A January decision by the government had allowed foreign companies that sell goods under a single brand worldwide to fully own retail stores in India.
But this policy came with a hitch—the government did not give a nod for marquee multinational retailers such as IKEA and Marks & Spencer to sell their own private-label food products in the country.
Change in Track
It now appears though that the government is likely to ease foreign direct investment (FDI) regulations to allow these foreign retailers to sell imported food items, such as bread, cookies, poultry and meat in their stores.
This comes after the government finally allowed foreign companies this month to set up supermarkets and sell a variety of brands directly to consumers by engaging in multibrand retail.
Though no official announcement has been made yet, it is widely believed by many local media outlets and experts that a October 1 circular by the Department of Industrial Policy and Promotion (DIPP) would clearly outline the approval for single brand retailers to sell their food products in the country.
FoodNavigator-Asia contacted the DIPP, where officials declined to comment and said that the circular “would make everything clear.”
The approval is key to the retailers’ success in India. According to research and consulting firm Technopak Advisors, India’s food and grocery retail business is expected to surge to US$30bn over the next five years.
Fear was about smaller players
FoodNavigator-Asia also contacted M&S and IKEA over these latest developments but no response was given by the time of posting.
Previously, it had been suggested that the Indian government did not want to upset and damage the established network of smaller grocery stores across urban and semi-urban regions by allowing food products to be sold at single-brand stores.
At that time, one official with a large consumer products major, said the fear was mostly about high numbers of food imports, which could put pressure on existing food processing majors, and conversely the producers.
As it stands, M&S has a 51-49% joint venture with Reliance Retail that allows it to sell clothes, lingerie and accessories but not food products, for which it will need a fresh approval, while IKEA still needs an approval to sell furniture, homecare and, as it earlier proposed, food products.