable idea to counter private players, and if everything goes to plan the first of the superstores can come up in a few months,” Sunil Pawar, general-manager of Maharashtra’s agriculture marketing board, told media.
”We are talking to the farmers’ cooperatives and traders and the government is very supportive of the idea.” Fearing the loss of livelihood, traders, farmers and small shopkeepers oppose plans by foreign and local companies to introduce western-style supermarts into India’s fragmented $350 billion market, expected to double in size by 2015.
Farmers worry the influx will lead to prices being dictated by a handful of large retailers. Their protests reflect wider social tensions in the fast-growing Asian giant, where private investment is frequently opposed by traders scared of new retail competition and villagers worried their land will be taken for factories.
Maharashtra’s farmers are hoping they can take the fight to the private giants with their superstores and chain of outlets that can sell vegetables, fruits and a range of farm products. “The idea is to gather scattered sales into a single sales channel through these farmers’ malls,” said Sopan Kanchan of the Grape Growers’ Federation of India. “Unitedly, we can take on the Wal-Marts and Reliances.”
With the blueprint ready, farming leaders are getting ready to apply for a 25 per cent subsidy on infrastructure costs they are eligible for under a government plan. Already, building sites are being identified in some of the cities in Maharashtra for the farmers’ superstores.
”There are about 350 farmers’ cooperatives in the state and they have lots of land,” Pawar said. So far, the retail protests have been sporadic but they have forced Reliance Industries, India’s biggest listed company, to lay off 1,000 staff and close stores in the north and east.
Foreign retail giants Carrefour and Tesco have also shelved investment plans due to the uncertainty. India does not allow foreign multibrand retail stores, but Wal-Mart has agreed to a wholesale venture with India’s Bharti Enterprises. They expect to open their first cash-and-carry store this year.
Large companies still account for only 3 per cent of India’s retail market. Retailers fear protests could snowball in India as politicians feel it could win them votes ahead of general election due next year. Those against private retail say 40 million jobs will be lost, against the 2 million that modern retail promises to create.
The basic fear seems to be that if buying becomes consolidated, the farmers will be “price-takers” and thus lose control of their destiny.
Oddly enough when Woolworth’s in Australia was starting to buy direct, they brought the Pundit down under to give a series of speeches and try to explain to wholesalers and producers how wholesalers and producers had survived the direct-buying transition in the U.S. Maybe it is time for a Pundit trip to India?