Final Thesis

Dear Suheal
I have received your synopsis as well as confirmation that I would be your

guide for the thesis .
The topic is fine and you can go ahead with your thesis on "Food retailing in
Karnataka: The Case for food supermarkets" .
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FOOD RETAILING IN KARNATAKA: A CASE OF SUPERMARKETS
Submitted to
Major Advisor/Guide
PROFESSOR TAREQUE LASHKAR
IIPM
Bangalore
K.B.RAMAPPA
Doctorate in food retailing

Operations Head
Mother Diary’s
Safal Retail
Bangalore
Submitted by
SUHEL PASHA .R
ID.NO. - B0709SS 10056
ALUMNI ID - BS07M002
INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

BANGALORE-560 034

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The Indian Institute of Planning & Management
ID NO: B0709SS 10056
THESIS TOPIC APPROVAL (Marketing)
Dear Suhel
I have received your synopsis as well as confirmation that I would be your
guide for the thesis .
The topic is fine and you can go ahead with your thesis on "Food retailing in
Karnataka: The Case for food supermarkets" .
Treat this mail as a formal approval of the same.
Remember to get yourself registered at the IIPM Academics by showing a
copy of this approval mail or forwarding this mail to
academics.iipmb@gmail..com and get the ID
Regards,
Tareque

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Acknowledgements
I am grateful to Mr. Tareque , HOD of Indian Institute Of Planning

and Management (Bangalore),for Providing the time and
informational support to revise this book.
I am also grateful to Mr. K.B. Ramappa, Operations Head of Safal for

information and infrastructural support.
Su
hel Pasha Rasheed

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1) Introduction
2) Review of Literature
3) Methodology
4) Results
5) Discussion
6) Summary and Policy Implications
7) Reference

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1. INTRODUCTION
Food is defined as any substance taken into the body for the purpose
of providing nourishment. The food industry is the complex, global
collective of diverse businesses that together supply much of the food
energy consumed by the world population. With population around the
world concentrating in urban areas, food buying is increasingly
removed from all aspects of food production.
Food accounts for the largest share of consumer spending. Food and
food products account for about 53 per cent of the value of final
private consumption. This share is significantly higher than in
developed economies, where food and food products accounts for

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about 20 percent of consumer spending significant spending on food
and increasing out of home food consumption represent opportunities
for food retailers and food service companies(www.tata.com) to cater
their needs.
Retail, according to concise Oxford English Dictionary, is the ‘sale of

goods to the public for use or consumption rather than for resale’.
Retailing is derived from the French word ‘retailer’ meaning ‘breaking

bulk’ and breaking bulk quantities into smaller saleable units. Usually,
a retailer buys goods or products in larger quantities from
manufacturers or importers, either directly or through a wholesaler and
then sells individual items in small quantities to general public or the
end users.
This is relatively a recent development, taking place mainly over the

last 50 years. The supermarket is a defining retail element of the food
industry, where tens of thousands of products are gathered in one
location, in continuous, year round supply, Supermarkets were first
established in U.S during the 1930’s as no – frills retail stores offering
low prices. In the 1940s and 50s they became the major food
marketing channel in the U.S.: the 1950s also saw them spread
through much of Europe. Their growth is part of a trend in developed
countries toward reducing cost and simplifying marketing. In the 1960s
supermarkets began appearing in developing countries in the Middle
East, Asia, and Latin America, where they appealed to individuals who
had the necessary buying power and food storage facilities.
The world over retail has been growing rapidly with increasing
sophistication and modernization of the life style of households and
individual and with increasing globalization of trade. The retail sector
has strong backward and forward linkages with other sectors like
agriculture and industry through stimulating demand for goods and
through mass marketing, packaging ,storage and transport, Moreover,
it creates considerable direct and indirect employment in the economy.
Also the consumers have benefited in terms of wide range of products
available in a market.
The retail sector is broadly classified in to two groups, Organized and

Unorganized retail sector, the organized sector is mainly characterized
by the typically large number of retailers, greater enforcement of
taxation mechanisms and better labour law monitoring systems. It is

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not just a stocking and selling, but is more about efficient supply chain
management, developing vendor relationships, quality customer
service, efficient merchandising and timely promotional campaigns. On
the other hand the unorganized retail market is characterized by
typically small retailers, more prone to tax evasion and lack of labour
law supervision. This market is more common in developing countries.
Global Scenario:
Retail has played a major role world over in increasing their activity
across a wide range of consumer goods and services. The impact can
be seen in countries like U.S.A., U.K, Mexico, Thailand and more
recently china. Economies of countries like Singapore, Malaysia, Hong
Kong, Sri lanka and Dubai are also heavily assisted by the retail sector.
Globally, retailing is a big business; its turnover is fast marching to 6.6

trillion. The retail industry in America employs more than 22 million
people and generates more than three trillion in retail sale annually
(www.epwrf.res.in). According to the India Retail Report 2005-images-
KSA techno park ,the retail sales was found to be the highest in
developed countries like USA and UK,. Where in 85 percent of the retail
sector was constituted by organized retailing due to 100 percent
Foreign Direct Investment(FDI) and its contribution of nine percent of
GDP and more than 10 percent employment in these
countries(www.imagesretail.com/india_retail_report.htm). The share of
organized retail is more so in case of developed countries due to the
busy life schedule and lack of time for shopping, high literacy rate,
exposure to media, greater availability and penetration of variety of
consumer goods into the interiors of the country and better shopping
experience. Whereas, the share of organized retail outlets in
developing countries was very less, it was 17 percent in china and very
meager of about three persent in india because of the poor literacy
rate, lack of exposure to media, non- availability and low penetration of
consumer goods to rural areas of the country and lack of shopping
experiences.
There are many Multi National companies operating in the retail

business throughout the world. The big four champions in 2004 were
Wal-Mart, Carrefour, Home Depot and Target. Expect Carrefour, which
was hailed from France, all these top champions were from USA .The
Combined sales was $438 billion and were growing at the rate of 10

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percent per annum, there growth comes from putting small stores out
of business. This is happening in Europe and Asia . The Big Box and
Hypermarket are operating everywhere. However, Germany based
Metro is operating in 27 countries all over the world including India
(KSA Techno park).
The traditional forms of independently owned small business and co-

operative have lost significant market share in developed countries
and the retail sector in these countries is now characterized by large
multiple chains run by the powerful and sophisticated organizations. In
global, the recently existing retail formats are Hypermarkets,
Supermarkets, Mass merchandisers, Discounters, Convenience stores,
Specialty stores , Mass merchandisers, Discounters, Convenience
stores, Specialty stores and mom and pops. The evolving formats with
their dealing category of goods and the examples of the type are
shown below:
Hypermarkets-These are mainly located out of town covering an area

over 40,000 Sq.ft aim at the monthly bulk shoppers. These markets
have spacious parking lots and sell variety of products such as
electronic, clothing, durables and so on part from groceries.
Supermarkets- It mainly based on the classical self- service system.

Its area varies from 4000 to 20000 sq. ft. They mainly focus on one of
the primary conditions of grocery, household goods, personal care etc.
Mass Merchandisers- The mass merchandisers have cross country

chain operations. They offer less choice in each category: give
discounts, cheap costs and inventories at lower level.
Discounters- Aimed mainly at bargain buyers, they are different from

supermarket. They offer less choice in each category; give discounts,
cheap costs and inventories at lower level.
Convenience stores-They are located at convenient points like petrol

stations that keep open day and night and sometimes do odd jobs for
time starved customers (clothes, laundry, medicine prescription, and
pick up).They occupy a small area, usually less than 2,000 Sq.ft.
Specialty stores- These are moving towards ‘consultative shopping’

where a salesman is well trained in offering specialized advice to
customers before they purchase any commodity.

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Mom-and-Pops-Traditional formats, these are very small (less than
1000 sq.ft) and family owned corner shops.
The Indian Scenario:
Trade or retailing is the single largest component of the services sector in

terms of contribution to GDP. Its massive share of 14% is double the figure of
the next largest broad economic activity in the sector. India is the ‘second
most attractive retail destination’ globally from among thirty emergent
markets. It has made India the cause of a good deal of excitement and the
cynosure of many foreign eyes. With a contribution of 14% to the national
GDP and employing 7% of the total workforce (only agriculture employs
more) in the country, the retail industry is definitely one of the pillars of the
Indian economy1.
Growing in tandem with the economy is the Indian retail sector. The sector is
on a high growth trajectory and is expected to grow by more than 27 per
cent over the next 5 to 6 years. Retail is one of India’s largest industries,
contributing to about 10 per cent of the GDP and providing employment to 8
per cent of the nation’s workforce. Indian retail business promises to be one
of the core sectors of the Indian economy, with organised retail sector
estimated to grow by 400 per cent of its current size by 2007-08.
Income, technology and life styles of consumers are changing, even from
whom they buy are changing. The location or the place where they buy is
changing; the shops are opened closed according to the convenience of the
buyers. The buying process has changed due to Internet buying, which
brings new and better deals and also saves time. Population growth rate,
increasing literacy rate and increasing family income has an effect on
consumer spending.
Changing social attitudes towards work, home and leisure affect the retail
strategies. Political decisions relating to the environment, shopping locations

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and fair trade affect, where and how retailers can trade. Changes in
technology bring new attitudes to buying products and services and to better
organization of the supply chain.
India has the highest shop density in the world and the present retail market
in India. We are ranked second in the global retail development index out of
30 by AT Kearney. This figure shows the comparative penetration of
organized retail in India.
Com pa ri t iv e pe nit ra t io n of org a ni z e d re t a il Traditional

Organized
120%
100%
80%
60%
40%
20%
0%
US Taiwan Malaysia Thailand Indonesia China India
Evolution of Retail Market in India.
In the beginning there were only kirana stores called Mom and Pop Stores,
the friendly Neighborhood stores selling every day needs. In the 1980s
manufacturer’s retail chains like DCM, Gwalior Suiting’s, Bombay Dying,
Calico, Titan etc started making its appearance in Metros and small towns.
Multi brand retailers came into the picture in the 1990s. In the food and
FMCG sectors retailers like Food world, Subhiksha, Nilgiris are some of the
examples.
In music Segment Planet M, Music world and in books Crossword and

Fountainhead are some others. Shopping Centers began to be established
from 1995 onwards. A unique example was the -Establishment of margin free
markets in Kerala. The millennium year saw the emeregence of super
markets and hypermarkets. Now big players like Reliance, Bharti, Tatas, HLL,

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ITC are entering into the organized retail segment. The big international retail
bigwigs are waiting in the wings, as the present FDI guidelines do not allow
them to own retail outlets in the country. Walmart is testing the waters by
agreeing to provide back end and logistic support to Bharti for establishment
of retail chains with a view to study the market for future entry when the FDI
guidelines change and to establish a backbone supply chain. Table 1 shows
the different phases in the growth of organized retailing in India.
Table: 1. Journey of Organized Retail in India
Year Growth Function
2000 First Phase Entry, Growth, Expansion, Top line focus
Second
2005
Phase Range, Portfolio, Former options
End to end supply chain management, Backend operation,

2008
Third Phase Technology, Process
Fourth
2011
Phase M&A, Shakeout, Consolidation, High investment
Sour
ce: Ernst &
Young
Few of India's top retailers are:
1. Big Bazaar-Pantaloons:
Big Bazaar, a division of Pantaloon Retail (India) Ltd is already India's biggest
retailer. In the year 2003-04, it had revenue of Rs 658.31 crores & by 2010; it
is targeting revenue of Rs 8,800 Crore.
2. Food World:
Food World in India is an alliance between the RPG group in India with Dairy
Farm International of the Jardine Matheson Group.
3. Trinethra:
It is a supermarket chain that has predominant presence in the southern
state of Andhra Pradesh. Their turnover was Rs 78.8 Crore for the year 2002-
03.
4. Apna Bazaar:

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It is a Rs 140-crore consumer co-operative society with a customer base of
over 12 lakh, plans to cater to an upwardly mobile urban population.
5. Margin Free:
It is a Kerala based discount store, which is uniformly spread across 240
Margin Free franchisees in Kerala, Tamil Nadu and Karnataka. Wholesale
trading is another area, which has potential for rapid growth. German giant
Metro AG and South African Shoprite Holdings have already made headway
in this segment by setting up stores selling merchandise on a wholesale
basis in Bangalore and Mumbai respectively. These new-format cash-and-
carry stores attract large volumes from a sizeable number of retailers who do
not have to maintain relationships with multiple suppliers for all their needs.
KARNATAKA SCENARIO
The study conducted by the Rabo India finances Pvt. Ltd. says that south
Indian states of Tamilnadu. Andhra Pradesh and Karnataka have taken a read
role in establishing modern food outlets. The growth of organized retailing
has shown particular vigor in Chennai and Bangalore where an estimated 40
per cent of their grocery requirement were met through modern retail
formats. The study pointed out that media exposure; nuclear families and
emancipation of woman are some of the important demographic reasons for
the shift in the decision-making variables from price. the study also
estimated that organized food retail sector is set to expand over ten folds in
the next five years to approximately Rs. 75 billion ($1.6 billion).the estimate
was based on the assumption that 6 million household would spend Rs.
1000/ per month through organized retail.
Karnataka is one of the leading states in organized retailing in India as there

are more than ten organized retailers (firms) with more than 100 outlets
including metro AG operating in Bangalore city alone due to increasing
urbanization and expanding service sectors like software, banking, insurance
and business process outsourcing (BPO),which has taken a metropolitan city
status more recently has led to increase in income of the consumers. apart
from Bangalore ,cities such as mysore, manglore, hubli-dharwad and
belgaum in Karnataka are also growing
Rapidly in terms of urbanization, income and organized retailing with local

food markets as they converting unorganized retail outlets into organized
form because of strong demand for convenience products; and better
educated concerned about health, nutrition, food safety, and the
environment.

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As income rose and shoppers although both convenience and new tastes and
stimulation, supermarkets were able to expand the products offered. The
global economy has changed, consumer demand has shifted, and retailers
operating system today are infused with far more technology than was the
case in the past. it was observed that lot of progress have been achieved in
the food retailing in the past decade through organized food stores such as
supermarkets, discount stores, fresh product outlets, specially stores,
convenience stores and off price retailers. But still there is a lot of scope for
the food retailing. the state is experiencing rapid structural change with the
emergence of huge retail firms with massive buying power and
concomitantly concentration in the manufacturing sector. hence, an effort
was made in the state to study the entire business aspects of organized food
retailing in general and supermarkets in particular. In addition, consumers
study was also undertaken to know the factors to be considered while
purchasing their food products in food retail outlets. The specific objective of
the study was as fallows:
1. To document the supermarket existing in the study area
2.To study the organizational structure in supermarket.
3.To evaluate the investment pattern of supermarket
4.To evaluate the financial management of supermarket
5. To study the procurement management in supermarket
6.To study the inventory management and its costs
7.To study the management of processing/value addition in supermarket
8.To ascertain the methods of pricing in supermarket
9.To ascertain the constraints/problems faced by the retailer.
10.To identify the factors influencing the consumers to purchase the food
products in food supermarkets/food retail outlets.
The above said objectives are very much relevant from the viewpoint if
investors in the food retailing industry and they helps in providing best
services to the consumers at competitive prices. Although few studies were
conducted on the food retailing, there were no studies, which cover the
above aspects of food retailing business and constraints faced by the
supermarket in Karnataka.

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Limitation of the study;
The study was purely based on the data given by the owners/executives of
the food retailing companies/outlets who are generally suspicious of the
motives of any investigation because of fear of taxation and competition. In
addition, due to non-availability of time series data with respect to the
business performance indicators over a period of time, only recent year’s
data (2006-07) was used to analyse the performance. Therefore, the
investigation was confronted with various drawbacks in ascertaining the
data. in case of companies having chain of outlets/units, only one unit/outlet
data was used to assess the overall
Objectives of the study;
Hence greater care was taken to collect the data as accurately as possible.
Presentation of the study;
The entire study has been presented in seven chapters. In the first chapter,
the importance and the current status of the present study was highlighted.
The specific objectives of the study as well as limitation of the study have
also been indicated.
Chapter II deals with the review of the relevant research studies connected
with the objectives Chapter III outlines briefly the main features of the
study area and the study outlets. The nature and sources from which
relevant data have been collected and the various statistical tools and
techniques employed in the study for evaluating the objective were included.
Chapter IV is devoted to the analysis of the data through a variety of tables
into which relevant details have been compressed and summarized under
appropriate heads presented in the tables.
Chapter V provides the casual relationship between certain variables and the
outcome which they produced.
Chapter VI briefs the summary of the main along with the policy implication
that emerged from the finding of the study
Chapter VII, the final chapter list the references cited while undertaking the
research.
II REVIEW OF LITERATURE

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In this chapter, an effort has been made to critically review the literature of
the past research work relevant to the present study.since,the studies related
to food processing and food retailing in the country are relatively few, the
available literature on the related subject has been reviewed and presented
under the sections namely
2.1 documentation in food industries
2.2 organizational structure and investment pattern in agro-industries
2.3 financial management in food industries
2.4 procurement managements in food industries
2.5 inventory management and costs in food industries
2.6 processing/value addition in food retailing
2.7 factors considered and methods of price-formation in food retailing
2.8 constraints and measure to solve the problems faced by the food
retailers
2.9 factors influencing the consumers to purchase the food products in food
retail outlets.
2.1 DOCUMENTATION IN FOOD INDUSTRIES
Dudinov (1999) documented the practices of small enterprises operating in

the food sector in the USA, Germany and France with the aim if identifying
factors contributing to their success to their success that could be used in
Developing this sector in Russia.
The main types of small enterprise operating in each of these countries were
described.in the USA; these were trading companies, wholesale-retail firms,
small trading enterprises and cooperative societies. In Germany enterprises
owned by a single owner dominate; small retail enterprise account for
approximately 60% of turnover in the German food market. In France, food
retailing was dominated by “self-service”, which accounts for two thirds of
enterprises in this sector, hypermarkets and supermarkets accounted 42% of
food sales, super stores 9% and convenience stores 12%.
Nikolaou and Hughes (1999) in their study to explore the role of publicity-
financed agricultural market information services (AMIS) organization, both in
development western economies (UK, germany and USA) and in economies

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in transition (Poland, Czech republic, Romania and Russia); and, taking the
case of Bulgaria, to question whether agricultural market information
services have fully performed the functions that they were designed for. The
study reported that the price and trade liberalization have always been
regarded as essential components of reform packages implemented in
economies in transition. In agriculture, typically, has been a programme to
improve market information through establishing AMIS.form an economic
perspective, the importance of AMIS relates to their function in augmenting
market integration through improving transparency in agricultural markets.
Frick and groenewald (1999) opined that the necessary data on agriculture
must be available for public and private decision –makers in the agricultural
sector to use agricultural information for decision-making, solve problems or
increase their knowledge. As a result of the supply of these data decreased.
also, the needs for data on agriculture of the various decision-making i.e. the
farmers and extension officers, changed .since information system are based
on the needs of the decision-makers, the need for data agriculture should be
determined before either existing methodology are improved or new
methodologies are introduced to increase the supply of data on agriculture in
south Africa.
Atkinson et al (2000) reported that the formulation of information and

communication management strategies would facilitates the development of
small-scale food processing enterprises in African, Caribbean and pacific
countries. The specific aim was to conduct critical reviews of the small-scale
food processing sector in Mozambique, South Africa and Zambia which would
highlight constraints relating to information and communication
management issues. The report notes that improving the flow of information
to small-scale food processors is crucial to their future success. The main
generic recommendations were:(1) development of a regional network for
information exchange;(2) establishment and development of business
support centres ; and (3) development of an information support system foe
small-scale food processing enterprises at the national level.
Virichev (2000) reported that in an attempt to stabilize the food market and
price, the Moscow administration set up a city reserve of basic commodities
and an ordering system for fruit and vegetables. In 1999, purchase included
680 000 tons of meat and meat products, 500 000 tons of sugar, 1 200 000
tons of grain, and large quantities of other essentials, enough to ensure
supplies foe Moscow. The supplies were funned from the budget, there were
additional non-budget sources, and interregional cooperation was actively

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pursued. Nevertheless, the national financial crisis and the drop in some
areas subsequently put considerable pressure on the system, compounded
by the sharp increase in imported foods, which in turn further depressed
domestic agricultural production. A major problem in prices and prevented
the establishment of a price-monitoring system. Appreciating that the key to
a stable food supply is support for domestic growers, it was proposed that by
2010 a total of 25 wholesale food markets (WFM), with the necessary
infrastructure, should be set in 2 stages, some based on existing sites, some
new. An information programme formed an important component of the
programme. Consideration designed to safeguard the operations of the WFM.
Perkins (2001) reviewed the state of the retail grocery market in Europe in
(2001). It comments that although the food retailing sectors was falling as a
percentage of overall retail sales across Europe, this was
Because of greater amounts of income being spent on non-essential services

and goods. It also reflects on previous assertions that the arrival of wal-mart
in Europe would begin a wave of consolidation. It goes on to discuss the
mergers that have taken place recently and also the other types of joint
ventures and alliances that have emerged. It views wal-mart as a potential
predator in the major European markets.
Lindgreen et al (2004) examined the extent to which companies in the Dutch

food retailing sector were using the World Wide Web and its associated
technology to conduct their business. It analysed the commercial web sites
of Dutch food retail companies (numbering 34 in all) to determine which
commerce processes were being supported online in this sector. The results
of the research provided insights to academics on the adoption of electronic
commerce in a particular industry sector and to food retail managers on their
competitor’s usage of the World Wide Web. The findings show that, generally
support for electronic commerce processes a sub –processes was merely
16% of the considered sample. Most retailers used internet only as a medium
of communication. Although others have set up commercial web sites that
provide higher customer support. Several sub –processes appear to be
supported such as core logistics, online customization possible in the
process. A high correlation was observed between search, valuation, and
authentication on the one hand and support for online payment on the other
hand. Lastly, there was no signification difference between regional/national
retailers or firm size, especially for the search and d valuation processes.

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Anders (2005) reported that due to increasing concentration and a rapidly
changing competitive environment in many food markets, it was expected
that farmers and processors suffer from the exertion of retail markets power.
This might be the case particularly on those regional markets where small-
scale marketing structures dominate. Given this background, this study
analysed the simulation exertion of retailers the German meat market. Based
on the production –theory approach proposed by gohin and guyomard
(journal of agricultural economics (2000) 51(2), 181-195) the modal
parameterized the retail industry’s oligopoly and oligopsonu equilibrium.
Standard market power measures like Lerner indexes were computed, and
selected elasticity’s of factor supply and industry demand were provided.
Results suggested that the hypothesis of perfect competition and price-
taking behaviour clearly has to be rejected upstream and downstream
market power in regional meat marketing is limited.
Eastwood et al (2005) study revealed that successful food retailing depends

to a significant degree on providing a positive shopping environment for
consumers. The SERVQUAL format was one way of gathering information
about shopper’s ideal and actual rating of an outlet’s characteristics.
Implementation of the identity strengths and weaknesses with respect to
patron’s evaluations of outlet characteristics. Six green groceries were
selected to reflect the diversity of outlets in Tennessee, and a survey of 1118
consumers in the selected outlets was conducted in the spring of 2000.
Results indicated that the consumer ratings vary by feature group for ideal,
actual, and actual minus ideal subgroup scores. The information could be
used to generate better store-specific strategies to meet consumer
expectations.
2.2 ORGANIZATIONAL STRUCTURE AND INVESTMENT PATTERN IN AGRO-

INDUSTIES
Muralidharan (1981) compared the establishment costs of three processing

units namely sugar, gur and khandsari units in mandya distinct of Karnataka.
He found that establishment cost of the three units to be in the order of rs 4,
40, 28,322.03 lakhs for sugar
Srinivasan (1997) studied the organisation and managements effectiveness’

of regulated market committee; he observed more or less uniform
organisation structure of regulated markets in Tamil nade, in thirukoilur
regulated market alone the post of junior superintend existed. However the

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number of posts in each cadre and the number of posts filled up varies with
the quantum of arrivals.
Ramdev (1998) observed the management appraisal of cashew processing

industry in uttara Kannada district of Karnataka.He found the line
organization type of structure in cashew processing industry, which is sample
and clear cut responsibility and authority with fast and easy feed back from
the employees. the discipline among employee maintained easily and
effectively, similarly their salary expenditure increased with increase in size
of the unit.
Efermenko (2000) presented an overview of the main aspects of

organizational structure that currently exist in the belarussian agricultural
sector. Prospects for the development of new organizational and legal forms
of commercial enterprises in the agricultural sector were considered, taking
into account the impacts of the new civil code of the republic of Belarus. It
was suggested that a new structure for “agribusiness” could gradually be
established, and this would embrace a whole range of ownership and
management types, including corporations (open and closed joint stock
companies, and limited liability companies),partnership, cooperatives
(production and consumer) and individual ownership (unitary enterprise, and
daughter or subordinate companies).
Mane rahul rajaram (2000 a) observed that both small and large starch units
followed the line organization type of structure because of less number of
actives and high investments in these industries, this is also easy to develop
a sense of belonging to the organization, communication is fast easy and
feedback from the employees can be easily obtained and immediate
corrective measures can be applied.
Ushachev (2000) reported that the crisis in the agro-industrial complex (AIC)
was attributed to a large extent to the absence of control of the
socioeconomic process occurring in it due to several reasons: the
organizational structure of the AIC had allowed to disintegrate; many of the
states control functions have split among numerous ministries and
departments; and relevant officials were unprepared for the conditions of
market economy. The strategy of the measures required to rectify the
situation involved: formulation of clear-cut objectives; step-by-step planning
of the control system; and a time scale to ensure the measures are carried
out. Practical implementation of this programme was discussed with specific

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proposal, including: establishment of a government council to coordinate and
develop the AIC; elimination of all forms of duplication among departments
responsible for inter- and intradepartmental agricultural questions;
estalbishment of an official agency for state property within the AIC system,
at both regional and federal levels; strengthening of regional administrative
organizations; gradual conversion of integrated, joint-stock type structure to
cooperative forms; and development of a special federal programme for a
single AIC management system.
Lzvekov (2000) observed the switch from a centralized to a market economy

in Russia has led to a change in the structure of the food distribution network
and the rise of the wholesaler as the link between producer and retailer. An
analysis was made of the wholesaler as the link between producer and
retailer. An analysis was made of the wholesaler sector, with particular
reference to its role in shaping the operating system employed with regard to
Russian conditions, the organizational structure and management system of
the MERKA fruit and vegetable company, it had a 2-tier structure: one
embraces the commercial director, the chief engineer and accounts
department, while the other operators the commercial trading operation. Its
modus operandi was said to permit it to unsercut its rival’s prices by 10-15%,
not least by operating through regular foreign importers, an important factor
in view of the current import levels of 80% of all fruits and vegetables.
Kozachuk (2001) reported that any management practices existing in

Russian enterprises were inappropriate for operating in market conditions.
There was a clear nee for management functions to be extended, and for
new methods and approaches to management that are suitable for different
ownership types to be developed. The process of managing a trading
enterprise should be based on market principles and modern management
methodologies. Key ideas in western management theory were considered,
and used as the basis for different models of organizational structure in
trading enterprises. These models include: the functional area; the divisional
structure, where positions are grouped by similarity of products or services;
and hybrid structures, which incorporate elements of both functional and
divisional structures. Different management styles were also considered.
Specifically the directive and democratic styles. It was stressed that the
choice of management style influenced by the economic situation and
functional characteristics of any given trading enterprise.
Hasert (2001) conducted an analysis of the competitiveness of milk

production, considering the unique condition of the eastern provinces of

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Germany. Based on experiences and comparing statistical data of the
territory, key factors for profit were concentration, specialization and strict
management of expenditures. Author suggested the optimal farm size to be
300-600 cows per farm. According to the income and of the specific inputs,
the profitability threshold was 7000 kg/cows. The precondition for successful
economical functioning was a management which was professional, had
strict management of expenditures and was highly motivated. In this
organizational structure, there was a chance and the potential of profitable
milk production based on employed workers , and was competitive to
farming systems based on family ownership.
Wilson and Thompson (2003) analysed the organizational structure of the

fresh produce industry in the western USA, Florida, and Mexico, operates in a
competitive environment. It used the data obtained fro interviews with 83
grower-shippers in 1995-96 traditional views and models of perishable food
suppliers fail to capture the fundamental role of time integration in firm-level
organization. A two-phase research design of major grower (shipper firms of
lettuce, tomatoes, and melons) reveals a diverse distribution of firms across
the time integration continuum. Most firms used more than one
macroclimate to extend product availability. Decision makers were
encouraged to understand the implicational of these temporally integrated
organizations on agricultural and trade policy.
Feher (2004) focused on efforts to reform the government structures, in

particular the ministries of agriculture, in the transition countries of central
and Eastern Europe In light of their EU accession. To guide the necessary
reforms in the public sector, several governments adopted a medium-term
strategy for public sector reforms. An integral part of the strategy was
functional analysis that would help to re-orient ministries of agriculture to
carry out their policy, regulatory and service delivery responsibililities cost-
effectively, with full transparency to the government, and with sensitivity
and courtesy to the public. The study makes comprehensive
recommendations for the abolition, rationalization, privatization and transfer
of functions on how remaining and new functions could be structured in
effective organizational units for both the medium and long term. The
benefits and implementation, and strengthen the accountability of subsidiary
institutions.
2.3 FINANCIAL MANAGEMENT IN FOOD INDUSTRIES

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Mohammed Ali (1992) used financial ratios to analyze, the performance of
fruits and vegetables processing units under private and public sector. The
study revealed that the solvency position of the private sector was found to
be lower, but for public sector it was high. The liquidity ratios in general have
revealed that the private sector unit is better position than public sector. The
profitability ratios have indicated the more eficient utilization of fixed assets
as well as owned funds by private sector unit. The turns over ratios were low
in case of public sector unit when compared to private sector unit.
Arora and zebul nisha (1996) in their study on rural food processing in
Rampur district of UP concluded that even with a low Laval of operation rural
food processing complexes are making profits. Their annual net returns,
operating profit to revenue ratio, net profit to revenue ratio, operating ratio
and operating efficiency are 23.70, 25.03, 41.81, 34.49 and 58.18,
respectively. The working capital employed and interest coverage ratios of
51.16, 68.38, 57.01 and 5.90, respectively, proves their financial soundness.
Devaraja (2000) study examined the performance of the horticultural

producer’s cooperative marketing and processing society limited in
Karnataka, India, during the period 1958/59-1995/96.
Physical and financial indicators of performance such as membership, retail

outlets, share capital, owned funds, total assets, long-term investments,
fixed assets, working capital, total liabilities, and sales, were Analysed.
Results show that there were substantial increases both in physical and
financial indicators over the period of study.
Mane rahul rajaram (2000 b) reported that the larger unit were more
efficient than the small unit. It may be because of economies of scale in
operation and management. Solvency position of large unit was somewhat
less sound but well within the acceptable norms. Both units were having
good financial strength.
Marton (2000) analysed the extent of foreign involvement in the Hungarian

food industry financial and economic characteristics of large companies with
majority foreign ownership operating in this sector. It was found that the
foreign-owned companies accounted for 51.7% of total sales in the
Hungarian food industry in 1997, compared with 23.7% in the United
Kingdom and just 7.7% in Finland. Of the ten companies operating in the
Hungarian food and tobacco sector (ranked by turnover). Only one, babolna

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RT, was 100% foreign-owned (namely cereol art unilever kits (food division),
coca-cola amatol kite, nestle hungaria kits, and egri dohanygyr kft).
Khan et al(2001) study assessed the costs,returns, and profitability of meat

retailing in peshawar,pakistan,using primary data collected in the beginning
of year 2000 from 80 meat retailers through a pre-tested interview schedule.
Analysis of the data shows that the total costs per month amounts to rs 130
763.74 meat retailing is a profitable enterprise, with net revenue per month
amounting to rs 8613.66.
Konieczka (2002) reported the profitability,liquidity,the level of debt and

efficiency data for a number of small (assets up to 20 million zloty), medium
(20-40 mil zloty) and large (over 40.0 mil zloty) polish sugar companies were
analysed for the period 1996-2000 in order to establish potential advantages
or industry restructuring. The results revealed generally weakening financial
indicators for the smallest companies, suggesting that restructuring in favour
of large sugar concerns with stronger market representation and lower unit
costs would bring economic advantages.
Gustafson (2003) study revealed that in Fargo, USA on an average, both food
manufacturing and food retailing small businesses had positive financial
characteristics.although, they were only marginally profitable and liquid, they
were highly solvent,accounts receivable and inventory comprise nearly half
of food manufactures total assets and a third of food retailers assets. By
most financial measures, food retailers were statistically smaller than food
manufactures. Both food manufacturers and food retailers utilized
computers, primarily for accounting/book keeping inventory management
and administration. Primary financial services used were for transactions and
trade credit. Nearly three-fourths of food manufacturing and one half of food
retiling supply purchases involve trade credit from a large number of trade
credit suppliers, on average. Both firm types have higher credit risks and
were tardy with repayment of trade credit
2.4 procurement management in food industries Natarajan (1990) observed

that the major cost in milk production was cattel feed (20%) he suggested
that agricultural price commission in consultation with economic ministries
and planning commission to recommend, from time to time to the
procurement and support prices of milk and milk products as done for other
performance of dairy co-operative societies (DCS), four factors were
important viz,,high milk utilization, better milk marketing, distribution of

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cattle feed and credit for buying and technical assistance to milk producers
through co-operatives.
Balasubramanian and prema (1996) in their study on processing and trading

of cashew nuts in India observed that the total processing and raw material
costs accounted for about 70%,labour charges 10.5% purchase taxes 5%
freight and handling charges 5%,packing cost 4.5% and remaining 5% was
contributed by costs of power,fuel,depreciation and overheads all put
together.
Bouvier-parton-p (1998) in his study on contractual forms between retailers

and their suppiers in the food sector reported that vertical inregration and
contractual relations are the two main features of the French food-retailing
sector. The economic weight of these is more or less similar. However, in the
long run it seems that (a) the contractual side is more important than the
integrated one and that (b) contractual forms related to high quality tend
now to be dominant.
Woods ET at (2000) examined the supply chain concept for horticultural

products which were characterized by pershability. Heterogeneity and lags in
production response to market signals, producer’s profit are vulnerable to
quantity, timing of supply and product specification. Many supply chains in
smaller industries were loose. Fragmented, interwoven, unstable and unique.
Hence, he suggested the firms operating in within these environments needs
an astute understanding of the chains, the hierarchy of channel members
and their relative position. Effective business strategies for individual firms
and supply chains need to be developed and redeveloped to accommodate
the dynamic nature of horticulture.
Lehtinen et al (2002) in their study on contract manufacturing in Finnish

food industy,found that in the future,direct deliveries from the contract
manufacturer to retail stores will increase, the delivery times will shorten and
thus, more flexibility is needed from the contact manufacturer.
Weindlmaier et al (2002) conducted a survey in the Bavarian (germany) food

industry (with 153 respondents) the study shows that from the point of view
of the processors, in the near quality management system in agricultural
firm might be a pre-requisite to deliver raw materials to the food industry.
Linggreen and hinley (2003) discussed the measures taken by tesco Food
Company in setting up effective guidelines for managing its relationship with
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neat suppliers. These guidelines for managing its relationship with neat
suppliers. These quidelines make it possible for Serious food scares and to
address consumers concern over animal welfare and environment issues
specific initiatives include different animals, feeds and medicinal policies and
schemes have been implemented by both tesco and the meat suppliers. The
benefits of tesco’s approach to its suppliers and consumers are considered
and included the ability to deliver higher value products.
Narayan reddy (2004) in his study reported that most (61%) of the retailers
get their requirements from wholesalers 15% from the large and other
retailers. Over 17% of the selected retailers get their goods from more than
one source, but a small percentage of retailers get some of their
requirements from producers. From the side of the terms of supply 67% of
retailers get their requirements by paying cash. Only 13% of the retailers get
their requirements on credit and 19% credit partly from the suppliers. Apart
from this, the study also shows that the organized retailers/hyper malls and
super markets get wholesales margin plus concession as they buy in bulk
and are also the producers.
Anonymous (2006) reported that in USA food retailing,labor was the largest
single marketting cost,accounting for half the industry,labour was the largest
single marketting cost,accounting foe half the industry’s expenses beyond
the farm.food retailers employ more than 3.5 million workers.the industry’s
next highest costs were for packaging (8.0 percent) and transportation and
energy ( a combined 7.5 percent).recent trends such as high energy costs
and the rising demand for more convenient packaging have increased all
these expenses.
2.5 INVENTORY MANAGEMENT AND ITS COSTS IN FOOD INDUSTRIES
Blayney and weimer (1991) analysed four general alternatives to the current
US dairy programme each with the objective of avoiding large milk surpluses
were studied by USDA these were (1) a target price/deficiency payment
programme; (2) a reclassification plan commonly called the class IV plan (3)
two-tier pricing; and (4) milk marketing diversion using a rating farm receipts
retail value and government cost it was concluded that the current
programme measured up well against the option stusied.although the
current programme did not guarantee producers a profit it provided the
market signals individuals need to make decisions and acted as a price floor
to stabilize downswings in prices .

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Farsad and lebruto (1993) reported that the consequences of overstocking
items or unserstocking were undesirable.overstocks absorb money and invite
waste. Under stocks risk disappointing customers with unavailable menu
items or add to food coats by requiring emergency runs to the cash and
carry through analysis of daily item use and an application of risk, managers
could calculate when to reorder that is when there is sufficient stock to cover
typical demand until the next delivery to account for unexpected demand
some safety stock must be included (by calculating the standard deviation of
each day’s use for the past time period say a week and factoring that with
the Z score of the sevice-level probability that management Is willing to
absorb) by factoring the lead time ( delivery and food prep) the standard
deviation of the usage and the acceptable probability of a stock out
managers can use a formula to determine precisely when to reorder. That foe
every one unit increases in inventory turnover. Market capitalization
increased by $479 million in the FAFH over the analyst period. Thus the
equality capital market places a premium on the efficient management of
inventors in the food system and rewards those firms that develop adopt and
implement supply chain technologies
Nein pichu and shiwen (2004) reported that as computes are more and more
widely used in livestock production and farmers manufacturing their own
feeds were growing more popular in Taiwan. This study was conducted to
design a package which included simple feed formulation and ingredient
inventory management to meet the farmer’s needs and to provide then with
a more effective management regime of the feeds ingredients. This system
was written in Microsoft visual basic 6.0 programming language and
Microsoft access database. The system was divided into four modules in
terms of printing report. The inventory management system could facilitate
the manages in monitoring the inventory to make the most effective
adjustment and usage of the ingredient. The managers could, therefore load
their ingredient costs. This system could be executed on windows operating
system and enable the farmers to consider shares livestock growth condition
to make it as a calculation tool to formulate animal feeds rapidly.

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2.6 PROCESSING / VALUE ADDITION IN FOOD RETAILING
Singh ET all (1994) Ina study on economics of marketing and processing of
pulses in Banda district (uttar Pradesh) observed that per quintal cost of
processing of arhar. Gramm and lentil was rs. 831.67 rs .823 and rs 752.05
respectively.
Kutz and boland (2000) study ravelled that us premium beef it’s a
cooperative partnership between all segments of the beef industry value
chain was affording each segment on interest in the key stages of beef
production and processing as well as equal share of the financial risks and
rewards. This value added strategy was accomplished through vertical
integration and adding equality based pricing structured to more closely link
beef producers and consumers.
Berverland (2001) analyzed the level of brand awareness within the new
Zealand market for ZESPRI kiwi fruit, the effectiveness of this branding
strategy employed by kiwi fruit new Zealand since it created value of this
fruit. And the implications of this findings for agribusiness in general using
the data collected from surveys if kiwi fruit consumers (n=1060 outside three
major super market chains in Auckland. New Zealand the results suggested
that the level of brand awareness for ZESPRI is low among consumers. it is
indicated that brand awareness could be increased through a relationship
marketing programming involving targeted marketing and supply chain
management.
Mahesh and nagaraja (2002) reported that the value addition of cashew
(anacardium occidentale) kernel baby bits (CKBB) was attempted by coating
with cane sugar, honey and salt. Optimum casting at 100 degrees c for 5 min
at 70% concentration for cane sigar and honey. And 5% for salt. Sweetened
(70%) and vanillin (0.1%) flavoured CKBB are the most preferred. de fatting
of CKBB enhances the per cent caiting. cating or cashew kernels of grades
with cane sugar at 70% is dependant on the surface area. Cashew apple

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juice could be coated on the CKBB. Acceptabity of cashew apple juice coated
baby bits (bb) improves with the addition of cane sugar at 70%
concentration. Permitted colours and acne sugar compete with each other
during caiting.
Madhrai and kamini Devi (2003) found that in watermelon, the rind
constituted 33% of the whole fruit weight. Value added preserved products
like pickles. Tuttti fruity. Vadiyams and cheese were prepared using the white
portin of watermelon rind. The quality of production in terms of physical
parameters was evaluated. All production was subjected to sensory
evaluation test using a panel of 20 judges. Results showed that mean
sensory scores for attributes were high. There was no change in mean scores
after one month storage.
Santhosh kumat et al (2003) in examines the Indian research efforts in
vegetables crops, new niches for vegetables production, and the impact of
pest management research it was indicated that the ongoing research
programmes on vegetables addressing may emerging challenges. There is a
wide scope for innovative improve net and a sharper focus on vegetables
processing, value addition and quality control.
Subasinghe (2003) studied the different innovations used by food processors
to add value to aquaculture products such as shrimps. In order to survive in
highly competitive market environment. Some of these innovations were
focused on the packaging and presentation of the shrimps, whereas others
focused on pre-processing/ processing. Such as peeling, preparation of
breaded products, application of batters and production of other shrimp
based products.
Arora et al (2004) found that vegetables washing are an important primary

process unit operation for value addition of the produce at farm level.
Washing is used not only to remove field soil, dust, pesticides, but also the
surface microbial load. Carrots, potatoes and spinach were washed
mechanically in a rotary vegetable washing machine at varying speed and
time and then evaluated for their quality. The microbiological washing
efficiency. Which is calculated by observing the total viable count of the
surface of the vegetable before and after washing ranged between 96.5-
99.8% as compared to recommended 80% indicating the adequacy of the
vegetable washing machine?
Kaveri and bindhu (2004) showed the effect of substituting 50% of the pulse
fraction of 10 Indian recipes (adai, pessarattu, plain dosai, masal vadi,
seeyam, and my sore bonda, kandharappam, dhokla, maladu and moong

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dhal halwa) with whole or defatted soyabean flour on quality and nutritive.
The results showed that all recipes substituted contents than traditional and
defatted soyabean flour-substituted recipes. Calcium,
Phosphorus, iron and protein contents were higher in substituted than

traditional recipes. The flavour taste and degree of liking of whole soyabean
floured- substituted and traditional recipes were almost similar,. It was
conclude that whole soyagean floured could be included in the daily diet by
incorporating in recipes at 50% level
Ramakrishnaih et al (2004) attempted to study the technology package
devolvement to retrieve the cotyledon from the dhal mill b products contains
about 50% cotyledon material amounting to one million tone and also
refining the same to an acceptable/ desired level. The technology consists of
de sronnnig size separation. And air classification followed by refining and
thermal stabilization of edible material. About 30-35% of the cotyledon
material was recovered form the by products from the commercial dhal mills
and used in the preparation of traditional piles based products. It could be
substituted in the based products such as vada, rasm/ sambar and papds up
to about 50%. Adoption of this technology by dhal millers in the county
would results in the recovery of about 5 lakh tones of cotyledon material
valued at rs 500, which could contributes to the econoes enlistment of the
industry.
2.8 FACTORS CONSIDERD AND METHODS OF PRICE FORMATION IN FOOD
RETAILING
Gautham battacharya and Simons (199) study revealed that the persistence
of low quality was explained with rational strategic behavoiur of producers
and consumers of experience goods in informs; markets, where quality was
revelled after purchase, price was determined by bargaining and
renegotiating of price does not necessarily follow after quality is improved by
the seller. Starting from a given contract between a buyer and a seller at a
given price that has been reached through costly bargaining , assume that
after the existing quality was revealed the seller corns across a project
(possibly adaptation of better technology), which will enhanced existing
quality . If the project is efficient. It will always be adopted by any formal
market structure.
Rosecky and king (2000) said that the accepted economic theory suggests
the prices of commonly available products in competitive markets are likely
to be approximately the are. If monopoly prices can be extracted the
resulting profits attract competitors into the market. In his study. He his

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study, he examined the prevailing prices in detail for a large number of
commonly available supermarket products in France, the United Kingdom,
and the USA. The results of this study show that some products have very
similar or the same prices and other products have different pricing pattern.
Santiago et al (2000) conducted a pilot sample survey in 1997 to study the
structural features of the foodstuff wholesale market in ao Paulo city, Brazil.
The usual pricing process in this market was simply achieved by adding a
mark-up to the costs. However me wholesalers obtain price information from
other wholesaler. Specialty those established far from the main wholesaler
areas. Wholesale are used to buying products from farmers (particularly no
0manufactured foodstuffs like potato onion and eggs) from jobbers or other
wholesalers [malze and garlic] from the jobbers and industries (rice) from
industries and other wholesalers (beans, meat, sugar, coffee and wheat
flour) most wholesalers sell to retailers, but some also sell to other
wholesalers sell to retailers but some also sell to other, wholesalers, to
restaurants to industries and even to consumers, Todorova (2000) presented
a method of price determined, which was based on comparisons of prices,
technical and trade parameters of competarive products in the case of
greenhouse tomatoes from Bulgaria and turkey. The price of Bulgarian
greenhouse tomatoes was determined to be 2.65 leva i.e. 32% higher than
that of the Turkish ones.
Hermann et al (2001) explained theoretical aspects of pricing and consumer
behaviour and to analyse them with reference to group of breakfast
products, using germen data from September 1996 to June 1999. The results
indicated major significance of special offers. On average, out of 20 groups of
foods, one product in each group was offered data discount every two weeks.
Special offers had very marked effects on sales which in some cases rose by
274% demand was greatest for products with a long storage life, such as
coffee. It apparels likely that consumers bought some items only during
special offer periods. There was very strong consumer reaction to price
changes for jams and breakfast cereals. An active pricing policy thus
represents central marketing instruments in food retailing; this was
consistent with strong consumer reaction to price changes. It does not
confirm the textbook statement that price elasticity of demand for food
products is low. It does however,
Diverge between types of retail outlet and product types, nevertheless
consumer reaction was very strong.
Ramadhani (2002) study suggests that there was a substantial amount of
trading and consumption of the fruits in both rural and urban areas of
Zimbabwe. The, marketing system was characterized by lack of production’s

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s all fruits were collected and retailer but few wholesalers. There were
numerous collectors and retailers but few wholesalers. There was also no
sophisticated product differentiation. There was a lack of an adequate price
formation mechanism as prices were based on information from neighbours,
knowledge of previous seasons and total cost incurred by traders.
Tu chihching and connor’s (2002) Newark was one of the two price
concentration studies of US grocery retailing that has failed to find a
positive relationship. They examined four possible sources of experimental
error in this study, based on a sample of US metropolitan areas in 1987-88.
The most important sources of error were the failure to exclude non
competing grocery retailers in the construction of the concentration
measure. The relationship was also sensitive data sources, and functional
form. When these changes were made, concentration was found to be
positively was significant despite a small non-random sample of cities and
unscientifically sampled prices.
Buzas (2003) paper presents the results of price analyses done in the course
of food retail activity investigation.he viewed from a theoretical-economic
approach, the consumer price contains the costs of production, processing
and trading as well as the profit share related to these activities. In practice,
particularly in the food sector, this kind of linear accumulation has rarely
succeeded. In the case of foods due to a decrease in consumption and
vertical competition, not only the profit share, but often some of the costs
could not be made good in the selling price. This failure has an impact on
agriculture producers and the food industry whereas in commerce price there
are diverse practices in use from the simple mark-up pricing method to the
complex marketing strategies based price-forming
Bacchi and alves (2004) analysed the price formation process of retail crystal
sugar in the centre-southern region of Brazil, considering the different
segments of its commercialization chain. The analysis as carried out over the
may 1998-december 2002 period. Result indicated that producer and retail
prices of crystal sugar have expensive relations in the short and long run.
Income was not proven very important in the explanation of the crystal sugar
price in the retail market. This was expected due to the small share of the
product in the expenses of families.
Herrmann and moser (2004) examined how far psychological pricing plays a
role in grocery retailing and whether it contributes to price rigidity of
branded foods in Germany. The empirical analysis was based on scanner
data of weekly prices for 20 branded foods across 38 stores in Germany for
144 weeks in the period 1996-99. The analysis shows that psychological
pricing points were extremely important in German food retailing; prices

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ending at digit 9 were by far the most important. Moreover, there was often
a strong concentration in pricing on only a few psychological prices. The
analysis also shows that psychological pricing seems to be one major
determinant of price rigidity in German grocery retailing. Prices of branded
foods were surprisingly sticky given the high variability of agricultural
commodity prices in food retailing. Apparently, prices do not change much
(apart from sales) and if they do, they tend to move from one psychological
price to the next.
Mclaughlin (2004) in his study explained the major factors that contributes to
the complicated price formation process,as several levels of fresh fruit and
vegetables in the US were marketing channels,market structure
changes,pricing techniques and promotional impacts, retail responses to
supply changes, and price versus value
Carman and sexton (2005) study analysed the retail milk pricing by
supermarkets and marketing margin behaviour for four fluid milk products in
nice large metropolitan market in the western United States. Multiple
empirical approaches are utilized to investigate retailer pricing behaviour,
and on balance, these methods provide significant evidence of non-
competitive price behaviour in each of the markets. Correlations of retail
price changes indicate considerable pricing independence among retailers
across cities, while rankings of retail prices by milk product provide across
cities, while ranking of retail prices by milk product provide significant
evidence that price were not based primarily on costs,
As would be true if pricing were competitive =. Estimated retail price
responses to farm price changes are consistent with monopoly pricing
behaviour for several of the milk products in several of the markets.
2.8 CONSTRAINTS AND MEASURES TO SOLVE THE PROBLEMS FACED BY THE

FOOD RETAILERS
Cannor et al (1999) reviewed the economic literature on empirical studies of
competition in the US food-retailing industry, with special attention to a few
studies that attempt to cope with new forms of horizontal and vertical
competition. With the end of the supermarket revolution in the 1970’s new
forms of horizontal, vertical and geographic competition have appeared to
challenge the supremacy of the supermarket format. New retail formats like
warehouse stores, super centres, and fast-food outlets appear to affect local
retail supermarket prices slotting allowances, coupons, and electronic data
gathering have intensified retailer-manufacturer rivalry. Foreign direct

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investment offers the promise of new European style management style in
US grocery retailing.
Anonymous (2000) found that the US food retailing industry has undergo
unprecedented consolidation and structural change in recent years. Large
retailers have purchased almost 3500 supermarkets since 1996 representing
annual grocery store sales of more than $67/thin/000 million. The nationwide
share of sales for the four largest retailers increased from nearly 16% in 1992
to almost 29% in 1998. Widespread consolidation in the grocery industry
could have implication for consumers and food market suppliers such as
grower-shippers and wholesalers. Some consumer’s fear that fewer food
retailers will eventually mean higher grocery prices and less variety.
Suppliers worry those fewer but larger buyers could force lower for products
and services that food retailers purchase. Retailers were likely to continue
consolidating in order to maintain profitability as competition for the
consumer food dollar increase.
Rudolph et al (2000) in their study suggested that the food retailers risk a
loss of image or even a loss of the customer if they do not learn to react
effectively to failures and improve their service strategy.
Aalto setala (2002) examined the empirical relationship between economies
of scale, concentration and industry-wide concentration (which can be
interpreted as multimarket contact) was taken into account in the evaluation
of grocery retail competitiveness. Data were obtained from observation from
1994, 1995 and 1997. The results show that the main factor affecting market
power was the size of the retail firm. Larger share grocery retailers, fro both
the local and the national markets, carried higher mark-ups. At the same
time, no firm-level scale economics were found from these larger firms. He
concluded from these findings that the main purpose of large grocery retail
mergers was to gain market power not efficiently.
Nageshwar rao and bramhanandan (2003) in their study on problems of
retail trades in Guntur district of andra Pradesh found that increasing salary,
other incentives and working hours were major problems from the
employees side rent on building was a problem of retail trades (62%) since
they were facing many problems from the building owner side like high rent,
frequent repair and demand for more good-will. Apart from these retailers
(44%) also had faced many problems on media like high rates, inadequate
information and coverage of area and timing problems.
Fischer (2004) examined the problems involved in the management of
international marketing activities of food products from the company
perspective. It indicated that the major obstacles encountered in the

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management of international marketing were higher transaction coasts and
risks relative to home market business activities more specifically, for food
products there were 6 main problem areas, which arise from the literature
skills and knowledge of foreign business partners mentally); trade fair
activities; special food product logistics and marketing problems; trade
terms, export documentation and billing, and foreign exchange risk
management; provision of foreign market information and government
assistance. Results from a questionnaire-based survey of companies from
germany ( in November 1998) and Australia (in July 1999) engaging in
exporting and/or importing of food products suggested that staff education
or trailing and logistics were the most important factors affecting success in
international markets. Implication of this study were
Those agribusinesses must give special attention to staff recruitment and
training and to the mastering of food product logistics if they want to
compete successfully internationality.
Muller et al (2004) study revealed that the different meanings of quality for
the products insufficient technical resources, badly coordinated working
processes and low consumer demand for organic products were identified as
weaknesses of the supply chain systems in germany, Switzerland and in
Netherlands. Many of the success factors for improving quality, such as a
common gaol and control of the participants, intensive communication,
exchange of knowledge and information and an informal leader of the chain
were also characteristics for network structures in general. In Switzerland,
success of the system in place was based both on a clear position of the food
retailing sector as an informal leader and on structures that encourage trust
and ensure a stable balance of power between actors. In the nether land, in
turn, the traditionally professional production and the general preferences for
personal contacts and dialogue as the specific advantages of the existing
structures.
2.9 FACTORS INFLUENCING THE CONSUMERS TO PURCHASE THE FOOD

PRODUCTS IN FOOD RETAIL OUTLETS
Recess (1992) in his study revealed that factors influencing the consumer’s
choice of food are complex, and must be added to variables such as
flavor,texture,appearance,advertising etc. demographic and Household role
changes and the introduction of microwave Owens have produced changes in
eating habits a reduction in traditional cooking. Fragmentation of family
means and an increase in ‘snacking’. The vigorous sale of chilled and other
prepared foods is related to the large numbers of working wives and single

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people, who require and value conveniences developments in retailing with
concentration of 80% of food sales in supermarkets, is also important..
consumers are responding to messages about safety and healthy eating
they are concerned about the way in which food is produced and want safe,
‘natural’, high quality food at an appropriate price.
Kainth (1994) in his study on “consumption of apples: consumer’s towards

view pattern and determinants” used ranking techniques to understand
consumer preference for apples in different income groups. He also used
linear multi-variety regression to analyse the factors affecting apple
consumption.
Ragavan (1994) reported that quality, regular availability, price, accuracy in
weighing and billing, range of vegetables and accessibility as the factors in
the order of importance which had influenced purchase of vegetables by
respondents from modern retail outlet.
Sundar (1997) study revealed that the grocery department of sarevana bava
cooperative supermarket, cuddalore was enjoying favourable images of
consumers in the attributes such as equality of price, behaviour of sales
persons, moving space, location, correctness of weight,
Packing of goods, number of sales persons and convenient shopping hours.
At the same time, the image is weak in the attributes such as quality of
goods, availability of range of products, variety of goods acceptance of
returns, credit facility, and door delivery and in sales promotional measures.
Devil et al (2003) conducted a study on means-end-chain analysis of the
food sector and explored the extent to which the findings made can be used
to inform the retail positioning strategy of food retailers in the UK, using data
obtained from 15 respondents. Using means – end theory as the theoretical
underpinning of the study, the study employed laddering methodology to
identify the linkages between food retail store attributes and personal values.
The findings of the study present a more personally relevant representation
of consumer’s perceptual orientations towards food retail store image. At the
attribute level “good quality products”,” good reputation”,” store has
additional services”, and “value for money”, are most sought after. These
were linked to the consequences “feel good” and to “save time”. Overall, the
findings support previous value driven research, concluding that “happiness”
and “quality of life” were the most strived for personal values.
Cavard and mortal (2003) undertook a survey among 2000 french
consumers in 2002 to study their behaviours regarding the purchase of fruit
and vegetables. It first appraised purchasing frequency; the weekly purchase
being prevalent. Regarding places of purchase, supermarkets come first,

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followed closely by market. In terms of modes of purchase, the self service
with assisted weighing was the preferred option. Consumer expectations
concerns better control of labelling and quality on the selling place with an
indication of consumer- by date. The main consumers, the old-aged people,
appear, however to be less concerned with this additional information.
Michels et al (2003) study revealed that almost all foods retailers in
Germany sold organic products, fresh ones being estimated at 45% of the
turnover. Surveys indicated that 49.7% of households bought fresh products,
principally vegetables at least once between April and December 2002
vegetables, fruit, potatoes, and eggs were the main categories on offer in
supermarket-type outlets; specialist whole food shops and producers direct
marketing enterprises carried a wider range of produce including meat.
Some 77% of turnover by the larger retailers was from sales to regular
purchases. Average frequency of purchasing. However, was not over 5 times
in 9 months. Younger customers tended to bu from specialist outlets rather
than supermarket.
Manivannan and raghunanthan (2004) observed that there was no close
relationship between the age, sex, education, occupation and extend of
utilizing departmental stores where as income alone had shown a close
relationship with the extent of utilizing departmental store at 1 % significant
level, which shows that there was a close relationship between income and
extent of utilizing department stores.
Kinsey et al 92004) in his study identified seven forces that have converged
to create a demand –riven food systems in the USA are
(1) more diverse consumer characteristics and tastes;
(2) the universal product code (bar code) and all the information technology
that followed;
(3) walmart (biggest food retailers in the world) the early adopted of
information technology consumer response, a defensive response to wal-
marts expansion
(4) concentration of retail ownership
(5) global concentration of food processing and manufacturing:
(6) new business models.
Haese et al (2005) study revealed that since late 1990, the number of
supermarket in South Africa has been steadily growing. Due to a more
effective and efficient management and procurement system, the
supermarkets can benefit from economics of scale and sell food at a relative
low price.intheir study they presented a case and sell food at a relative low
price. In their study presented a case study of two villages in the Transkei

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area of South Africa. In these poor rural communities. The majority of
households now buy their main food items from supermarkets rather than
from local shops and farmers. White presenting an important step towards
livelihood development and food security, these supermarkets provides
many food items at lower prices. With an increase in income, the households
look for variety and exoticism in their food products, and will most likely fin
this in the supermarkets, rather than the stores.
III METHODOLOGY
This chapter presents the climatic and economic feature of the study area,
nature source of data collected analytical tools and techniques employed
under the following headings.
3.1 description of the study area
3.2 sampling design
3.3 selections of the products
3.4 nature and sources of data
3.5 analytical tools and techniques and concepts used in the study
3.1 DESCRIPTUION OF THE STUDY

The state of Karnataka is situated ona tableland where the western and
eastern ghat converges into the nilgiri hill complex. And is confirmed roughly
within 11.5 degree north and 18.5 degree north latitudes and 74 degree east
and 78.5 degree east longitudes. The state is bounded by maharastra and
goa state in the north and north-west; by the Arabian Sea in the west; by
kerala and tamilnadu states in the south from north to south and about 4000
kms from east to west. and covers an area of about 1.91.791 sq km. it
accounts for 5.83 percent of the total states of the country in terms of both
geographical area (1.92 lack kms) and population of 5.27 crores (2001
census).
Karnataka is one of the leading states in the country terms of economic

development and its per capita income during 2002-03 was rs.21696. the
state GDP at constant prices (2002-03) was rs 72.399 crores accounts for 5.5
percent of the national GDP> the state has witnessed a healthy 6.5 per cent
CARG in the GSDP for ten years period 1994-2003, being the highest among
the leading states in the country. The state is largely services oriented and
income from the sector contributes to half the state’s GDP with the
agricultural and the industrial sector contributing to nearly 25percent each.
The major manufacturing oriented industries. Among the services oriented in
the state include sugar, paoper and cement industries. Among the services

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oriented sectors. Karnataka leads the Indian biological industry. IT is another
thriving industry in the state. Concentrated in and around Bangalore. The
silicon valley of India. The states pride having a string infrastructure and the
number of national and stet highway make inter-city and town
communication easily accessible. Karnataka also has a strong railway and
airport network. It is a preferred destination for investments and the
Karnataka udyog mithra is a single contract point for all investors who wish
to invest in the state.
Karnataka is also one of threading states in organized retailing in India as

three are more than the organized retailers with more than 100 outlets
including metro AG operating uin Bangalore city alone due to increasing
urbanization and expanding services sectors like software, banking, I
insurance and business process outsourcing (BPO). Which has taken a
metropolitan city status more recently has led to increased income?
Of thee consumers apart from Bangalore cities such as Mysore Mangalore,
hubli dharwad and Belgaum in karnataka re also growing rapidly interims of
urbanization. Income and organised retailing with local food marketers as
they are converting unorganized retail outlets into organized from because of
strong demand for convince products. And better educated consumers
concerned about health, nutrition, food safety. And the environments. Since
majority of modern retiling formats like Karnataka were purposively for the
study.
Bangalore city situated at an altitude of 920 meters above the sea level. It
sis the principal administrative, cultural, commercial and industrial centre of
the state. The city which is spread over an area of 2190 square km. enjoys a
pleasant and equable climate throughout the year’s use to its elevation
(100m)... it is also blessed with a large number of lakes and parks within the
city. Today Bangalore is the fastest growing city in the Asia with a burgeoning
population of more than four million. The literacy rate of the city was 86.58
percent. Its tree lined street and abundant greenery have led to it being
called the garden city’ of India. However since local entrepreneurs and the
technology gland Texas instrument discovered item potential as high tech
city in the early 1980s.banglaore has seen major technogy boom. It is called
the silicon valley of India. There are more than ten organized retailers with
more than 100 outlets including metro AG operating bang aloe city alone.
The super marketers like foodworld, nilgiries, trinethra, subhikdsha and
spencers are the major players operating with their chain of outlets in
Bangalore.

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The twin cities hubli-dhrawad is located at a distance of around 430 kms
from bangaloe the capital of Karnataka state. The climate is hot and wet
during the summer and rainy seasions and pleasant during winter. Dharwad
is the administrative capital of the dhrawad district and hubli serves as the
commerce centre. Dharwad is a quiet, pleasing and fast growing city twenty-
two km away, dhrawad forms a twin city. These cities cover an area of 202.4
sq kms with the urban population of 7.86.018. Hubli- dharwad is known for
its prestigious educational institutes. Dhrawad is perhaps best known for its
pedhas. A sweet made out of milk. And is a must buy for any tourist visiting
the city. Today dharwad has grown beyond its borders, with industries dotting
both its northern and southern boundaries. In years ahead. it promises to be
a beehive of commercial activity. The location of the city on the NH4 makes it
equidistant from two of the most industrialised centres in the country.
Bangalore the capital of Karnataka state and pune the 2nd most industries
city in maharastra . Most of the retail sector in these cities small business
which occupied a significant market share. Recently hubli based BDK based
group of companies entered to modern retailing by operating two
supermarkets outlets (in 2001) at hubli and few local retailers also
modernizing their stores in the form of supermarkets.
Mangalore is an important city in Karnataka and is situated on the west
coast. After integration the city id developed fat in all direction viz. in the
field of education, industry and commerce. Mangalore is loated at 12’-52’N
latitude and 74”-49’E longitude. The city is located in the Western Ghats and
in the west by the the Arabic sea. Three national highways viz. NH -17 linking
panvel and kanyakumari. NH-48 linking mangalore and babangalore.NH-13
linking Mangalore and Sholapur pass through the city. A domestic airport is
located at bajpe. This is 15 km from city connecting it to Mumbai and
Bangalore. Mangalore is also linked by rail to all major cities of India and is
also having all weather harbours. Mangalore is headquarters of ghakshina
Kannada district, the largest urban converting an area of Karnataka and the
fourth largest city of the covering an area of 132.45sq with the urban
population of 4.19,306. The city is an administrative, commercial, and
educational. And industrial centre . An all weather port is located in
mangalore and is the only major port of Karnataka, major banks of the indfai
are organizes from this town. It is also famous for educational institutes. Only
in this millennium, some of the organized retailer’s entered this city with
modern retail formats. Foodworld is in operating since 2002.
Belgaum Is one of the fastest growing cities in the northwest part of
Karnataka. The district of Belgaum borgers maharstra and goa.
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Belgaum is accessible via air from Bombay and Bangalore. Belgaum is
famous for the sweets and locally made ice cream. Belgaum is also home to
several decisions of the Indian armed forces. The commando school of the
India army is also situated in Belgaum. The Indian air force has a a big
airbase near belagaum.a s of 2001 census the city had an area of 94.08 sq
kms with population of 3.99.653. The city had an average literacy rate of
78% higher than national average of ^55. There were no organized retailers
in this city but few local retailers converting their old stores into modern
formats.
Mysore city was the capital of royal Mysore province. To the people of India
the word Mysore synonymous with sandalwood. Silk and fine inlay- work
using ivory.. Mysore is also the home of May well regarded musicians and
artists. It is the fastest growing city in Karnataka next to Bangalore. The city
spread over area of 128.42sq kms with urban population 7.8lakh. being a
traditional city there were no organized retailers till 2001,but recently
because of its booming economic growth, few organizes retailers like food
world and nilgiri’s have entered this city with their supermarket and many
local retailers are also converting their old a stores into the modern formats
(like supermarkets).
3.2 SAMPLING DESIGN

To fulfill the objectives related to the supermarkets operations of the study a
multistage random sampling technique was used. In the initial stage,
Karnataka state was selected as it is one of the leading states in organized
retailing in India t the second stage, five cities across Karnataka such as
Bangalore. Hubli dhrawad, mangalore, belagaum and Mysore were selected
as the majority of organized retailers were existed in these areas. Recently
most of the local retailers in those areas also modernizing their stores in the
form of modern formats like supermarkets. In the last stage, three
supermarkets (one outlet/branch) from each city were selected randomly, so
that total sample size selected for the study was 15. Among the number of
supermarkets existing in these areas, only three supermarkets who were
agreed to provide the data are selected. However, supermarkets which were
in operation for at least two successive years were selected and their
performance was studies for the last financial year 2007=07.
In addition to study the factors influencing the consumers to purchase food
products in these supermarkets/retail outlets, ten consumers from each
selected supermarkets/retail outlets (30 from each city) were interviewed
randomly, so that total number of consumers accounts to 150.

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3.3 SELECTON OF PRODUCTS
Since it is difficult to study the overall operation in all the products only two
products from each agricultural commonly groups like rice and wheat in
cereals, turn and green gram in pulses, dry chilly and mustard in spices,
banana and apple in fruits and finally tomato and onion in vegetables were
selected based on their volume of sales in supermarkets.
3.4 NATURE AND SOURCES OF DATA

The detailed information required for the study was collected from both
primary and secondary sources in order to accomplish the various objectives
of the study and are illustrated with their heads as follows.
A) PRIMARY DATA
The primary data on roles and responsibility of each individuals in the
hierarchy and the pattern of investment like fixed and working capital were
collected in detail to know the investment pattern and organized structures
of the supermarkets. The data on financial management aspects like
different assets and liabilities, owned fund, inventory, working capital, sales
and returns were collected from their records like balance sheet, profit
and loss account and trade account were collected to know the financial
status of this supermarket. The information on procurement aspects like
channels of procurement of raw materials, quantity procured costs of
procurement and inventory aspects like quantity and value of different
inventories maintained at different stages and their cost of carrying were
collected to understand the procurement and inventory management in
those markets. The information on stages involved in processing, cost
incurred in processing and value addition per unit of each selected products
in different categories such as foodgrains, pulses, fruits, vegetables and
spice products and the various price determination methods adopted by
these supermarkets were collected from the concerned authorities of sugar
markets to evaluate management of processing and price determination.
Similarly, the data on problems faced by the supermarkets such as causes
for loss in retail business, sources of finance, infrastructure problems,
problems from the movement authorities etc.. were also collected from the
concerned authorities of these selected supermarkets. Apart from these to
study the factors influencing the consumers to purchase food products from
the supermarkets/food retail outlets. The information regarding the socio
economic factors like age, education, occupation, income , family size, family
type, religion etc.. products factors like price, quality, packaging, labelling

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and other factors like range of product s, convenience, location , credit,
home delivery, parking facilty,service quality and schemes and offers etc.,
were collected fro, the randomly selected consumers from each
supermarkets using the protested schedule through the personal interview
method.
B) SECONDARY DATA
The secondary data on area, production and education status of the selected
cities were collected from the respective municipal corporation.
3.5 ANALYTICAL TECHNIQUES EMPLOYED

IN ORDER TO ANALYSE THE OBJECTIVES OF THE STUDY, THE DATA
COLLECTED WERE SUBJECTED TO ANALYSIS THROUGH APPROPRIATE
TECHNIQUES AS FOOLWS;
3.5.1 Tabular analysis
3.5.2 Financial ration analysis
3.5.3 Factor/ cluster analysis
3.5.4 Principal components technique
3.5.5 Garrett’s ranking technique
3.5.1 TABULAR ANALYSIS
The data collected were presented in tabular form to facilitate easy
comparisons. The investment Patten, hierarchical levels of organization in
supermarket outlets, cost of procurement, inventory costs, value addition
and problems faced by the retailers were presented in the form of tabular
analysis. The data was summarized with the help of statistical tools like
averages and percentages to obtain meaningful inferences.
3.5.2 The financial ratio analysis techniques was consider to be a most useful
tool in evaluating the performance of the supermarkets and they mainly
points out the relative importance of the selected items. The financial
statement used in this study correspond to the financial; year of the super
markets April to march of 2006-07. In this study the ratio analysis techniques
has been heavily relied upon to test the solvency,liquidity, profitability,
turnover and sales of the supermarkets. The ratios used for the analysis are
described below.
3.5.2.1 Test of solvency
The solvency ratios would indicate the abity of the supermarkets to meet its
medium and long term obligations and they would loss provide a basic for
measuring the leverage effects on the supermarkets. To meet the solvency

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positions of the supermarket, ration such s liabilities to own funds and fixed
assets to owned funds were employed.
a. Total liabilities to owned funds ratio

The ratio reflects the total commitment which the supermarkets. Owed to the
creditors in relations to the owned funds of the supermarkets. This ration is
computed using the tuition given below.
Total liabilities
Total liabilities to owned funds ratio=……………………………………………………
Owned funds
The total liabilities referred to all the items under liabilities column of balance
sheet except the net profits, subsidies and owned funds. The paid up share
capital, depreciation fund. Reserve funds and net profits were included under
the owned funds of the supermarkets.
b. Fixed assets to owned funds ratio

This ratio would indicate the extent of owned funds incepted in fixed assets.
Ratio was obtained using following equation.
Fixed assets
Fixed assets to owned funds ratio; ……………………………………..
Owned funds
3.5.2.2 Test of liabilities

This measures the ability of the supermarkets to meet immediate maturing
obligations. These ratios called balances sheet ratios, ratio of liquid assets to
total assets, current ration and acid ration were employed to measure the
liquidity position of the supermarkets.
a. Liquid assets to totals assets ratio
This ratio shows the liquidity performance of the supermarkets. It indicates
the position of the total asserts maintained in liquid from which would help
the supermarket to meet its immediate maturing obligations.
Liquid assets
Ration of liquid assets to totals assets ration: ……………………………….
Total assets
Liquid assets included cash in hand, cash at bank, short term deposits , value
of closing stock adjusting heads due to, sundry debtors, deposits with banks
etc. the total assets include all the items under the assets column of the
balance sheet, viz., sum of current assets and fixed assets.

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b. Current ratio
The ratio would measure the number of units of current assets owned by the
supermarkets to meet each of the short term obligations. It is given by the
following equation.
Current assets
Current ratio=……………………………..
Current liabilities
If the ratio was more than one. It suggested that current assets of the
supermarkets were adequate to pay off all current liabilities. If it was one
they were just sufficient and if less than one. The supermarkets could be
unable to pay current dues when asked fro. A current ration of roughly two
was considered to be satisfactory level. Current liability was obtained by
deducting long term loans and long term deposits from the total liabilities.
3.5.2.3 Test of profitability

The profitability ratios would provide a fairly sound method of diagnosis pf
the financial status of the supermarkets and overall efficiency of the
supermarkets. These ratios compared the returns over the amount sunk into
the business by the supermarkets. Thus these ratios indicated the prodigality
of sales and investment made in the business. The ratios employed for the
study are discussed below.
A. Ratio of net total assets
This ratio would indicate the earning capacity of the total assets of the
supermarkets. It was computed as follows.
Net profits
Net profits to total assets= ……………………….
Total assets
An increase in the ration over the years showed improvement in the overall
efficiency of the supermarket. Net profits included the amount of income
received by the supermarket after meeting all its expenses at the end of the
years.
B , net profits to owned funds ratio
This ration showed the extent of profitability in relation to investment of
owned funds of the supermarkets. It was calculated by he equations given
below.
Net profits
Net profits to owned funds ratio=………………………

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Owned funds
c. Net profits to total sales ratio

This ratio is alos known as net profit margin. It was determined by relating
the net income after taxes to the net sales for the period. The ratio was
calculated as under.
Net profits
Net profits to sales ratio=………………………………………
Total sales
d. Net profit margin (%)
The net profit margin was determined by relating the net income after taxes
to the gross retunes for the period and is expressed in terms of per cent.
Net profits
Net profits to sales ration=…………………..*100
Gross returns
3.5.2.3 Tests of turnover
The ratios which were quite important to this study, but did bot come under
any of the above categories of test presented below.
a. Working capital turnover ratio
This ratio was employed to assess the efficiency of the total working capital
employed by the supermarkets in their business and was calculated as under
Total assts
Working capital turnover ratio=……………………………..
Total working capital
The higher the turnover greater would be the efficiency and longer the
rate of profitability.
b. Fixed assets turnover ratio
Fixed assets turnover ratio was used to test the sales turnover of fixed
assets. it indicates the efficiency in utilizing the fixed assets. This ratio was
compute as foods.
Total assets
Working capital turnover ration= ………………………………
Total working capital
Higher the fixed assets turnover ratio, higher would be the efficiency of the
supermarkets in utilization of fixed assets to generate sales.
3.5.3. factors/principal component analysis

The techniques of faster analysis, which is a multivariate statistical
technique’s as employed to ascertain the major problems faced by the
supermarkets in the business of foods retailing factors analysis was used in

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data reduction by identifying a small number of factors, which explain most
of the variance observes in a much larger because it has some advantage
than other techniques (mittalZ & paul 2004) in principal component analysis
.a set of original variables is transformed into a new variables are linear
functions of the original variables is transformed into a new variable are liner
functions of the original variblaes.the objectives is to find out only a few
compounds , which accounts for most of the variation in the original st of
data. The principal compotes (p1) is determined as follows,
P1-a1j+a2j+a3j Z3+…. +anj Z
Where, Pi=1 1 to n, are new uncorrelated components
A0=i=1 to n and j=1 to n, the Z coefficients are factor loadings.
Zi=1 to n are observed variables as standardized by dividing (X-X) by its
standard deviation (x).
Each component makes a maximum contribution in descending order to the

sum of the variance of the variable. Normally, the first principle components
contribute a maximum to their total variance: the second principle
component contributes to the residual variance and so on. The sum of the
variance of all the principle components is equal to the sum of the variance
of the original variables. Sum of square of factors loadings (a2 1+a2+a2+) is
called variance explained by factor (1) this is also known as exigent value ().
The percentage contribution of p1 in the total variance of original variables
(X) is given by,
P1=/n x 100 (n=number of variables)
The principal component analysis was carried out by using SPSS 10
statistical package. After the data were fed into it, the package provided
output such as correlation matrix, initial factor matrix and rotated factor
matrix. Initial factor matrix generally fails to be meaningfully interpretable.
Therefore, rotated factor matrix was used for identification of factors. Varian
rotation (an orthogonal method), the most common rotation method was
used for rotation. This method tries to produce factors are as simple as
possible by maximizing the variance of the loadings across the items within
factors. These leads to high loadings becoming higher and lower loadings
declining. For the selection of factors Eigen values more than one is taken
into account. Identification of and naming of any factor would be a subjective
conclusion. Generally, the heavy loaded key variables would be subjective
conclusion. Generally, the heavy loaded key variable would be a considered
as basis for identification and naming of dimension. In order to assign some
meaning to factor solution a minimum level of signification for factor loading

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was 0.5 was taken. Higher the value of factor loading of the variable on a
particular factor, greater would be the association with that factor.
In principal component analysis 38 variables were considered to be the
major problems affecting the food retailing business in Karnataka. Indicators
were identified after careful investigation of the earlier studies and
consultation with the higher authorities of the supermarket. The selected
problems are presented in table 3.1
3.5.4 CLUSTER ANALYSIS OF VARIABLES

Classification of characteristics into meaningful sets of clustering is an
important procedure in all the social and biological science. The cluster
analysis is a formal multivariate statistical procedure it is a simple form of
correlation analysis and it provides a measure of similarity among different
independent variables. This analysis and it provides a measure of similarity
among different independent variable. This analysis starts with a data set
containing information about population based on the sample of entitiesa
and attempts to recognize these entities into homogeneous groups.
The cluster analysis of variable was adopted to analyse the scores obtained
from the opinion survey of consumers in order to know the factors
influencing the consumers to purchase food products in supermarket.
Clusters were formed using the minimum distance (maximum similarity)
method, also known as s ingle linkage method. Initially each variable were
grouped to form a cluster. The amalgamation process was continued in a
step wise fashion/method until a single cluster was formed contain all the
variables.
The so classified cluster were subjected to test the correctness of the group
classification using discriminate analysis, this analysis helps us to know the
relative importance of different variables in regard to their power to
discriminate between the groups. The case-wise statistics derived from the
discriminate analysis and the proximity matrixes of squared Euclidean
distance for the cluster classification were presented in appendix-V appendix
–VI respectively.
The selected variables/factors influencing the consumers to purchase food

products in supermarket are presented in table 3.2
3.5.5 GARRETT’S RANKING TECHNIQUE

Garrett’s ranking techniques was used to rank the factor considered by the
retailers in pricing the products at the supermarkets.

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For this purpose twelve factors were first identified as important ones
considered by a majority of retailers in their business. These factors were
identified in consultation with the higher authorities of the considered by the
retailers in pricing the products were nature of products, market forces
(supply & demand) product life competition, long-term pricing, market
segmentation, quality of the products, relative prices of the producers, price
should not be high, price should convenience prospective consumers, price
shall ensure profitability and availability of the products. The selected
retailers were asked to rank the above factors. In this next stages,, rank
assigned to each factors by each individual was converted into per cent
position using the following formula.
Per cent position=100 (Rij-0.5/Nj)
Where, Rij stands the it factor (i=1,2,……12) by the jth individual (j=1,2,……
15) and Nj stands for the number of factors ranked by jth individual. Once
the per cent positions were found, scores were determind for each per cent
position were found, scores were determined for each per cent position by
referring garret’s table. Then, the scores for each factor were summed over
the number of retailers who ranked that factor, in this way, total scores were
arrived at for each of the twelve factors. And mean scores were calculated by
dividing the total score by the number of retailers/supermarkets, who gave
ranks. Final overall ranking of the twelve factors was done by assigning rank
1, 2, 3…etc in the descending order of the mean scores.
3.6 DEFINITION OF TERMS AND CONCEPTS USED IN THE STUDY

3.6.1 CAPITAL INVESTEMNT
Fixed capital
The items included under the fixed capital are the cost of land, building
machinery and equipments and other fixtures.
B .Working capital
The working capital included cost of raw materials, utilities (like power, oil
water charges), processing material (cloth bags, tags, labels) cost, wages,
salaries, company overheads (repair and maintenance cost) and
administrative overheads (stationeries expenses, office communication),
interest on working capital, chemical cost, increase fee, cost of processing,
and advertisement expenses.
C. Investment on building

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This includes investment on building for processing/value addition, storage,
and office and drying yard.
D. Investment on machinery and equipments
Under this, investment made on display cases, floral cases, display walk-in
freezers, hot-food display cases, ice machines, packing machines, weighing
machines etc.
E. Investment on other fixtures
It includes investment on fan, tube lights, furniture, and computers in the
supermarket (outlets).
F. Investment on infrastructure
It includes investment on power generator, trolleys and treansport vehicles.
3.6.2 Procurement
A.Procurement cost of products
It was computed by adding the items of commission charges to organizers,
transport and loading/ unloading charges
B.Inventory -It is defined as usable but idle resource at different stages.
C.Raw material
It means that the products brought by the retailers Is processed but not
packed.
D.Finished product
After processing/value addition products are kept in cloth bags/polythene
bags wrapping boxes and sealed.
E.Cost of arraying inventory

This is expressed in rupees per item held in stock per unit time. It is worked
out by adding the items of storage cost and interest on carrying inventory.
F.Storage cost
It includes the retail charges of the warehouse and maintenance charges
where in the products are stored
G. Maintenance charges In this variable cost of insecticides, white
washing and cleaning were included.
H. Interest on carrying inventory

It is worked at the rate 18% at the value of products stored for number of
months.
3.6.3 processing/value addition

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I. Stages of processing/value addition
A pre cleaning: it refers to the removal of particles such as pieces of trash,
stones, clods, removal of foreign materials. Other products etc larger in size
than desirable products from threshed products lot. Incase of fruits and
vegetables, it is washing of fruits and vegetables to remove dusts, removal
of decayed etc.
B.Conditioning: it refers operation such as shelling, debarking etc., for basic

cleaning of fruits and vegetables.
C.Grading. It refers to the actual cleaning and grading of products based on
the quality preferences
D.Treating. It refers to the application of fungicide, insecticide or combination
of both, to products so as to disinfect them from seed borne or soil borne
pathogenic organisms and storage insects.
E.Bagging and stitching: it refers to filling of products in bags/polythene bags
to an exact weight.
F.Labelling and stitching: it refers to attaching labels, certificates, tags on the
products bags and sewing the seed bags
II value addition-It is calculated by subtracting the purchase value of one
quintal of any product from the sale value of finished product.
III cost of processing/value addition
This was computed by adding costs incurred on power, supervision charges
during processing, chemicals, packing meterials (cloth/polythene bag, tags,
labels, gunny bags) and labour charges.
3.6.4 Marketing
a. Retailers: he is the one who sells company’s individual products/item
in small quantities to the ultimate consumers.
b. Cost of marketing: it is calculated by adding commission charges,
outward transport charges and advertisement expenses.
c. Outward transport charge: this is the charge incurred by the company
in transporting the products from warehouse to retailing outlets.
d. Commission charges: it Is the charge paid to the
intermediaries/commission agent while buying groceries from market. This
varies from commodities to commodities.
e. Advertisement expenses; these are the expenses incurred in selling
the company’s products. This is calculated by adding the cost of the items
(banners, wall psters, pamphlets, advertise through Medias like TV, radio
etc0 SPENT FOR PROMOTING THS SALES.

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f. SALES REALISATION; it is calculated by adding the sale value of main
products.
3.6.5 Pricing methods

I. cost based pricing methods: in this case no accounts is taken for market
requirement but set of amount is added to the costs the draw back of this
method is that if cost increases the price of the products must also increases.
a. absorption cost pricing- large department stores follow this kind of pricing
methods . The price of each product is dependent on how many costs it
creates.
B. target pricing- a target price is made then costs are adjusted.
II. Market based pricing methods: dependents on accurate analysis of the

market and consumer requirement.
a.Penetration pricing – this method is used for new products wanting to gain
market share. The products are priced low to get a hold in the market.
b.Market skimming- for new innovative products, first few months higher
prices were charged as there is a little competition and the products is
popular because of it is new.
c.Loss leader pricing- charging below cost price to try and attract customers
(in supermarket)
d.Psychological pricing- hitting price points that are significant, ex rs 999.99
sounds better than rs 1000.
e.Discounting pricing- offering lower prices for a set time period to try and
boost sales and sell off unwanted stock.
III… Completion based pricing methods

a. Closing rate or market pricing- charging the same as the competitors
of the market leader
b. Destroyer or destructor pricing- charging below average to drive out
compotation.
IV RESULTS
In consistence with objectiveness of the study, the necessary data collected
from various sources were analyzed and interpreted and the results of such
analysis are presented in this chapter under the following heading.
4.1 documentation of supermarkets
4.2 investment pattern of supermarkets
4.3 organizational structures of supermarkets
4.4 procurement management in supermarkets

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4.5 inventory management and its costs in supermarkets
4.6 processing/ value addition in supermarkets
4.7 financial management in supermarkets
4.8 factors considered and methods of prices formation in supermarkets
4.9 problems face by the food retailers
4.10 factors influencing the consumers to purchase the food products in
supermarkets
4.1 DOCUMENTATION OF SUPERMARKETS

Since food retailing is relatively a recent development and supermarkets
have been defining retail element of the food industry. An effort was made in
this section to collect and document existing supermarket in selected cities
across Karnataka. As on today (2006), the names of existing supermarket,
number of outlets and address of their head offices presented in table 4.1-It
was evident from the table 4.1 that majority of multi outlets forms of
organized food retailing firms’ found only in cities like Bangalore and Mysore
and recently formed un-organized form of outlets were observed in
Mangalore, Belgaum and hubli dharwad . However the highest number of
outlets accounted by shubhiksha (40) followed by foodworld (33) fabmall
(23) s*mart (18) namdhari’s fresh (14) and nilgiries dairy farm ltd (12) were
found in Bangalore city. The other supermarkets existing in the city were
spencer’s food bazaar. Ahar supermarkrts, Monday 2 Sunday, farm line
supermarkets. M.K retail co, super mart, Raba traders etc., etc .a ll these firm
shad their head offices at Bangalore only.
In Mysore city except few firms like loyal world (which had 4 outlets) fabmall,
M.K Hussein & sons and nilgiri’s (2 outlets each); all other supermarkets had
one outlets each. The famous supermarket in the city was loyal wotls,
arihanth super bazaar, Mohan Bandar, shivananda supermarket, a-z
supermarket, a-z supermarket and food world. Among the existing
supermarkets in the city, few organized supermarkets like food world, nilgiri’s
shubhiksha and fabmall have their head offices at Bangalore.
Most of the supermarkets in mangalore city were of UN organized and family
owned. Except two pullets owned by alga stores supermarkets, all other
supermarkets had one outlets each in the city. The supermarkets like Andy’s
supermarkets, Apna bazaar, food world, Nilgiri’s and food bazaar were well
known in the city. On the other hand the supermarkets Like Jimmy’s
supermarkets , Misbah supermarkets ,Move and pick, Non super bazaar
Ruby’s supermarkets , Sudhat bazaar etc. were also playing then role in the
business.

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In Hubli- Dharwad and Belgaum cities, most of the local and traditional
retailers were recently their stores into modern style supermarkets. it was
witnessed from the table 4.1 that pick n pay sangam food basket. Day 3 Day,
needz supermarkets and Eshan supermarkets were the only five
supermarkets in Hubli-Dharwad city, however, the supermarkets operating in
the Belgaum city were Hans Ral supermarkets and shoppers paradise, which
are all family owned.
4.2 INVESTMENT PATTERN OF SUPERMARKETS

The average area of the supermarkets outlets and their capital investment
patterns in table 4.2 it is observed from the table that the average area of
the supermarkets was found to be more in Bangalore (4333.33 square feet)
followed by Mysore(3133.33 square feet) Hubli Dharwad (2833.33 square
feet) Mangalore (1833.33square feet) and Belgaum(1200 square feet) the
expenditure incurred on the establishment of supermarket outlets is treated
as fixed capital investment which includes land & building, machineries &
equipment, infrastructural facilities, other fixtures, salary to permanent
employees and others fixed capital,.
It could be seen from the table that the overall total fixed costs per outlet
was 78.42 lakh. Though the fixed capital drastically varied from city to city,
the highest of rs, 256.30 lakh was found in Bangalore followed by rs, 71.60
lakh Hubli-dharwad Rs. 39.23 lakh in Mysore, Rs 18.81 lakh in Belagaum and
rs 13,00 lakh inmanaglroe, controversially it accounts for 30.01 percent of
the total capital. Among different fixed capital. The proportion of land &
building alone accounts for 23.50 percent employees accounts to 2.10
percent, 1.20 percent, 1.08 percent respectively, of the total capital.
Increases of working capital, raw materials were the prime costs,
contributing about 67 percent of the total capital. The other working capital
incurred in the establishment of supermarkets ere wages to casual labours,
power charges, packing material etc their share in the total capital was very
meagre(less than one percent) however at an overall average level the costs
required to established a supermarket in karnarka was rs.261.33 lakh and
the same in different cities such as bangaloe,mysore, hubli-dharwad,
Mangalore and belagaum were rs 762.061 lakh , rs 205.867 lakh, rs 173.191
lakh, rs 96.78 lakh and rs 78.53 lakh respectively.
4.3 ORGANIZATINNAL STRUCARUTR OF SUPERMAREKTS

Organizational structure involves arrangement of activates and assignments
of personnel to these activate sin order to achieve the organizational goal.
Form managerial points of view the main concerns are ensuring

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communication and coordination. It is way by which various parts of an
organization are tied together and coordinated manner and it illustrated the
various relationship among levels of the hierarchy within the organization as
well horizontal relationships among various aspects of the organizational
operations a well planned organizational structure results in better use of
resources.
Such organization structure agows,
I) The pattern of authority and responsibility among organizational
members.
II) The communication flow within the organization
III) The system of task differernation and integration.
The type of organization structure would depend upon the type of
organizational itself and its photocopy of operations. Basically there are six
types of organizational structures.
a) Line organization
b) Line and staff organization
c) Functional organization
d) The divisional organization
e) Project organization
f) Matrix organization
Though the study found that line and line staff, a nd the functional categories
of organization structural in multi outlet 9chain of supermarkets)
firms/companies, the line organization easy commonly followed in both multi
firms (chain of supermarkets) and supermarkets not in chain.
Line organization: this is the clear and simplest form of organization and is
the most common among low invest companies. The authority is embedded
in the hierarchical structure amend it flows in a direct line from the top of the
managerial hierarchical down to the operative levels of workers it clearly
identifies authority, responsibility and accountability at each level. These
relationship I the hierarchic connect the position and tasks of each level with
those above and below it. There is a clear unity of command so that the
person at each level and is responsible only to the person above him.
Thereby the communication is fast and easy feedback from the employees is
acted upon faster. The line personnel are directly involves in achieving the
objectives of the company.
Line and staff organization: in this type of organization structures delineation
of organizational authority between management personnel having overall
planning and direction responsibility and operational personnel having direct
job performance responsibility. Here staff is adversary to the line function.

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Functional organization; this type of organization structure is based on
functional performance, organizational department crested to fulfill
organizational functions such as marketing, finance and personnel. This type
of organization has characteristics of both line and staff functions.
The organization structure of supermarkets in chain and supermarkets not on
chain are illustrated in figurer 1 and figure 2.
4.3.1 Organizational structure of supermarkets in chain

In the hierarchy of theses outlets, they have executive (managing
director/chief executive). The role of a managing director is to design,
develop and implement the strategic plan for their company in the most cost
effective and time efficient manner. He is responsible for both the day to day
running of the company and developing business plans for the long term
future of the organizational. In the supermarket firms, MD is assisted by
general mangers of all the department such as purchase, marketing, fiancé
and the system.
The general mangers are also an executive who has overall responsibility for
managing both the revenue and cost element of a particular department.
This is often referred too profit & loss resposibityl. This means that general
managers usually oversee most or all of the functions as wella s the day to
day operations of the particular department. Frequently he is also
responsible for leading or coordinating the strategic planning functions of the
company. The GM is assisted by an assistant general manger; he is in turn
assisted by purchase mangers, store mangers, supervisors and labours in
hierarchy, the whole team is responsible for the complete purchase and
procurement of related material for He Company. The purchasing mangers,
buyers, and purchasing agents make up a key component of a firm’s supply
chain. The responsibility of the GM and his team involve supervision,
marketing profitability and sales, reputing, resale pricing, inventory, s service
maintains and other duties as requested by managements. He is assisted by
an AGM, shop
Manager’s supervisors, cashiers attainders sales representatives and

watchmen in a top-down hierarchy. The GM (finance) assisted with AGM
(accounts) and accountants are responsible for maintenance of overall
accounting and auditing aspects of the business. Finally, GM (system) looks
after day to day operations of the supermarkets and is responsible for
developing process, system, quality and service standards. The flow chart of
the organizational structure of supermarket is shown in fig 1.

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4.3.2 Organizational structure of supermarket not in chain In these
supermarkets, the proprietor or the manager is the head of the supermarket
and he will be the decision maker in the organization. He is usually assisted
with supervisors, cashiers, sales representatives and watchmen in a
hierarchical way. The manager himself looks after purchasing, inventory and
marketing activities like purchasing, processing, marketing and sales
activities as assigned by the manager. The organizational flow chart is shown
in fig 2.
4.4 PROCUREMENT MANAGEMENT IN SUPERMARKET
Procurement management automates all procurement process and enables

any organization to establish a collaborative working relationship with key
suppliers. More efficient and streamlined procurement activities reduce
purchasing costs, eliminate unnecessary transactions, and enable us to take
advantage of strategic supplier relationship.
4.4.1 Existing procurement patterns
The existing purchasing pattern and the agency preferred by the

supermarkets across karnataka are presented in table 4.3. it was observed
from the table the supermarket followed centralized or store level purchasing
pattern for procuring the selected products. In Bangalore, cent percent of the
supermarket followed centralized purchasing pattern whereas in case of
Mangalore and Belgaum, cent per cent preferred store level purchasing. In
Mysore, 66.67 per cent prefer store level purchasing and 33.33 per cent have
gone for centralized purchasing and the reverse was found in hubli-dharwad.
Further, it was noticed from the table that all the supermarket purchased
groceries through commission agent/market in all the cities but fruits and
vegetables were purchased from various sources.. in addition to the own
production and direct purchase from the farmers, some of the supermarkets
in Bangalore purchased fruits and vegetables from commission agents also
for resale at supermarket but in mysore and Mangalore these products were
purchased from commission agents only. No sale of fruits and vegetables was
found in belgaum and hubli- dharwad supermarket.
4.4.2 Monthly average quantity and value of procurement in various

supermarkets across cities
4.4.2.1 Bangalore-The monthly average quantity and value of procurement of

selected commodities by supermarket in Bangalore city are presented in
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table 4.4. It was revealed from the table that among grocery items, the
average frequency of purchase was 4.67 in rice, wheat, green gram and tur
dal but it was 4.33 in chilli and 2.67 in mustard. Tur dal was procured in
highest (6.46 quintals) quantity followed by green gram (5.54 quintals) ,
rice(4.88 quintals), wheat (4.29 quintals ), mustard (0.64 quintals) and
chilli(0.48 quintals). All the groceries were procured from the commission
agents/market. The SMR 9standard), SMR(premium) and SMR(regular)
varieties in rice, and byadgi stem less variety of chilli were the major
varieties in their respective items procured in highest quantities. However,
the total amount spent on these items was found to be high in green gram
(Rs. 25,750.42) followed by tur dal (Rs. 21,248.96) wheat (Rs. 8882.29),
rice(Rs, 8366.61), chilli(Rs. 3,459.44), and mustered(Rs. 1599.43). The
average price per quintal was the highest in chilli (rs. 7258.33) and lowest in
rice (Rs. 1719.290 in grocery items.
Whereas in case of fruits and vegetables, tomato was procured was highest
(14.63 quintals) quantity followed by onion and banana (12.50 quintals
each), and apple (5 quintals). On an average, the frequency of purchase was
10 in case of tomato and banana while it was 4.67 in onion and 8.33 in
apple. In addition to commission agents and direct
Procurement of tomato from farmers. Own production was also detected in

Bangalore supermarkets. The maximum amount spent in procurement of
apple.
4.4.2.2. Mysore
Table 4.5 represents the average quantity and value of products procurement
of commodities by supermarket in Mysore city. The average monthly
frequency of purchase was four in rice, wheat, green gram, tur dal and chilli
whereas it was two in mustard. Here the highest quantity of commodity
procured by the supermarkets was in rice (3.12 quintals) followed by green
gram
(3.17 quintals), tur dal(2.77 quintals), wheat (2.07 quintals), mustard(0.23

quintals) and chilli (0.21 quintals) in grocery items. In respect of total
amount, the maximum of Rs. 14,698.06 was observed in green gram due to
its high unit cost (Rs 4,642.50/quintal) and the minimum was found in
mustard (Rs.583.33) as it was purchased in small quantity.
The maximum procurement in case of fruits and vegetables was found in

banana (20 quintals) followed by tomato(12 quintals), onion (10 quintals)

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and apple (6 quintals) and the total amounts to Rs.33,120 for apple,
Rs.33,000 for banana, Rs. 6700 for onion and rs 6600 for tomato. The
average frequency of purchase was 15 in tomato, 10 in banana and apple,
but for in onion.
4.4.2.3 Mangalore
The average monthly procurement of selected commodities by the

supermarket in Mangalore city is shown in table 4.6 it could be seen from the
table the maximum quantity of grocery was purchased in rice (4.96 quintals
amounts to Rs. 8017.92) followed by tur dal (3.41 quintals amounts to Rs.
12558.33), wheat (1.24 quintals amounts to Rs. 24898.17) chilli (0.23
quintals) and mustard (0.15 quintals). The purchase frequency was 5.67 in
rice, wheat, green gram, tur dal and chilli. Mustard procured 2.33 items in a
month. In fruits and vegetables, there was no sale of apple noticed in
Mangalore supermarkets, however, more procurement quantity and total
costs were observed in banana (9 quintals & Rs. 14600) followed by onion
(5.5 quintals & Rs. 3937.50) and tomato (4.5 quintals & Rs. 2790.83). the
unit costs were also in the same order, while the purchase frequency was 10
in tomato and five in onion.
4.4.2.4 Belgaum
The purchase frequency of groceries in begum was differed from commodity

to commodity (tab 4.7). However, the frequency observed was 4.39 in rice,
4.67 in wheat, 4.33 in green gram, 4.42 in tur dal, 4.33 in chilli and two in
mustard. All these products were procured from commission agents only. The
table reveals that rice (2.33 quintals) was the major commodity procured by
the supermarkets followed by tur dal (2.13 quintals), wheat (1.92 quintals),
chilli (0.19 quintals) and mustard (0.09 Quintals). While the estimated total
amount were Rs. 6,299.17, Rs 6,289.58, Rs. 3,662.78, Rs. 3,496.88 Rs.
1,292.50 and Rs. 196.67 in case of green gram, tur dal, rice, wheat, chilli and
mustard, respectively. No sale of fruits and vegetables was noticed in
Belgaum city supermarkets.
4.4.2.5 hubli-dharwad
Table 4.8 presents the average monthly costs incurred in procurement of

commodities by supermarkets in hubli-dharwad city. It could be seen from
the table that were procured in the order of 4.46 quintals, 2.88 quintals, 2.75
quintals, 2.61 quintals, 0.26 quintals and 0.18 quintals, respectively. The
amount spent high in respective commodities. The frequency purchase was

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3.67 in rice, wheat, green gram, tur dal and two in mustard. No sale of fruits
and vegetables were seen in hubli-dharwad.
4.4.2.5 Overall
The overall monthly average quantity and value of products procured across
different cities in karnataka are shown in table 4.9. it was noticed from the
table that the average frequency of purchase in groceries was 4.53 times a
month in rice and wheat, 4.47 times in green gram, 4.48 times in tur dal,
4.67 times in chilli but only 2.2 times in mustard. The quantity purchased
was also more in rice (0.85 quintals) followed by tur dal(0.77quintals), green
gram(0.71 quintals), wheat (0.54 quintals), chilli (0.07 quintals) and mustard
(0.12 quintals). The cost per quintal was highest in chilli (Rs. 6739.79) while
least in rice (Rs. 1,688.050. hence the total amount is found to be much in
Rs. 14,258.75
Due to its high unit price and maximum purchase quantity. Further, it is
revealed that the APMC was the only agency preferred in buying these
products.In case of fruits and vegetables, the purchase frequency was more
in tomato (10.83) and banana (10.00). Similarly, the quantity purchased was
high in banana (1.38 quintals/trip) as the quantity purchased in maximum
quantity. Apart from own production, these fruits and vegetables were
procured from various sources such as commission agents and direct
purchase from the farmers particularly in case of tomato
4.4.3 Monthly costs incurred in procurement of commodities by supermarket

in different cities
4.4.3.1 Bangalore -The average monthly costs incurred in procurement of

selected commodities by supermarket in Bangalore city are presented in
table 4.10. it was revealed from the table that among grocery items, green
gram accounts for high total cost (Rs. 26,005.14) in procurement followed by
tur dal (Rs. 21,545.56), rice(Rs. 9,838.42), wheat(Rs. 9067.56), chilli (Rs.
3,676.58), and mustard(Rs. 1.773.52) while the quantity was maximum in tur
dal (6.46 quintals), green gram (5.54 quintals), rice(5.52 quintals),
wheat(4.29 quintals), mustard (0.64 quintals) and chilli (0.48 quintals). Other
than the price of the products, transport costs are the prime costs in
procurement however; the costs were Rs. 279.58, Rs.273.96, Rs.235.42,
Rs.233.24, Rs.106.20 and Rs.79.78 in green gram, tur dal, wheat, rice,
mustard and chilli, respectively. The sales tax at the rate of four per cent
seen only In case of spices and it was found to be highest of Rs.138.38 in
chilli as the unit cost of the product itself was high. Further, the total cost per

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quintal was high in the order of chilli (Rs. 7715.78), green gram (Rs.
4,691.72), tur dal (Rs. 3,257.47), mustard (Rs. 2,785.63), wheat (Rs.
2,359.45) and rice (Rs. 1,777.66).
In case of fruits and vegetables, tomato was procured in highest (14.63

quintals) quantity followed by onion and banana (12.50 quintals each) and
apple (5 quintals) although the total cost were high(Rs. 27,025) in apple
followed by banana (Rs. 23,175), onion (Rs. 7,224.38) and tomato (Rs.
7,224.38). The transport costs incurred in procurement of fruits and
vegetables were Rs. 1,312.50 in tomato, Rs.675 each in banana and apple,
and Rs. 275 in onion. Yet, the costs per quintal were in the order of Rs. 5,405
in apple, Rs. 1,854 in banana, Rs. 782.33 in onion and Rs. 495 in tomato.
4.4.3.2 Mysore-Table 4.11 corresponds to the average monthly cost incurred

in procurement of commodities by supermarket in Mysore city. Here the
highest total cost was accounted by green gram (Rs. 14,834.72) due to its
high unit cost (Rs. 4,685.61/quintal) and quantity purchased and the
minimum was accounted by mustard (Rs. 646) as it was purchased in small
quantity (0.23 quintals0. The subsequent total costs of other groceries were,
Rs. 9,087.22 in tur dal, Rs. 5,675.62 in rice Rs. 4,154.83 in wheat and Rs.
1,649.84 in chilli. The proportion of transport cost was highest in rice that is
Rs. 142.52 followed by green gram (Rs. 136.67), tur dal 9Rs. 119), wheat (Rs.
102.17), mustard (Rs. 39.33) and chilli (Rs. 33.32). The sales tax of Rs. 62.11
was observed in chilli.
In case of fruits and vegetables, the maximum procurement was in banana

(20 quintals ) and less in apple (6 quintals) thus the total cost were alos high
(Rs. 34,000 and Rs. 33,420 ) in respective commodities. The cost was Rs.
7,200 each in tomato and onion. The unit cost was as high as Rs 5,570 per
quintal in apple. However, the transport cost was more in banana (Rs. 1000)
and least in apple.
4.4.3.3 Mangalore
The average monthly costs incurred in procurement of selected commodities

by supermarkets in Mangalore city are depicted in table 4.12 it was shown
from the table that the maximum quantities of groceries were procured in
rice (4.96 quintals ) followed by tur dal (3.41 quintals), green gram (2.82
quintals), wheat (1.24 quintals ) and chilli (0.23 quintals ) and the maximum
cost was incurred in chilli green gram (Rs. 12,648.22) followed by tur dal (Rs.

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10,688.88), rice (Rs. 8,192.38) and wheat (Rs. 2,542.06) and chilli (Rs.
1730.61). Mustard was procured in minimum quantity. In addition, relatively
high transport cost (Rs. 169.08) was found in rice and low (Rs. 40.69) in
chilli. The highest local sales tax of Rs. 66, 02 was accounted for chilli.
In respect of fruits and vegetables, there was no sale of apple was noticed in
Mangalore supermarkets, however, more procurement and total costs were
observed in banana (9 quintals & Rs, 15,150 ) followed by Onion (5.5 quintals
& Rs. 4,207.50) and tomato (4.5 quintals & Rs. 3,022.50). The unit costs also
found in the same order.
4.4.3.4 Belgaum-The average monthly charges incurred in procurement of

commodities by supermarket in Belgaum city are shown in table 4.13.
The table reveals that rice (2.33 quintals) was the major commodity procured
by the supermarkets followed by tur dal (2.13 quintals), wheat (1.92
quintals), chilli (0.19 quintals) and mustard (0.09 quintals). While the total
costs were rs. 6,356.11, rs. 6,353.33, 3735.88, Rs. 3,547.99, Rs. 1370 and
Rs.216.48 in case of green gram, tur dal, rice, wheat, mustard and chilli,
respectively. The total transport costs were found to be highest in rice (Rs.
75.42) followed by tur dal (Rs. 72.08)and wheat(Rs.60.83). The unit cost was
highest in chilli that is Rs. 7212.81/quintal and lowest in rice (Rs.
1,611.31/quintal). The local sales tax in spices was more (Rs. 51.70) in chilli
as compared to mustard. No sale of fruits and vegetables were noticed
begum city supermarket.
4.4.3.5 hubli-dharwad-Table 4.14 presents the average monthly costs

incurred in procurement of commodities by supermarket in hubli-dhrwad city.
It could be seen from the table that rice followed by green gram, wheat tur
dal, chilli and mustard were procures in highest order of 4.46 quintals, 2.88
quintals, 2.75 quintals, 0.26 quintals and 0.18 quintals, respectively. Over
quintal cost was Rs. 7216.64 for chilli, Rs. 4,180.73 for green gram, Rs.
3,090.01 for tur dal Rs. 2,604.41 for mustard Rs. 2,154.58 for wheat and Rs.
1690.63 for rice. As it was observed in the earlier cities that the sales tax
was applied only for spices and chilli was the maximum was found in
supermarkets.
4.4.4 Average monthly costs incurred in procurement of commodities by

supermarkets in Karnataka
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The overall average monthly costs incurred in procurement of commodities
by supermarket in different cities (karnataka) is gives in table 4.15 it was
observed from the table that rice (3.85 quintals) followed by tur dal (3.47
quintals ), green gram (3.18 quintals), wheat (2.45 quintals), chilli (0.32
quintals) and mustard (0.26 quintals) were the major groceries procured by
the supermarkets. In proportion to the quantity, the total costs were found to
be in the descending order of Rs. 14,169.36, Rs. 10,997.59, Rs. 6,561.78, Rs.
2289.54 and Rs. 687.56 for green gram, tur dal, rice, wheat, chilli and
mustard. The costs per quintal was Rs. 7144.09 for chilli, Rs. 4,463.64 for
green gram, Rs. 3,149.58 for tur dal, Rs. 2,671.88 for mustard, Rs. 2,236.46
for wheat and Rs. 1,726.99 for rice. However, the sales tax was found in
spices and it was Rs. 46.93 in chilli followed by mustard that is Rs. 25.28.
Similarly, in case of fruits and vegetables, the purchase was highest in case
on banana (13.83 quintals) followed by tomato (12.50 quintals), onion (9.33
quintals) and apple (5.50 quintals). The total costs incurred were Rs. 30,180,
Rs. 24,148.15, Rs. 7,058.15 and Rs. 6,564.79 for apple, banana, onion and
tomato. The transport costs seems to be more in tomato (Rs. 1,012.50 ) and
less in apple (rs. 287.50) based on their quantity purchased. The commodity
wise costs incurred in procurement of commandeers by supermarket in
selected cities across karnarka are illusterded in table 4.16. On an average
groceries, rice was the major commodity procured in highest quantity (4.12
quintals) followed by tur dal (3. $& quintals) green (4!2 quintals) chilli (0>27)
and mustard (0.26) bu the total costs were high in green grams (14,371.40)
followed by tur dal (sr 11.140.43) rice (rs 7.005.440 wheat (4,887.40) chilli(rs
2,060.76) and mustard (rs 701.24) it was note worthy to mention that in all
the commodes quantise procured and their unit cost were found to be high in
Bangalore alone where in the procurement of tur dal was 6.46 quintals (rs
4.691.39/quintals) rice was 5.52 quintals (rs1777.96/quintals) wheat was
4.29 quintals and chilli was 0.48 quintals (rs 7715.78/quintals) city to city. As
it was revealed from the table the quantity procured in rice was more (4.96
quintals) in Mangalore but least in wheat (.24 quintals ) in most of the
commodities such as rice, green gram ,tur dal, chilli and mustard the
procurement was less that is 2.33 quintals, 1.49 quintals, 2.13 quintals, 0.19
quintals and 0.09 quintals, respectively in belgaum. The local sales tax of
4percent on spices found in all the cities and the average was highest in chilli
(rs 77.91) followed by mustard (rs.25.28).the transport costs varied in
accordance with the quantity purchased in all the cities and in all the
commodities. However the highest transport cost was noticed in rice (rs
157.20) and the least was in mustard (rs 42.540

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In respect of fruit and vegetable’s the maximum quantity of commodity
procured commodities were banana (3.83 quintals) followed by tomato
(10.38 quintals)onion (9.33 quintals) followed by tomato(10.38 quintals),
onion (9.33 quintal) and apple (5.50 quintals) whereas the cost power
quintals and total costs incurred were more in apple (rs 1.745.78/quintala
and rs 3.0222.50 total cost) followed by banana (rs 1745/quintals and rs
24.108.23 total cost0 onion 9rs 588.89/quintals and rs 5.815.63 total cost)
the table alos indicated that the fruit and vegetables procured from farmers
directly in the study area.. The transport costs were high in tomato
(rs712.50) and banana (rs 708.33) s the quantity procured was high in these
commodities.
Table 4.17 presents the city wise average monthly charges incurred in
procurement of commodities by supermarket. The monthly total quantity
pressured was highest in Bangalore (67.65) followed by mysore (59.77) and
mangalore 31.80, hubli- dharwad(13.13quintals ) and belagaum (8.14
quintals ) and in same descending order. The total costs were rs 13,
9110.31, rs 1.17.868.23 Rs.58.583.55, Rs.35.097.47 and Rs 21.580.23 in
respectively cities. Similarly, the transport costs were rs 414568 s, 2972.9rs,
1478.44 rs, 297.66 and rs 541.69 in Bangalore, mysore mangalore,
belagaum, hubli ,Dharwad, however depending on the quantity procured
total coasts in different commodities varied across cities.
4.5 INVENTOERY MANAGEMNT AND ITS COSTS IN SUPERMARKETS
Inventory refers to stocks of anything necessary to do business. These stocks

represent a large portion of the business investment and must be well
managed in order to maximize profited. Raw materials inventory. Work in
process inventory, finished products inventory and work in sales inventory
represents the various forms of investors. Each type represents money tied
up until the inventory leaves the company as purchased products. Likewise,
merchandise stocks in a retail store contribute to profits only when there sale
puts money into the cash register. In fact many small businesses like
supermarket. Unless investors are controlled, they are unreliable, inefficient
and costly. Inventory management and inventory control must be designed
to meet the dictates of the marketplaces and support the company’s
strategic plan.
In addition to inter on working capital, shrinking labour charges and packing

material, cold storage were also added to the inventory cost compounds of
fruits and vegetables.

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4.5.1 Most of inventories and preparation of products for sale in
supermarkets of different cities.
4.5.1.1 Bangalore -The cost of inventory and preparing the products for sale
in Bangalore short time period inventories were maintained in different
commodities,. In groceries the period was 4.67 days in mustard whereas in
case of fruits and vegetables, 4.67 days in onion. 3.60 days in apple and 3
days in very perishable like tomato and banana the quantum of investors
was found to be the highest in tur dal (6.46quintals) followed by wheat (5.75
quintals) green gram (5.54 quintal 0 rice (5.52 quintals ) mustard (0.64
quintal ) and chilli (0.48 quintals) in groceries the respective inventories
valued at rs .21.859.03 ,Rs. 9,417.06 rs, 26.903,63, rs. 10.107.12, rs.
1.750.08 and rs. 3.703.32. among different type of inventories. The finished
product inventory was observed to be the highest both in terms of quality
and storage period it was 4.66 quintals in whet valued at rs.6.765.47 held for
1.40 days. Next to the finished product inventory ,most of the product was
detained at work in tur dal was 0.42 quintals for 1.10 days, in wheat was
0.55 quintals for 1.30 days and rice was 0.80 quintals for 1.20 days. The
storage period of work in process inventory was low in most of the products
that is one day in rice, 0.84 days in wheat, 0.22 days in green gram, 0.39
days inters dal and 0.13 days Inc hills. The packaging material cost and
labour charges for cleaning and packing were found to be the major costs
components of inventory management in all the commodities. However
these costs were rs. 582.50 And rs 233 in tur dal, rs 631.50 and rs 210.50 in
wheat and rs.400 and rs 160 ingrain gram. The minor costs include interest
on working capital at the rate of 12.5 percent and shrinking/ wastage of the
product. The shrinking costs were rs. 533.85 in green gram. Rs 436.63 in tur
dal. Rs 101.18 in rice etc. at anal verge, the total inventory cost per quintal
was more in chilli ( rs .394.33) followed by mustard 9rs 253,90) green (rs
.201.63) tur dal (rs 1993.61) wheat (rs 166.46) and rice (rs 136 .90)
In fruit and vegetables’ the quantity of inventory maintained and their values
were high values were in high in onion (12.50 quintals valued at
rs.11.606.25) and low in apple (1.39 quintals valued at rs. 7845.86) in
addition the quantity maintained in tomato was 4.88 quintals with the worth
of rs.3.126.86 and in banana was 4.17 quintal with the worth of rs. 7.987.64.
The work in process and finished product inventories were not kept in case of
bana and apple as they are directly sold in the shop. As in the case of
groceries , the finished product inventories found to be maintained in highest
quantity and for long period in tomato (3. 50 quintals for 1.60 days) and
onion (8.50 quintals for 1.90 days) on the other hand, raw material inventory
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was found maximum in banana ( 2.46 quintals for 1.80 days) and apple (0.91
quintals for 2.20 days) in inventory cost components , shrinking was
perceived to be the highest cost in onion ( rs .1160.61) followed by banana
( rs 790.10 ) apple (rs 771.92) and tomato (rs 322.31 ) further the cold
storage cost was rs 22.59 in tomato, rs 123 in banana and rs, 54.50 in
apple./in apple . in contrast the labourn charges were nil in banana and
apple, and no cold storage was used in onion. However the total inventory
cost per quintal was n descending order incase of apple (rs.608.96) banana
(rs 240.47) tomato (rs. 227 .52) and onion (rs 202.78)
4.5.1.2 Mysore -Table 4.19 presenters the costs of inventory and preparing
the products for sale in yore supermarkets. It was shown in table that the
storage period of inventories was 4 days in all the groceries except mustard
wherein storage period was 15 days. In case of fruits and vegetable the
period was 2 days in tomato. Banana and apple but 4 dates in onion.
The quantity and value of groceries was looked to be high in rice ( 3.33
quintals accounted for worth of rs.5963.20) followed by green gram (3.17
quintal accounted for worth of rs .15391.14) wheat ( 3.oo quintals accounted
fro worth of rs.4847) tur dal (2.77 quintal accounted for worth of rs 9366.06)
chilli (0.21 quintals accounted for worth of 1.52 days in green gram, 2.11
quintal for 1.30 days in rice. 1.90 quintals for 1.52 days in green gram , 2.11
quintals; for 1.30 days in rice , 1.90 quintals for 1.40 days in tur dal. More
than half of the quantity of chilli (0.10 quintals) and mustard (0.12 quintal)
was alos held in this stage only. The rework in process inventory accounts for
less quantity and minimum storage period in almost all groceries. World in
sales inventory was 0.72 quintals of rice, 0.65 quintals of wheat, 0.45
quintals green gram, 0.32 quintal of tur dal, 0.05 quintal of chilli and 0.04
quintals mustard. In respect op costs. Packaging material and labour charge
was the major and shrinking and inters on working capital were the minor
compotes in inventory magnet, the packaging cost was higher in the order of
green gram ( rs 258.75) rice ( rs.244.76) wheat (rs.243.20) tur dal (rs 184)
chilli (rs.20.40) and mustards (rs .20.27) the labour charge accounted for rs
129.59, rs .110.50, rs 106.99 rs, 102./93. Rs. 20.60 and rs. 24.03 in green
gram , rice, wheat, tur dal, chilli and mustard, shrinking was observed too be
more in green gram ( rs 310.35)
In fruits and vegetables the quantity and value of inventory period was more
in onion (10 quintal valued at rs .7920) followed by banana (1.33 quintal
valued at rs 2282.95) tomato (0.80 quintals valued at rs.631.40) and apple

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(0.40 quintals valued at rs 2328.80) as in the case of Bangalore, the work in
process inventory and finished product inventories were not maintained in
banyan in onion (6.80 quintal for 1.40 days) (and it was very 0.33 quintals in
tomato. The work inhales inventory management of fruits and vegetables
followed by shrinking and packaging material. The costs were Rs. 562.50, Rs.
396.78, Rs. 340 for onion and Rs 32.25, Rs 68.72 and rs. 16.50 For tomato.
However the total the cost involved was rs.315 .70 in rice, Rs 262.90 in tur
dal, rs. 202.40 in green gram, rs 126.25 in wheat, Rs 22.92 in chilli and rs.
6.60 In mustard. The labour chargers were Rs.124.31 in rice, rs 123.21 in tur
dal. Rs 94.27 in green gram, Rs 68.45 in wheat, Rs 24.88 in chilli and Rs
14.19 in mustard. however, the total inventory cost per quintal was highest
in chilli (Rs 361.56) followed by green gram (Rs 201.64) tur dal (Rs 180.78)
mustard (Rs 168.29) and wheat (Rs 137.66)
In fruits and vegetables, the maximum inventory was maintained in onion

(5.50 quintals valued at Rs 4628.25) subsequently in tomato (1.50 quintals
valued at Rs 1190.25) and banana (0.60 quintal valued at Rs 1029.00) it was
also observed from the table that the finished product inventory had the
highest quantity and maximum storage period Ire 2.80 quintal for 1.90 days
in onion. There were no work in process inventory costs concern labour
charge and packaging materials were the main components of. It was Rs
268.35 and Rs 230.89 in onion. Rs 76.67 and Rs 123.50 in tomato
respectively. However, there was no cold storage was observed in mangalore
supermarkets. The unit cost of inventory for banana was Rs 214.03, Rs
162.00 fro tomato and Rs 116. 66 for onion.
4.5.1.4 Belagaum-It could be noticed from the table 4.21 that the storage
period of inventory by the supermarkets were 4.39 days in rice, 4.42 days in
tur dal, 4.33 days each in wheat, green gram and mustard but the highest
storage period of 15 days was observed in mustard.
The quantity of inventories was found to be high in wheat (2.56 quintals)

followed by rice (2.333 quintals) , tur dal (2.13 quintals), green gram (1,49
quintals ), red chilli (0.19 quintals) and mustard (0.09 quintals ) in groceries.
The respective inventories valued art Rs. 3935.15, Rs 3861.39, Rs 6575.00,
Rs, 1359.69 and Rs, 223.72.
Among different type of inventories, the finished product inventory was

observed to be the highest in terms of quantity. It was 1.75 quintals in wheat
followed by 1.451 quintals I =n rice 1.33 quintals intern dal. 0.76 quintals in
green gram 0.10 quintals in chilli and 0.30 quintals in mustard. The kept in

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work in process inventory was found to bee minimum in all the cases. The
packaging cost was found to be the prime cost in inventory as it was Rs
213.50 in wheat Rs.155.53 in rice, Rs 13.93 intern dal, rs 78.28 in green
gram, Rs 16.30 red chilli, Rs 4.48 in mustard. Similarly the labour cost
incurred were Rs .132.55 in green gram Rs.132.19 in tur dal Rs. 39.32 in
wheat, Rs.38.42 in rice, Rs.27, 28 in red chilli rs.4.48 in mustard. It was
observed that the total inventory costs were found maximum in case of tur
dal (Rs.333.46 ) and low in mustard Rs.15.31) however, the unit cost per
quintal was high in chill (Rs 319.89) followed by mustered 170.22), green
gram (1652,.21) tur dal (rs.156.55) wheat, (RS166.86()< rice (Rs143.70).No
sale of first and vegetable were observed in belagaum supermarkets
4.5.1.5. HUBLI-DHARWAD -It was observed fro the table 4,22 storage periods
commodities in the inventories by the supermarkets were 3.76 days each in
rice, wheat ,green ,.rice ,tur dal,.chilli whereas the period was 15 days
mustard.
Asia revealed from the table that the quantity maintained in inventories and
their valuates where more in rice, (4.46 quintals with at Rs 7705.77)followed
by wheat *(4.00 quintals worth at Rs.6277), green gram (2.88 quintals worth
at Rs.12488.40 ) tur dal (2,61 quintals worth at Rs 8378.10 ), red chilli(0.26
quintals worth at Rs 18.57),mustard 0.18 quintals worth at Rs 456.21) among
the different inventors finished product inventory occupied maximum
quantity and storage period in all t he commonideuis that is 2.80 quintals for
1.26 days in rice flowered by 2.15 quintals foe 1.35 days in wheat two
quintals 1,.16 days in green gram,1.75 quiytnatla for 1.10 days in tur dal
,0.15 quintals for 1.35 in chilli’s, and 0.5 quintals for 5.97 in mustard, again
the wok in processes inventory I was low in the common dies. Here
packaging materials, labour charges and shrinking were the major cost
components. The packaging material cost was Rs .280, Rs.275.20, Rs.214, Rs
174<rs.123.55 Rs.5.67, rice wheat, greeengeam, tur dal, chilli and mustard
respectively. The cost was Rs.250.97 and Rs 168.18 in shrinking of green
gram and tur dal. The total inventory costs were found to be high in green
gram(rs 578.26) low in mustard (Rs.24.59) at Ana verge the total inventory
cost per quintal was in the descending order chilli( Rs .3337.14),green gram
(Rs.22.78), tur dal (Rs 170.04),mustard (Rs 136.63), wheat (Rs 117./42) and
rice (Rs103.66) no sale of fruits and vegetables were observe in Hubli
Dharwad supermarket.
4.5.2 Average costs of inventory and preparing the products for sale at
supermarkets in Karnataka the cost of inventory and predating the products

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fore sale in selected cities. Across Karnataka are presented in table4.23. it
could be seen the table that the shirt time period inventories were
maintained in different commodities. In case of groceries the period was 4.48
days in rice,
4.44 days each, wheat and green gram, 4.49 days in tur dal , 4.45 days in
chilli 13.82 days in mustard whilt in case of fruit vegetables. 2.73 days in
onion 1.12 days in apple and 1.60 each in tomato and banana. The quantity
of inventories in groceries were found to be high in rice (4.12 quintal)
followed by tur dal ( 3.48 quintals ), wheat ( 3.39 quintals) green grams (3.18
quintals ), chilli (0.27 quintals) and mustard (0.26 quintals)the respective
inventories valued art Rs 7188.38, Rs 11474.77, Rs 5444.01 Rs. 14894.80,
Rs 2046.38 and Rs 689.07. Among different type of inventors the finished
product inventory was observed to be the highest both in terms of quantity
and storage period. It was 2.58 quintals for valued at 4477.02 held for 1.42
days, 2.34 quintals in tur dal valued at Rs, 7771.87 held for 1.42days, 2.20
quintals in wheat valued at Rs .3502.29 held for 1.53 days, 2.01 quintals in
green grams valued at Rs 94466.78 held for 1.61 days, 0.14 quintals in chilli
valued at Rs. 1021.93 held for 1.65 days and 0.14 quintals in mustard valued
at Rs 369.77 held For 5.74 days.
Next to the finished product inventory , most of the product was detained at
work in sales inventory and raw material inventory, the work in sales
inventory in tur dal was 0.33 quintals for 0.95 days, in wheat 0.51 quintals
for 0.98 days in rice 0.57 quintals for 0.70 days, in green gram 0,39 quintals
for 1.13 days, in chilli 0,04 quintals for 0.89 days and in mustard was 0.04
quintals for 2.22 days the storage period of work in process inventory was
low in most of the products that is 1.08 days in tur dal, 0.15 days in green
gram, 0.08 days in wheat , 0.06 days in mustard and 0.05 days in chilli . The
parking material cases and labour charges for cleaning and packing were
found to be major cost components of inventory management in all the
commodities. However these costs were Rs 297.93 and Rs 121.56in wheat,
Rs 289.20 and Rs 267.87 and Rs 129.34 in tur dal Rs, 230.69 and Rs 107.59
in green gram Rs .25.20 and Rs 23.12 in chillies Rs 70.96 and Rs 29.53 in
mustard. The minor costs include interest on working capital at the rate of
12.5 percent and shrinking of the product. The shrinking costs were Rs
298.35 in green gram, Rs 229.56 in tur dal , Rs 79.81 in rice, Rs 54.40 in
wheat, Rs 43 .39 in chilli and Rs 7,37 in mustard, t the average , the total
inventory cost per quintal was more in chills (Rs 361.37 ) followed by
mustard (Rs 216.39 ) green gram (Rs 202 .53) tur dal ( Rs181.88), wheat (Rs
140.51) and rice ( Rs 117 .87 )With respect to fruit and vegetable the
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quantity of inventories maintained and their values were high in onion (5.60
quintals values at Rs , 4830.90 ) and low in apple (o.39 quintals valued at Rs
.2034.93 ).
The other commodies such as tomato were 1.44 quintals valued at Rs 989.70
and banana was 1.22 quintals valued at Rs 2259.92. the work in process and
finished product incensories were not kept in case of banana and apple as
they sold in theshop.a sin the case of groceries, the finished product
inventories found to be maintained d in highest quantity for long period in
onion (3.62 quintals for 1.04 days) and tomato (0.94 quintals for 0.64 days)
but the raw material inventory was found maximum in banana (0.63 quintals
for 0.80 days) and apple (0.23 quintals for 0.66 days). In different inventory
cost components, shrinkage perceived to be the highest cost in onion (Rs
102.91). The cold storage cost was Rs. 50.80 in tomato (Rs. 30.10 in banana
and Rs. 11.30 in apple. Labour charges were nil in banana, and apple. Cold
storage was not used for onion. However, the total inventory cost per quintal
was in descending order in case of apple (Rs. 613.93), banana (Rs. 215.31),
tomato (Rs. 208.69) and onion (Rs. 159.97).
The commodity-wise costs of inventory and preparing the products for sale
across cities in karnataka are shown in table 4.24. it may be seen from the
table that the average strong period of groceries was 4.49 days in tur dal,
4.48 days in rice, 4.47 days in wheat and green gram, 4.45 days in chilli but
it was 13.82 days in mustard. Whereas in case of fruits and vegetables, the
period was 13.82 days in mustard. Whereas in case of fruits and vegetables
,the period was 4.56 days in onion, 2.67 days each in tomato and banana,
and 2.80 days in apple. It was noticed that in most of grocery items, the
inventory period was more (5.67 days) in Mangalore and the less (3.67 days)
in hubli-dharwad. On the other hand, the period was varied across cities and
commodities. Further period of inventory was found to be high in mustard
but the period was differed across cities and lowest was detected in tomato
and apple.
The maintained of maximum quantity of grocery inventories were found in

bam galore (6.46 quintals of tur dal ,5.75 quintals of wheat , 5.54 quintals of
green gram , 5.52 quintals of rice, 0.64 quintals of wheat,5.54 quintals of
green gram 5.52 quintals of rice , 0.64 quintals of mustard and 0.48 quintals
of chilli) while the least quantity maintained was found in belgaum (2.58
quintals of wheat 2.33 quintals of rice, 2.13 quintals of tur dal, 1.49 quintals
of green gram 0.19 quintals of green gram 0.19 quintals of red chill and 0.09
quintals of mustard). On the contrary the quantity maintained in Mysore and

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mangalore were differed in some of the products. It was the quantity
maintained in rice at Mangalore was 4,96 quintals whereas it was 3.33
quintals in mysore. Similarly the quantity of inventory in wheat was three
quintals in mysorebut it was 1.62 quintals in mangalore. In case of costs,
packaging material followed by labour charges, shrinking and interest on
working capita; were identified as the major components. The greater total
costs were also noticed in Bangalore in all the products but these costs were
also noticed in Bangalore in all the products but these costs were varied
across cities and commodities to commodities. Further the total inventory
Costa were also high in Bangalore alone except green gram, wherein the
total inventory cost over quintal was Rs .222.63 in mysore in contrast it wars
201.63 in Bangalore.
In fruits and vegetables category, the highest quantity of inventory was

found in Bangalore (12.50 quintals of onion, 4.88 quintals of tomato, 4.17
quintals of bana and 1.39 quintals of apple) followed by mysore ( 10 quintals
of onion, 1.33 quintals of bana , 0.80 quintals of tomato and 0.40 quintals of
apple) and mangalore (5.50 quintals of onion, 1.50 quintals of tomato, 0.60
quintals of bana) no sale of fruit and vegetables were witnessed in Belgaum
and hubli dharwad. Intern of inventory costs, the average total costs were
high in onion (Rs 1493.03) followed by apple (Rs.549.46), tomato (Rs 499.47)
and bana (437.80). Nevertheless average total inventory costs per quintal
were more in apple (Rs.620.07), banana (Rs.197.17), tomato (Rs.190.30) and
onion (Rs.149.90) in that order. However these costs were found to be
greatest in Bangalore (Table 4.24).
The city wise costs of inventory and preparing the product for sale are
elucidated in table 4.25. Even though, the quantity of inventory maintained
was high in Bangalore (47.33 quintals) followed by mysore (25;24 quintals),
mangalore (20.79), hubli dharwad (14.39 quintals) and belagaum (8.81
quintals), Bangalore (4,85 days ) and mysore (4,50 days). Among different
commodities, the quantity stored in onion was maximum(12.50 quintals in
Bangalore, 10 quintals in mysore and 5.50 quintals in Bangalore, 0.21
quintals anymore, 0.23 quintals in mangalore. 0.19 quintals in belagaum and
0.26 quintals in hubli-dharwad, the respective values were maximum and
minimum as the case may be. With respect to cost component, packaging,
costs were found to be prime constituent. On an average it accounts
Rs.2868.84 in bangaloe followed by Rs.1375.77 in Mysore. Rs .1141.77 in
mangalore. Rs 973.40 in Hubli-Dharwad and Rs.603.43 in Belgaum. The cold
storages were nil in mangalore, belagaum and hubli dharwad but seen only
in case of tomato, banana and apple in Bangalore and Mysore. However the
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total inventory cost per init was more in case of chilli (RS 394.33 in
Bangalore. Rs 353.36 in Mysore .Rs 361 in mangalore, Rs.319.89 in Belgaum
and Rs.337.14 hubli-dharawad).
4.6PROCESSING/VALUE ADDITION IN SUPERMARKETS

Processing in the supermarkets is the removal of inert materials. Other crop
seeds undersized seeds from the raw, materials in case of groceries whereas.
It is cleaning and grading of products in fruits and vegetables. Generally,
these activities are done through mechanical means.
4.6.1 EXTENT OF ACTIVTIES UNDERTAKEN IN PREPARION OF PRODCUTS FOR

SALE IN SUOPERMARKETS.
The steps or stages identified in the processing of commodities by the
supermarkets are as follows.
Stage I: cleaning
Stage II: grading
Stage III: bagging
Stage IV: labelling and sticking conditioning was not observed in any
supermarkets in the study area. The extent of activities undertaken in
preparations of the products for sale in supermarkets is shown in table 4.26.
It is revealed from the table that in the entire groceries cent percent of
cleaning, bagging and labelling and sticking were undertaken by all the
supermarkets. However, grading was observed in 66.67 per cent of
Bangalore supermarket but it was no seen in Belgaum supermarket. In
overall it represents that cent per cent of the supermarket followed
cleaning,bagging and labelling and activities and 26.67 per cent of them
undertaken grading activities across cities in the state.
In fruits and vegetables cleaning activity was observed in all the
supermarkets,which are dealing with these products but cent per cent
guarding, bagging and labelling and sticking were identified only in
Bangalore supermarkets. At an overall it accounts 100 per cent of the
supermarkets carried out cleaning activity and 33.333 per cent each followed
gearing, bagging and labelling and sticking activities in the state.
4.6.2 VALUE ADDITION IN SUPERMARKETS FOR THE SELECTED PRODUCTS-

Value addition as a result of processing during the resale of average value
added in case of groceries was maximum in wheat (31.33 per cent) this is
followed by rice (30.59 per cent) mustard (28.05 per)On the other hand in

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fruits and vegetables category the per cent value addition in Bangalore
super markets was found to be highest in tomato (64.78 per cnt) as against
20.65 per cent in apple. Similarly, it was 41.73 per cent in onion and 28.00
per cent in banana. The indicated percentage of value addition in my sore
supermarkets was 45 per cent in tomato, 39.09 per cent in onion, 25.00 per
cent in banana and 21.14 per cent in apple. In respect of Mangalore too, the
value addition was maximum in tomato wherein the percentage value added
was 37.83 perCent. The banana and apple occupied 35.00 per cent and
28.99 per cent accordingly. On the overall supermarkets, the greater per cent
of value addition was found in mustard (27.68 per cent) among groceries and
tomato (49.21 per cent) in fruits and vegetable. The value addition in other
commodities were in the descending order of 26.99 per cent, 26.17 per cent,
19.99 per cent, 17.48 per cent, and 16.21 per cent in wheat, rice, tur dal,
green gram and chilli, and 38.61 per cent, 27.33 per cent and 22.90 per cent
in onion, banana and apple. However, out of the selected cities the
maximum value addition in both groceries and fruits and vegetable were
found in Bangalore.
4.7 FINANCIAL MANAGEMENT IN SUPERMARKETS

Financial performance refers to any companies ability to generate new
resources, from day to day operations, over a given period of time. The
financial ratio represents the relationship between two accounting figures
expressed mathematically. In financial analysis, a ratio is used as an index or
yardstick for evaluating the financial performance or status of any institution
against certain standards. Ratio analysis technique is popular in the
accounting system of enterprises in general and helps in spotting trends
towards better or poor performance. It is helpful in finding significant
deviations from an average or pre-determined standard. The financial ratios
relevant to supermarkets in retailing are grouped under four different
categories namely, solvency ratios, liquidity ratios, profitability ratios and
turnover ratios and pre presented in table 4.28
Solvency ratios-The long-term solvency positions of the supermarket are assessed

by these ratios. Solvency refers to the ability of the supermarket to replay its
outside long-term liabilities/total liabilities. Solvency ratio indicates long-term
stability of a concern. The long-term creditors would judge the soundness of the
supermarket on the basis of the long-term financial strength measures in terms of
its ability to pay the interest regularly as well as replay the installment of the
principal on due dates or in one lump sum at the time of maturity. Here the ratios
like total liabilities to owned funds and fixed assets to owned funds were considered.
The ratio of total liabilities to owned funds was found to be 0.798, 0.600, 1.905,

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3.535, and 0.345 in Bangalore, My sore, Mangalore, hubli and belgum, respectively.
On the overall across cities it was 1.400 which indicates the soundness of the
supermarkets business in the state. The ratio of fixeed assets to owned funds was
found to be 0.697 in Bangalore, while 1.731 and 1.367 were found in Mangalore and
hubli-dharwad. At an average the ratio was 0.853 for the overall supermarkets
across the state. Liquidity ratio-Liquidity ratio indicates the continuous operation of
the supermarkets. These ratios are used to measure the ability of an institution to
possess adequate cash to meet immediate obligations. The liquidity position of the
supermarket was examined using two ratio namely liquid assets to total assets ratio
and current assets to current liabilities ratio.
A review of the table indicates that in all the supermarkets. The liquid assets
to total assets ratio was less than 0.5 which is 0.459 in Bangalore, 0.404 in
My sore, 0.157 in belgaum and 0.268 in hubli-dharwad and hence the overall
was 0.337. it indicates that more than 50 per cent assets were not in liquid
assets form. The current ratio (ratio of current assets to current liabilities)
presented in the table indicates that the ratio was more than one in all the
cities supermarkets except mysore, wherein the ratio was 0.994. it means to
say
The supermarket had more than one rupee of current assets per rupee of
current rupee of current liabilities
Profitability ratios-These ratios can be used to assess the financial status and
overll efficiency of the supermarkets these ratios were used to compare the
return on investments an important indicator of the operational efficiency of
a firm is its profits however total profits do not indicate the efficiency where
as the profit per unit of different aspects of business certainly does. Hence
the ratio of net profits to different determinations were worked out and
presented in table 4.28 Net profits to fixed assets ratio were found to be
1.297, 0.717, o.705, 0.677 and 0.572 in various cities on the descending
order in mysore, hubli-dharwad, belgaum, mangalore and
banglore.similarly,the ratio in case of net profits to total assets was high in
belgaum wherein the ratio was 4.509 followed by myosre (3.146), mangalore
(2.187), banglore (1.373) and hubli-dharwad (0.868). however , the overall
ratio was 2.499. the obtained ratios were 4.621 in mangalore subsequently
1.773 in hubli-dharwad,1.229 in mysore ,0.859 in bangalore and 0.537 in
belgaum.the overall net profit to own funds was 1.989.the ratio of net profits
to total sales ratio point outs the net profits for each rupee of own funds used
in the business, which were 0.205 incase of bangalore, while 0.170 in case of
mangalore. It is quite good in mysore (0.191),hubli-dharwad (0.180) and
belgaum (0.178). Net profits to total sales were also found to be 0.189 in
cities across the state indicating 0.187 rupee contribution to rupee of total
sales.

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Turnover ratio;The turnover indicates the operational efficiency of the
supermarket in the study area. The efficiency of supermarket in the selected
cities was compared using the indicators such as working capital turnover
ratio and fixed assets turnover ratios.
The working capital turnover ratio indicated the relationship between sales
and working capital. This ratio was highest 0f 5.156 in belgaum followed by
1.890 in Bangalore, 1.576 in Mangalore, 1.539 in hubli-dharwad and 1.331 in
mysore supermarkets. In contrast, the fixed assets to turnover ratio was
6.784 in mysore, 4.319 in hubli-dharwad, 3.971 in Mangalore, 3.931 in
belgaum and 3.581 in Bangalore. At an average, the average working capital
turnover ratio was 2.298 and fixed assets to turnover ratio was 4.517 for the
state.
4.8 factors considered and methods of price-formation in supermarkets In

order to assets the relative importance attached by the supermarket to the
factors considered in pricing of products at supermarkets in different cities
across Karnataka garret technique was employed. The factors considered in
the analysis were nature of products, market forces (supply & demand),
product life competition, long-term pricing, market segmentation, quality of
the products, relative prices of the producers. Price should not be high, price
should convenience prospective consumers, and price shall ensure
profitability and availability of the products. In addition to city- wise results,
overall results of the analysis are presented in table 4.29
Table 4.29 represents the results of the garret ranking analysis conducted in
respect to factors considered in pricing the products in supermarkets by the
retailers (supermarket)
As the table reveals, the Bangalore supermarkets attached significance

importance to quality of the product followed by price should ensure
profitability, nature of the product, competition, product life, price should not
be high, availability of product, price shall convenience prospective
consumers etc. in mysore supermarkets attached first preference to nature
of the product and the least consideration was given to market
segmentation. The order factors such as quality of the products =,
availability of the product, price should not be high, competition etc were
also considered next to nature of the product. Nature of the product, quality
of the product, price should ensure profitability and competition were
reflected as the prime factors considered in pricing at Mangalore. Similarly,
competition, price should not be high, quality of the product and price ensure
profitability were the factors considered in belgaum firms. In case of hubli-
dharwad, quality of the products was considers the most important factor in
fixing the price for the products. Long term pricing was given least
importance. The other factors namely, competition, price should not be high,
nature of the products, availability of the product, market forces, product life

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assumed second, third, fourth, fifth, sixth and seventh important place in
hubli-dharwad supermarkets.
In the overall, the factors –quality of the product, nature of the product,
competition, and price should not be high, price should ensure profitability,
availability of the product, product life, relative price of the rival products,
market forces price shall convenience prospective consumer, market
segmentation and long-term pricing were considered as important in that
order. The sum of the opinion of the retailers, which are converted into
scores (garret table) and the mean scores obtained are presented in
appendix-I
One of the most crucial areas of decision making for retailers is pricing. The
main objectives of the pricing are to get handsome return on investment, to
achieve the growth in terms of sales, to increase he market share and to
stabilize the variations in the prices to protect prospective consumers and in
turn total sales. In case o retailing, the supermarkets decide the price for
their products base on the market situation. However, the methods of pricing
followed in supermarkets were illustrated in table 4.30 .
In addition to absorption cost pricing and going rate pricing methods by the
cent per cent of the Bangalore supermarkets, target pricing, perception
pricing and discounting pricing were adopted by 66.67 per cent of the
supermarkets about 33.33 per cent was followed loss leader pricing in items.
It was cent per cent 66.67 per cent and 33.33 per cent of the supermarkets
in Mysore followed absorption cost pricing and going tare or market pricing,
discounting pricing and penetration method o pricing. All the supermarket in
Mangalore adopted absorption cost pricing and going rate or market pricing
methods, whereas 66.67 per cent of them in the city were also made use of
loss leader pricing. A part from this. 33.333 per cent of the supermarket also
went behind penetration pricing , discounting and destroyer or destructor
pricing methods occasionally. The pricing in belgaum supermarkets was done
through absorption cost pricing and going rate or methods pricing methods
by all the firms tougher with discounting pricing by 33.333 percent of the
supermarket, similarly the methods employed by the hubli dharwad
supermarket were absorption cost pricing, discounting pricing ( in festivals)
and going rate or market pricing methods (100 per cant each) and
penetration pricing and loss leader pricing (33.333 percent each)at an
overall, cent per cent of the supermarket in the state followed absorption
cost pricing the products at supermarket .a bout 60 percent followed
discounting pricing special days while 33.33 per cent and 26.67 percent
adopted penetration pricing and loss leader pricing methods. A small
proportion (13.33 per cent and 6.67 percent) of the supermarkets also
adopted target pricing (fro selected products) and destroyer or destruct
pricing methods in their retailing business.

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4.9PROBLEMS FACED BY THE FOOD REATILER
In the present study 38 variable were identified and grouped into 10 factors
after rotation of principle components technique. Out of the 10 factors 9
factors, which explain 92.38 of the total variable were selected for
interpretation. Table 4.31 shows the factor loading of the each variable under
different factors and the percentage variation explained by each factor.
The first dimension explains 19.18 per cent of the variation. Among 38
indicators 8 showed higher factor loading (above 0.5) on the first dimension.
Availability of trained employees, banks for sources of finance demand for
credit from the customers , bargain from the customers, government scheme
fro finance, repayment from the customers and credit facility from the
wholesales had highest factor loading of 0.797, 0.788, 0.743, 0.697, 0.665,
0.594, 0.555 and 0.523 respectively. This implied that these indicators were
the key problems in the supermarket business in different cities of Karnataka.
In contrast to these advertisement rate and coverage of area, WTO impact
on profit margin and on price of the products and market information from
the wholesalers had shown negative factors loadings.
The Second dimensions explained 15.85 per cent of the variation and it
consists of 6 indicators with high factors loading (above 0.4). Except
transportation facilities (0.677), timing of advertisement (0.669) , damages
of products from wholesalers (0.658), bribes to government authorities
(0.650)< tax Charged by the government (0.583) and margin from the
wholesalers (0.486) have shown positive factor loading on supermarket
business.
The Third dimension, which explained 11.04 per cent of the variation in the
problems of the supermarket consists of 5 indicators . Among the five, four
indicators – demand for discounts and offers from the customers, locations –
demand for discounts and offers from the customers, location of the
supermarket. Who impact on the problems but information in advertisement
shown negative effect.
VAT charges, demand for new products from the customers , land and
building and financial resources were comes under fourth dimension
explained about 9.78 per cent variation, the respective factor loading are
0.72, o.55, 0.52 and 0.48. the fifth dimension explained 9.42 percent of the
variation . The number of indicators included in this dimension was 3, with
insurance facilities and procedures of the government have negative factors
loading but variations by the wholesalers had positive factors loading.

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About 6.67 percent of total variation was explained by sixth dimensions
consisting of storage facilities and agencies for supply of products to the
supermarket have positive loading.
The two variables such as delivery from the wholesalers and option of the
retailers regarding VAT included in seventh dimensions explained 6.19 per
cent of the total variations with positive consequence on the problems of the
retailing.
The eight and ninth dimension which expand 4.70 and 4.10 per cant of total
variations includes existing locations of the site and avalitiblity of untrained
employees respectively had factors loading of -0.46 and 0.52
The components matrix and the extent of variation explained by different

dimensions on the problems of supermarket in Karnataka are shown in
appendix – II appendix-III
FACTORS INFLUENCING THE COMNSUMERS TO PURCHASE THE FOOD

PRODUCTS IN SUPERMARKET
in this section, results of the opinion of the consumers to go for purchase at

the supermarket in the study area were collected using three point scale
technique based on their importance as most , medium and less
performance. The opinions obtained in terms of acores (I,e there points
scale) from the counsyue,rs were analyzes using cluster analysis and the
results of the analysis are presented in table 4.32
it was revealed from the table that out of 30 variables, 13 variables were
found in the first aggregate cluster named as accessibility and product
quality factors, 10 were grouped in second aggregate cluster named as
influencing factors to go for purchase at supermarket and remaining seven
variable were includes in third cluster amend the cluster as product
promotion q1quality factors were convenient location of the supermarket,
range of product availability, convenient for purchase,availability of quality
products, saves time of shopping, working women and convenience,
frequency of visits etc based on their similarly within the variable, similarly
the influencing factors in the second clusters were reasonable price , parking
facility, shopping is seen enjoyable at supermarket, attractive packing,
schemes and offers, concern about health, welfare and the environment,
influence of peer group, availability of range of brands etc as the stimulate
the consumers to opt for supermarket for their purchase. The products
promotion n factors in the third cluster group were payment methods,
interest in eating foreign foods, home delivery facility, new products market
development, attractive advertisement, fresh fruits and vegetables and fresh
bakwy products availability. The similarly of the variables can be seen in the
dendrogram (appendix-IV). However the cluster classification obtained from

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the analysis were tested in the discriminate analysis and the results gained
are presented in table 4.33, it is found from the table that he group
classification was cent per vent correct. The cluster analysis were given in
appendix V and the proximity was presented in appendix VI
V DISCUSSSION
The findings of the study, which were presented previously, are discussed in
this chapter under the following headings to arrival at a meaningful
interpretation.
1. documentation of supermarket
2. investment pattern in supermarket
3. organizational structure of supermarket
4. procurement management of supermarket
5. inventory management and its costs in supermarket
6. financial management in supermarket'
7. financial management in supermarket
8. factors considered and methods of price- formation the food
products in supermarket
1. DOCUMENATION OF SUPMARKET
Table 4.2 presents the list of existing supermarket in selected

cities across Karnataka (up to 2006). The name some existing
supermarket, number of outlets and addresses to heir head
offices re presented in the table. It was observed from the study
that majority of the organized supermarket (multi outlets)
existing and operating only in big cities like Bangalore and
Mysore . These organized supermarkets have multi outlets
operating under the single management and accounts fro huge
turnover.
The un-organized recently formed supermarkets were found in Mangalore.

Belguam and hubli-dharwad. In these cities, the big local and conventional
store owners have converted their indigenous general stores into the modern
type of stores called supermarkets to cater the changing needs and
expectations of modern consumers consumer familiarity that runs from
generation to generation Is one big advantage for the traditional retailing
sector.
The more organized form of supermarkets found in banglore city based on

their number of outlets were shubhiksha (40) followed by foodworld
(33),fabmall(23), smart (18), namdhari's fresh (14) and niligiri dairy farm Ltd

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(12). the other important supermarkets in the city were spencer's, food
bazaar, monday to sunday, farm line supermarkets, M.K retail Co. super
mart, ruba traders etc. all these supermarkets have head offices at banglore.
The famous indigenous supermarkets in the mysore city were loyal world,
arinath super bazaar, mohan bhandar, shivananda supermarket, A-Z
supermarket and foodworld. However, the organized supermarkets like
foodworld, niligiri's, s shubhiksha and fabmall have presented the city more
recently and most of these had their head office at banglore.
The family owned un-organized supermarkets such as baliga stores

supermarket, Andy’s supermarket; apna bazaar, jimmy's supermarket,
misbah supermarket, move N pick, noor super bazaar ruby's supermarket,
sadhar bazaar were well known in the city. Just recently,
The organized supermarkets like foodworld, niligiri's and food bazaar have
also entered into the food retailing business in the city.
Pick 'n' pay, sang ram food basket, day 2 day, needs supermarket and eshan
super Shoppe were the only five supermarkets in hubli-dharwd city, however,
pick 'n' pay and sangram food basket had two outlets each in the city.
Similarly, the supermarkets in the belgaum city were hans raj supermarket,
neena supermarket, quality supermarket, rex supermarket and shoppers
paradise, most of which are family owned.
2.INVESTMENT PATTERN IN Supermarkets
it was found from table 4.2 that the average area of the supermarket outlets
in different cities were found to be 4333.33 square feet, 3133.33 square feet,
2833.33 square feet and 1200 square feet in Bangalore, mysore, hubli-
dharwad, manglore and belgaum, respectively. The area was high due to
more transactions, range of products and more spacious to attract
consumers in big cities like banglore and mysore and less in manglore, hubli-
dharwad and belguam as the supermarkets in these cities were recently
converted from the conventional stores. Sometimes organizations are
created large at the outset, usually because size is an advantage or a
necessity. For example, the owner of an independent supermarket does not
open a small store in a newly built subdivision and then grow larger as
demand warrants. Instead, a large store is designed and built that has the
capacity to deal with the expected number of customers in the
neighborhood. A small grocery store could not complete effectively in price
and selection with other nearby supermarkets.
In addition, table indicated that though, the fixed capital drastically varied
from city to city, highest was found in Bangalore (Rs. 258.30 lakh) followed
by hubli-dharwad (Rs. 71.60 lakh), mysore (Rs. 39.23 lakh),belgaum(Rs.

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18.81 lakh) and manglore (Rs. 13.00 lakh), however, the overall average
total fixed cost per outlet was Rs. 78.42 lakh for the state as a whole. At the
same time, it accounts for 30.01 per cent of the total capital. This is due to
higher amount of capital investment on sophisticated modern equipments
and infrastructural facilities. Among different fixed capital, the proportion of
land 7 building accounted for 23.50 per cent of the total capital elements
were machineries & equipments, other fixtures and salary elements were
machineries & equipments, other fixtures and salary to permanent
employees which accounts to 2.10 per cent, 1.20 per cent, 1.08 per cent
respectively of the total fixed capital.
In case of working capital, raw materials were the prime costs contributed
about 67 per cent of the total capital as the retailing business (supermarkets)
itself is to reselling of commodities and quicker conversion if inventory into
cash. The other important working capitals incurred in the establishment of
supermarkets were wages to casual laborers, power charges and packaging
material. These results are on par with the study conducted by nagesh
(1990) wherein the highest fixed capital investment was in building (72.81
per cent) followed by machinery and equipments(15.42 per cent) and land
(11.77 per cent) in production and marketing of cashew in Karnataka at an
overall, the average total costs required to establish a supermarket in
Karnataka was 261.33 lakh and the same in different cities such as banglore,
mysore, hubli-dharwad, manglore and nelgaum were Rs. 762.061 lakh, Rs.
205.876 lakh, Rs. 173.191 lakh, Rs. 96.78 lakh and Rs. 78.53 lakh,
respectively. The higher costs in big cities was due to higher labour costs,
social security to employees, high quality real estate, much bigger premises,
comfort facilities such as airconditioning, back-up power supply, taxes etc.,,
it is more so incase are of low cost structure, mostly owner-operated, has
negligible real estate and labor costs and little or no taxes to pay.
ORGANIZATIONAL STRUCTURE OF SUPERMARKETS-
it was observed that the organized supermarkets or supermarkets in multi

outlet (chain of supermarkets) firms/companies followed line, line and staff,
and the functional categories of organizational structures whereas line
organization was commonly followed in un-organized supermarkets or
supermarkets not in china. This may be because of huge investment and
more number of activities in organized supermarkets and the reverse is true
in un-organized supermarkets. The line organizational structure in both the
supermarkets was found to be similar with the studies conducted by ramdev
(1998) and mane rahuk rajaram (2000) they found that the both small and
large scale agro-based units having
both less and high investments followed line organization type of structure
because of fast communication, easy feed back and possibility to take easy
and immediate corrective measures. The functional organizational structure

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followed in the organized supermarkets was found to be reliable when it is
compared with the repory presented by kozachuk (2001) regarding
management practices existing in Russian enterprises, which were
inappropriate for operating in market conditions due to lack of functional
organizational structure I trading enterprises
The line organization is simple; authority and responsibility are clear cut,
easily assignable and traceable. It is easy to develop a sense of belonging to
the organization. Communication is fast,easy and feed back from employees
can be easily obtained and immediate corrective measures can be applied.
The discipline among employees can be maintained easily and effectively.
In line and staff organizational structures delineation of organizational

authority between management personnel (staff) having overall planning
and direction responsibilities and operational personnel (line) having direct
job performance responsibilities. Here staff is advisory to the line function.
Similarly, functional organization structure is based on functional

performance; organizational departments are created to fulfill organizational
functions such as marketing, finance, and personnel. This type of
organization has characteristics of both line and staff
functions.organizational structures of supermarkets in chain (organized
supermarkets In the hierarchy of these outlets/supers they have executive
(managing director (MD)/chief executive (CEO) to design, develop and
implement the strategic plan for the company in most cost effective and
time efficient manner and in turn he is responsible for both day-to-day
running of the company and developing business plans for the long term
future of the supermarkets. He is assisted by general mangers (GM) of
different departments such as purchase, marketing, finance and the
systems.
The general manager takes care of overall responsibilities for managing both
revenue and cost elements of their respective department. Usually he over
see almost all the functions as well as day-to day operation of their
department. Frequently, he is also responsible for leading or coordinating the
strategic planning functions of the supermarkets. The GM (purchase) is
assisted by an assistant general manager (AGM) in turn purchase managers,
store managers, supervisors and labourers in a hierarchy. The whole team is
responsible for the complete purchase and procurement of related materials
for the company such as price, quality, availability, reliability of the products
and technical support when choosing suppliers and merchandise. They try to
get the best deal for their company, meaning the highest quality goods and
services at the lowest possible cost to their companies. The purchasing
managers, buyers, and purchasing agents make up a key components of a
firm's suply chain.

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The responsibilities of the GM (marketing) and his term involved in
supervision, marketing, sales of the supermarkets. He is assisted by an AGM
(marketing), shop managers, supervisors, cashiers, attendees , sales
representatives and watchmen in a top-down hierarchy. The team looks after
reporting, resale pricing, inventory, service maintenance and other duties as
requested by management. In addition, the marketing people involves in
developing and implementing an annual marketing plan, directing division
marketing activities, and developing an annual sales and promotion program.
The GM (financial) assisted by AGM (accounts) and accountants are

responsible for maintenance of overall accounting and auditing aspects of
the business. They helped in planning, budgeting, maintaining recors and
accounts of employees, customers and suppliers. Finally, GM (system) looks
after day to day operations of the supermarkets and is responsible for
developing process, systems, quality and service standards.
2.Organizational structures of supermarkets not in chain (un-organized

supermarkets)The proprietor or the manager is the head and sole
responsible for anything in these supermarkets. He will be the decision
maker in the organization usually assisted with supervisors, cashiers, sales
representatives and watchmen in a hierarchical way. The manager himself
looks after purchasing, inventory and marketing activities. Some time, any
person in the supermarket can be assigned for various activities like
purchasing, processing, marketing and sales activities as assigned by the
manager
PROCUREMENT MANAGEMENT IN SUPERMARKETS
1.existing procurement patterns it was observed from the table 4.3 that only
two types of purchasing patterns such as centralized or store level
purchasing pattern were followed in supermarkets for procuring the selected
products. In order to establish and effectuate a uniform procedure for the
handling of purchasing matters; to obtain the most suitable service and
commodities at the lowest price; and to promote the best possible means of
exercising financial control over expenditures, the centralized purchasing
system was adopted by most of the optimizes multi-store inventory control
from one central location to manage just-in time replenishment. In contrast,
store level purchasing refers to the purchase of commodities for the
individual outlets as and when necessary, mostly followed by the un-
organized supermarkets.
It was also noticed from the table that in Bangalore, cent per cent of the
supermarkets followed centralized purchasing pattern due to their multi
outlet operations and organized form of retailing. On the other hand, in
Mangalore and belquam, cent pet cent preferred store level purchasing
because of their single outlet operation and un-organized structure of

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retailing. However, 66.67 per cent of supermarkets in my sore, preferred
store level purchasing and 33.33 per cent have gone for centralized
purchasing and the reverse was found in hubli-dharwad depending upon
their mode and size of operation. These results are in accordance with the
study conducted by woods t al (2000) while studying the supply chain
concept for horticultural products. They found that many supply chains in
smaller industries were loose. Fragmented, inter woven, unstable and
unique. Hence, they suggested those firms operating in within these
environment needs an astute understanding of the chains, the hierarchy of
channels members and their relative position. In the study, he also
suggested effective business strategic for individual firms and supply chains
needs to be developed and redeveloped to accommodate the dynamic
nature of horticulture. Further it was noticed from the table that all the
supermarket purchased groceries through APMC (agricultural produce
marketing committee) in all the cities because of prevention of the existing
rules and regulations of the government to procure agricultural products
from any other sources but fruits and vegetables were purchased directly
from farmers and groom wholesale markets. In addition to these sources
some supermarkets in Bangalore have their own production. In mysore and
mangalore fruits and vegetables purchased through wholesale market only.
On the other hand , no sale of fruits and vegetables were found in belagaum
and hubli-dhrawad supermarket. These are equivalence with the results of
the study reported by narayana redddy (2004), he stated that most (61
percent) of the retailers get their requirement from wholesalers, 15 percent
from the large and other retailers over 17 percent of the selected retailers
get their goods from more than one sources, but a small percentage pf
retailers get some of their requirements from producers. Apart from this , the
study also shows that the organized retailers/ hyper malls and supermarkets
get wholesalers margin plus concession as they in bulk and are also the
producers.
2.MONTHLY AVERGE QUANTITY AND VALUE OF PROCUREMENT IN VARIOUS

SUP S ACROSS CITIES
1 .BANGALORE;It was reveled from table 4.4 that among grocery items. The
average frequency of purchaser was ranged from four to five times in a
month for groceries. Among the groceries, rice, wheat,greeen gram and tur
dal and chilli were produce more frequently than mustard wherein the
procurement was 2.67 times a month. On the average, tur dal was procured
in highest (6.64 quintals) quintals followed by greeen gram (5.54 quintals).
rice (4.48 quintals) wheat (4.29 quintals), mustard (0.64 quintals) and chili
(4.29 quintals). The average quintals of purchase in cereals and pulsed was
high because of the high turnover and demand from the consumer the
grades like standard, premium and regular in sona masoori rice and byadagi
stem less variety chilli were the major varietes procured in highest quantities
based on the consumer preferce. The average total amount spent on these

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items were found to be in green gram(Rs./25.274.56) followed by tur dal
(Rs.21.271.60), wheat (Rs.8,832.14) rice(Rs.9603.18), chilli (Rs.3,48.43) and
mustard (Rs.1603.34). However the average price per quintals was highest in
chilli(RS.7258.33) and lowest in rice (Rs.1719.29), the main sources of
purchase for groceries was APMC only in case of fruits and vegetables
tomato was procured in highest (14.63 quintals) quantity followed by onion
and bana(12.50 quintals each ) and apple (5 quintals ) high demand for
tomato and onion was natural due to the daily use of these things in good
preparation by the consumers. On an average , the frequency of purchase
was 10 times a month in tomato and banana, 4.67 times in onion and 8.33
times in apple depending on their perish ability nature. In addition to market
and direct procurement of tomato from farmers, own production was also
observed in Bangalore supermarket whereas the procurement in other fruits
and vegetables was found to be from wholesale market only. The maximum
amount spent in procurement as apple (266.750.00) because of its high unit
cost price.
5.4.2.2mysore-as presented in table 4.5 the average monthly purchase

frequency in groceries was found to be four times a moth in case of rice,
wheat, green gram, tur dal and chilli but it was two times in mustard because
of its less demand. The highest quantity procurement by the mysore
supermarkets was found in rice (3,12 quintals), wheat (2.77 quintals)
followed by green gram (3.17 quintals) and chili (0.21 quintals ). based on
the unit cost and quintals purchase the total amount spent by these
supermarkets was maximum of rs.14.689.06 was observed in green gram
due to its high until cost (Rs.4.642.50 quintals) and the minimum was found
in mustard (Rs.583.33) as it was purchased in small quantity.
The higher procurement incase of frits and vegetables was observed in

banana (20 quintals) followed by tomato (12 quintals) onion (10quintasl )
and apple (6quintasl ) depending upon the demand for these products and
the total amounts to Rs.33.120 for apple. Rs.33.000 fro banana. Rs.67... For
onion and Rs.6600 fro tomato. Here the average frequency of purchase was
15 times a month in tomato, 10 times in banana and apple, but only four
times in onion because of its hairiness.
3.Mangalore - the average monthly purchase of selected commodities in

mangalore supermarkets shown in table 4.6 reveals that the maximum
quantity of grocery purchase was in rice(4.89 quintals ) followed by tur
dal(3.41 quintals), green gram (2.82 quintals ), wheat (1.24 quintals ), chilli
(0.23 quintals ) and mustard (0.15 quintals ) depending on their turnover in
the supermarkets the amount spent respective of the order was Rs.8.023.29,
Rs.10.552.54, Rs 12.535.56, Rs.2,498.47, Rs.1.623.90 and Rs.361.00 based
on their quantity purchased due to the demand for those products. The
purchase frequency was 5.67 times a month in rice, wheat, green gram, tur
dal and chilli but 2.33 times a month in mustard because of its less demand.

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All these products were acquired from APMC only. In fruits and vegetables, no
sale of apple was noticed in mangalore supermarkets because of non
availability of fruits in wholesale market and the dominance of traditional
fruits sellers in the study area. However, more procurement in terms of
quantity and total costs were observed in banana (9 quintals & Rs.14.700)
followed by onion (5.5 quintals & Rs.3.932.50) and tomato (4.5 quintals &
Rs.2.797.50). The units costs were also observed in the same order. While
the purchase frequency was 10 times a month in tomato and five times in
onion. All these products were also purchased from the wholesalers market.
4. Belgaum
the frequency of groceries in belgaum was different from commodity to

commodity (Tabel4.7) that is 4.39 times a month in rice, 4.67 timeline month
in wheat.4.33 times in green gram.4.42 times in month in tur dal. 4.33 times
in chlli and two times a month in mustard fro thr reason that the
supermarkets purchase the products whenever need arises. All these
products were procured from APMC only. In addition, the table also revealed
that rice (2.33 quintals) was the major commodity procured in supermarkets
followed by tur dal (2.13 quintals),wheat (1.92 quintals), chilli(0.19 quintals )
and mustard (0.09 quintals ).a t the same time, the estimated total amount
were Rs.6.305.69, rs.6281.25, rs.3660346, rs.3.481.15, rs 1.292.3 and Rs
196.44 in case of green gram, tur dal, rice, wheat, chilli and mustard,
respectively based on their unit cost and q1uanity purchased. However these
products were brought from APMC only as it is the only regulating body for
marketing of agricultural commodities. No sale of fruits and vegetables were
noticed in supermarkets of these products in the supermarkets. a part from
this fact, the other reasons opined by the retailers were lack of aviability of
fruits and vegetables regularly. Existence of traditional fruit and vegetables
vendors in the city, lack of manpower to look out of these products as these
marketed in everyday early morning.
5.Hubli-Dharwad
The results of table 4.8 reported that the average monthly costs incurred in
procurement of commodities by the supermarkets in hubli-dharwad city. It
was rice followed by green gram,wheat,tur dal, chilli and mustard procured in
order of 4.46 quintals,2.28 quintwls,2.75 quintals,2.61 quintsl,0.26 quintals
and 0.18 quintals , respectively in the city, the amount spent was also high in
those respective commodities. The frequency of purchase was 3.67 times in
rice,wheat,green gram, tur dak and two in mustard. No sale of fruits and
vegetables were seen in hubli -dharwad which are attributes to the reasons
that lack of infrastructural facilities to handle these products like lack of
manpower, cold storage , non availibity of product etc., like in other cities ,
the grocey items wee procured from the market

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5. Overall
The overall monthly average and value of products procurement acrosss

cities in Karnataka presented in table 4.9 revealed the the average frequency
of purchase in groceries was ranged from four to five times month but it was
only 2.2 times in mustard. The quality purchase was also found to be more in
rice (0.85 quintals ) followed by tur dal (0.77 quintals ), green gram (0.71
quintals ), wheat (0.54 quintals)chilli(0.07 quintals ) and mustard (0.12
quintals). This is attributes to the fact that the turnover in cereals and pulses
was much more when compared with spices, as these products are daily use
items by the consumers and hence, the demand was more in these
commodities. the cost per quintals was highest in chili (Rs 6739.79) while
least in rice(Rs.1.688.90). Further the total amount spent found to be much
in green gram (Rs.14.258.75) due to its high unit price and high quantity
purchase. It was also repotted that the APMC was the only source of
purchase for grocery products as it id the only governing body fror marketing
of agricultural commodities. the existing policies of the government also
prevents from sources with respect to fruit and vegetables, the purchase
frequency was more in tomato(10.83) and banana(10.00) due to their
perishables nature of the products in general and tomato in particular and
also to avoid wastages during storage. Correspondingly, the quantity
purchased was high in banana (*1.38 quintals) as the demand for this
products was more. Apart from own production and direct purchase of fruits
and vegetables from farmers by the supermarket in Bangalore. All
supermarkets in various cities purchased fruits and vegetables from
wholesale markets only.
5.4.3monthly costs incurred in procurement of commodities by supermarkets

in daggering cities
5.4.3.1BANGALORE
It could be seen from the table 4.10 that the average monthly costs incurred
in procurement of selected commodities by supermarkets in Bangalore city.
Among grocery items, green gram accounted fro high total cost (Rs 26.005
.1111114 ) in procurement because of its high unit cost and quantity
purchased followed by tur dal (Rs. 21.545.56) rice (Rs.1.773.52) wheat (rs.
9067.56) chili (Rs. 3.676.58) and mustard (Rs.9.838.42) where the equinity
purchased was 6.46 quintals in tur dal, 5.54 quintals in green gram. 5.52
quintal in rice, wheat in 4.29 qunrals.0.54 in chili. It was found from the study
that next to price of the product, transport costs were the prime costs in
procurement and the sales tax at the rate of four per cent seen only in case
of spices. However the costs observed in transport were Rs.278.58, Rs.
273.96, Rs 235.54, RS 233.24, Rs.106.20 and Rs,79.78 in green gram , tur
dal ,wheat. Rice, mustard and chili, respectively. The sales tax was found to
be high ( rs.138.38) in chili. Respectively. The sales tax was found also high

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in chili (Rs.7715.78) a the cost of the raw material itself was high in this
commodities. As in the excise of groceries, transport costs were also found to
be high in fruits andvegitavles. The total costs were rs. 1313.50 in tomato,
Rs.675 each in banana and apple, Rs.275 in onion. The high total transport
costs in tomato and banana attribute to high quantity purchase primary. In
addition these vegetables are more perishable than the other two (onion and
apple) and needs special care while transport including the transport
material. Further tomato was procured in highest (14.63 quintals) quintals
because of more demand from the consumers onion and banana stands next
to tomato in terms of quality purchased (12.50 quintals each). Apple
procurement was very meager (5 quintals) because of its high unit coat and
less demand from the consumers total costs were noticed to be high (Rs.
27,025) in apple followed by banana (Rs. 23,175), onion (Rs. 7,224.38) and
tomato (Rs. 7,224.38).
5.4.3.2mysore
In mysore, high total cost was accounted by green gram (Rs. 14,834.72) due
to its high unit cost (Rs. 4,685.61/quintal) and quantity purchased and the
minimum was accounted by mustard (Rs. 646) as it was purchased in small
quantity (0.23 quintals). Based on the quantity purchased the proportion of
total transport costs were high in rice (Rs. 142.52) followed by green gram
(Rs.136.67), tur dal (rs.119), wheat(Rs. 102.17 quintals), mustard (Rs. 39.33)
and chilli (Rs. 33.32). in addition the sales tax was found in spices. In fruits
and vegetables, the utmost procurement seen in banana (20 quintals) and
less in apple (6 quintals) thus the total cost were also high (rs. 34.000 and
33,420) in respective commodities. The transport costs were more in banana
(Rs. 1000) and least in apple (table 4.11).
5.4.3.3Mangalore - The average monthly costs incurred in procurement of

selected commodities by supermarket in Mangalore city depicted in table
4.12 shows that the maximum quantity of groceries were procured in rice
(4,96 quintals ) followed by tur dal (3.41 quintals ) ,green gram (2.82
quintals), wheat (1.24 quintals) and chilli (0.23 quintals) but maximum cost
was incurred in green gram (Rs. 12,648.22) because of its unit cost and
quantity purchased. Mustard was procured in minimum quantity due to its
less demand and consumption by the consumers relatively high transport
cost (Rs. 169.08) were found in rice and low (Rs. 40.69) in chilli. The local
sale tax at the rate of four per cent was prevailed in this market too which is
highest of Rs. 66.02 accounted in chilli. No sale of apple was noticed in
Mangalore supermarkets because of non=availability of the product in
wholesale market and the dominance of tradition fruit sellers in the town.
More procurement and total costs were observed in banana (9 quintals & Rs.
15,150) followed by onion (5.5 quintals &Rs. 4,207.50) and tomato (4.5
quintals & Rs. 3,022.50) depending on their quantity handled.

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5.4.3.4Belgaum - It could be seen from the table 4.13 that the average
monthly costs incurred in procurement of commodities in belgaum
supermarkets. Rice was the major (2.33 quintals) commodity procured
followed by tur dal (2.13 quintals), wheat (1.92 quintals), chilli (0.19 quintals)
and mustard (0.09 quintals) in mysore supermarket. Corresponding total
costs were Rs. 6,356.11, Rs. 6,353.33, 3735.88, Rs. 3,547.99, Rs. 1370.00
and Rs. 216.48 in case of green gram, tur dal, rice, wheat, mustard and chilli,
respectively because of their quantity purchased and high unit cost. The total
transport costs were found to be high in rice (Rs. 75.42) followed by tur dal
(Rs.72.08) and wheat (Rs. 60.83) for the same reason. The local sales tax in
spices was more (Rs. 51.70) in chili as compared to mustard for the simple
reason that the unit cost of chilli was more than the mustard. No sale of fruits
and vegetables were noticed in belgaum city supermarkets because of lack
of infrastructural facilities of handle these products.
5.4.3.5 hubli-dharwad
It could be seen from the table 4.14 that rice followed by green gram, wheat,
tur dal, chill and mustard were procured in order of 4.46 quintals, 2.88
quintals, 2.75 quintals, 2.61 quintals, 0.26 quintals and 0.18 quintals,
respectively in hubli-dharwad. As it was observed in the earlier cities that the
sales tax was applied only for spices and chili was the maximum contributor
(Rs. 71.36) for it. However, the transport costs were high in green gram
observes because of lack of infrastructure facilities to handle thee fruits and
vegetables and also due to non-availability of these products and product
suppliers regularly.
5.4.4 Average monthly costs incurred in procurement of commodities by

supermarkets in Karnataka as it was observed from table 4.15 that at
an overall, rice (3.85 quintals) next were tur dal (3.47 quintals), green
gram 3.18 quintals), and wheat (2.45 quintals) were the major
groceries procured by the supermarkets as these are the daily use
items by the consumers and hence the demand was more in these
cases. Whereas, in case of spices such as chilli and mustard the
quantity purchased was very meager (less than 0.5 quintals/month)
because of less turnover in these commodities. In proportion to the
quantity, the total costs were also found high in almost all the
commodities. However, the average cost per quintal accounted was
Rs.7144.09 for chilli, Rs. 4,463.64 fro green gram, Rs. 3,149.58 for tur
dal, Rs. 2,671.88 for mustard, Rs. 2,236.46 for wheat and Rs. 1,726.99
for rice. The sales tax was found only in spices and it was Rs. 46.93 in
chilli which is followed by mustad.

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Similarly in case of fruits and vegetables, the purchase was highest in
banana (13.83 quintals) subsequently tomato (12.50 quintals),onion (9.33
quintals) and apple (5.50 quintals) depending on their demand prevalence.
The transport costs seems to be more in tomato (Rs. 1,012.50 ) as it is very
perishable and purchased in high quantity compared to other products and
less in apple (Rs. 287.50). it was noted from the table 4.16 that in all the
commodities. Quantity procured and their unit costs were found to be high in
banglore alone. It may be due to the higher average size of the supermarkets
and high turnover of the commodities. Wherein, the average procurement of
tur dal was 6.46 quintals, green gram was 5.54 quintals, rice was 5.52
quintals, wheat was 4.29 quintals, mustard was 0.64 quintals and chilli was
0.48 quintals. In contrast, the commodities procurement was found to be less
in belgaum due to the existence small sized un-organized supermarkets and
their small turnover. The local sales tax of four per cent on spices found in all
the cities and slightly high sales tax was observed in chilli (rs. 77.91 )
compared to mustard (Rs. 25.28) .the transport costs varied accordance with
the quantity purchased in all the cities and in all the commodities. How ever,
the highest was noticed in rice (rs. 157.20) and the least in mustard (rs.
42.54) in fruits and vegetables, the quantity procured was maximum in
banana (13.83 quintals) followed by tomato (10.38 quintals), onion (9.33
quintals) and apple (5.50 quintals) depending upon their existing demand,
whereas, the cost pr quintal and total incurred were more in apple (rs.
5487.50/quintals and Rs. 30,222.50 total cost) followed by banana (Rs.
1745.78/quintals and Rs. 7,062.22 total cost). The table also indicated that
the fruits and vegetables procured from various such as wholesale market,
own production and direct purchase from farmers except banglore, almost
only. The transport costs detected high in tomato (Rs. 712.50 ) and banana
(Rs. 708.33) as the quantity procured was high in these commodities. City-
wise average monthly cost incurred in procurement of comm by the
supermarket (table 4.17) found that the monthly total quantity procurement
was high in banglore (67.65 quintals) followed by mysore(59.77 quintals),
banglore(31.80 quintals), hubli-dharwad (13.13 quintals) and belgaum (8.14
quintals), as the supermarkets size and the turnover were maximum in the
city. Sometimes organizations are created large at the outlets, usually
because size is an advantage or a necessity . For example, the owner of an
Independent supermarket does not open a small store in a newly built
subdivision and then grow larger as demand warrants. Instead, a large store
is designed and built that has the capacity to deal with the expected number
of customers in the neighborhood. A small grocery store could not compete
effectively in price and selection with other nearby supermarkets. In the
same way, the total costs were in descending order in these cities. Similarly,
the transport costs were Rs. 4145.68, Rs. 2,972.91, Rs. 1,478.44 Rs. 541.59
in Bangalore, mysore, Mangalore, belgaum and hubli-dharwad. However,
depending on the quantity procured total costs in different commodities
varied across cities. Except tomato, total costs per quintal in all the
commodities were also found to be high in Bangalore only. This is mainly

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because of the reason that the supermarkets in Bangalore procuring tomato
from different sources like direct procurement from the farmers and
wholesale auction market like safely company which is mainly dealing with
auctioning of fruits and vegetables. Apart from this, own production of fruits
and veg were also observed in few supermarkets.
5.5. inventory management and its costs in supermarkets inventory refers

to stocks of products,which represents a large portion of the business
investment and must be well managed in order to maximize profits.
Raw materials inventory , work in process inventory, finished products
inventory and work in sales inventory represents the various forms of
inventories maintained by the supermarkets. Each type represents
money tied up until the inventory leaves the company as purchased
products. In fact, many small businesses like supermarket cannot
absorb the types of losses arising from poor inventory management
unless inventories are controlled, they are unrealizable, inefficient and
costly. Inventory management and inventory control must be designed
to meet the dictates of the marketplace and support the company's in
the supermarkets are interest on working capital, shrinkage, labor
charges, packing material and cold storage charges.
5.5.1 Cost of inventories and preparation of products for sale in supermarket

of different cities
5.5.1.1 Bangalore the costs of inventory and preparing the products for sale
in banglore city presented in table 4.18 revealed that supermarkets
maintained short time period inventories in almost all the
commodities. It may be due to the reason that they do not want to
get caught with obsolete items and just try to have an adequate
inventory on hand. These just-in -time inventory and material
requirements planning (MRP) management approaches works to
eliminate inventories rather than optimize them. These reports are
on par with the results obtained by farsad and lebruto (1993). he
reported that the consequences of overstocking items or under
stocking were undesirable. Overstocks absorb money and invite
waste in food inventory management. Further, form better inventory
management controls to new loss prevention methods,retailers are
integrating more technology initiatives into their operations to run
more efficient stores.In groceries, particularly in cereals and pulses
the inventory period was ranged four to five days in spices it ranged
from four to 11 days. While in case of fruits and vegetables the
periods ranged between three to five days because of perish ability
of these products. The volume of inventories found to be high to be
in tur dal (6.46 quintals ) followed by wheat (5.75 quintals) green
gram (5,54 quintals ), rice (5.52 quintals ),mustard (0.64 quintals )

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and chilli (0.48 quintals ) with their respective values ar
Rs.21.859.03 , Rs.9417.06, Rs 26,903.63, Rs. 10.107.12, Rs
,01750.08 and Rs. 3.703.32 based on their turnover in turn due to
consumer demand for essential and daily use items. The fifnished
product inventory was observed to be highest both in terms of
quanity and storage period as the business involves quick
conversion of inventory and hence the mangers must formulate a
plan to ensure enough inventories is on hand for production of
finished product, the finished product stock was 4.66 quintals in tur
dal valued at Rs15.830.02 held for 1.60 days 4.21 quintals in wheat
valued at RS.6.765.47 held for 1.50 days and 3.60 quintals in rice
valued at Rs.6.555.60 held for 1.40 days next to the finished
product inventory, most of the product was detained at work in
sales inventory and raw material inventory. The work in sales
inventory should be maintained to retain the prospective customers
from the psychological point of view. However the work in ales
inventory in tur dal was 0.42 quintals for 1.10 days, unit what was
0.55 quintals. The storage period of work in process inventory was
low (less than a day) in almost all the products because as soon as
the raw material comes they will subject product stage. In case of
inventory costs, the packaging material and labor charges for
cleaning and packing were to be the major cost components in all
the commodities. Packing is an important cost component in
supermarkets inventory as it involves costs in getting good quality
packing material which should have good appearance, durable and
printable form to deliver the products in an exciting presentations
with difference in size and weight of packets. Most of the
supermarkets have their own brand names which create an image
in the minds of customers in turn help in attracting them. However
these costs were Rs.400 in tur dal, rs 631.50 in wheat, and
Rs.210.50 in wheat and Rs.400 and Rs 160 in freen gram. The minor
costs include interest on working capital at the rate of 12.5 percent
and shrinking/wastage of the product. The shrinking costs were
Rs.533.85 in green gram ,Rs.436.63 in tur dal, Rs 101.18 in rice etc.
at an average, the total inventory cost per quintal was more in chilli
(Rs.394.63) followed by mustard (Rs.2533.90), green gram
(Rs.136.90) as the unit shrinking was more in chilli and mustard.
5.5.1.2 In fruits and vegetables, the quantity maintained and their values
were high in onion (12.50 quintals at RS.11.606.25) and low in apple
(1.39 quintals at Rs.7.845.86). In addition , the quantity maintained
In tomato was 4.88 quintals with worth of Rs.3.126.86 and in
banana was 4.17 quintals with the worth of Rs 7.987.64./the work in
process and finished product inventories were minimum in case of
banana and apple as most of these directly sold in the shop by just
manual cleaning and grading. Alike groceries the finished product
inventories in fruits and vegetables were maintained in higher

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quantity and for lengthy period in tomato (3.50 quintals for1.60
days) and onion (8.50 quintals for 1.90 days) on the other hand raw
material inventory in banana was 1.05 quintals for 0.52 days and
apple was 0.25 quintals for 1.12 days. In inventory, shrinking cost
was perceived to be the highest cost iin onion (Rs.1160.61) followed
by babab (Rs.978.05). Apple (Rs.905.26) and tomato (Rs.322.31).
The cold storage cost was Rs.226.50 in tomato ,Rs.123.00 in banana
and Rs.45.50 in apple and the per unit cost seems to be same for all
commodities. In contrast, no cold storage was used for onion
because of its sturdiness. Nevertheless the totla inventory cost per
quintals was in descending order in apple (Rs.759.51) followed by
banana (Rs.327.91). Tomato (Rs.226.50) and onion (rs.202.78)
5.5.1.2MYSORE The cost of inventory and preparing the products for sale in
mysore supermarkets presented in table 4.19 revealed that storage period of
inventories was four days in all groceries that storage period of inventories
was four days in all groceries except mustard, wherein the storage perod was
15 days because of its non pershability. In case of fruits and vegetables, the
period was two days in tomato, banana and apple but four days in onion
depending on their pershabilty.The quality and value of groceries was seems
to be high in rice (3.33 quintals) followed by green gram(3.17 quintals),
wheat (3.00 quintals), tur dal(2.77 quintals), chilli(0.21 quintals) and mustard
(0.23 quintals), the respective values were Rs. 5,963.20, Rs. 15,391.14, Rs.
4,947, Rs, 9366.06, Rs. 1612.33, and Rs. 624.16 depended on the respective
unit costs. The maximum quantity of inventory was held in finished product
stage in all grocery items as in the case of banglore supermarkets. How ever
, the finished quantity maintained were 2.25 quintal in green gram, 2.11
quintals in rice, 1.90 quintals in wheat, 1.60 quintals in tur dal. Even more
than half of the quantity of chilli and mustard found to be held at this stage
only. The work in process inventory accounted for less quantity and minimum
storage period in almost all groceries. The packaging cost was higher in
green gram (Rs. 258.75) followed by rice (Rs. 244.76), wheat (Rs. 243.20),
tur dal (Rs. 184.00), chilli (Rs 20.40) and mustard (Rs 20.16)
In fruits and vegetables, the quantity and value of inventory period was more
in onion (10 quintals) followed by banana (1.33 quintals), tomato (0.80
quintals) and apple (0.65 quintals) depending on their perish ability and
demand. The finished product inventory had highest quantity in onion (6.80

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quintals) subsequently in tomato (0.33 quintals). The work in sales inventory
was 0.43 quintals in banana, 0.75 quintals in onion, 0.25 quintals in tomato
and apple as it is an important stage to attract customers and to retain
them. However, the labors costs were Rs. 562.50, Rs. 340 for onion and
32.25 Rs. 68.72 and Rs. 16.50 for tomato. The total inventory cost per
quintal was Rs. 758.69 in apple. Rs. 181.39 in tomato, Rs. 178.21 in banana
and Rs. 130.27 in onion. Negligible labors charges were seen in banana and
apple as they involve simple cleaning and grading.
5.5.1.3 Mangalore - It was observed from table 4.20 that the storage period
was 5.67 days in cereals and pulses whereas the period was 5.94
days in chilli and 12.87 days in mustard. Similarly, in fruits and
vegetables the storage period was three to five days in fruits and
vegetables depending on their keeping quantity and demand for the
products. No sale of apple was noticed in Mangalore supermarkets
because of the reasons such as non-availability of the product
regularly, existence of conventional fruits and vegetables vendors in
the city, less demand for the product, high price of the product and
fear of losses due to perish ability and lack of infrastructures to
handle these fruits.
5.5.1.4 The inventories in grocery items were found more in rice (4.96
quintals) followed by tur dal (3.41 quintals), green gram(2.82
quintals) and the respective values were Rs. 8,284.44, Rs.
11,170.31,Rs. 13,115.82, Rs. 2,643.84, Rs. 1,698.72 and Rs. 391.20.
as in the case of other cities, finished product inventories were also
occupied top position in terms of quantity and period of storage.
The least quantity the commodity seized was again the work in
process inventory. The quantity at work in sales was moderate of
0.72 quintals in rice, 0.35 quintals in wheat, 0.45 quintals in green
gram, 0.32 quintals in tur dal, 0.05 quintals in chilli and 0.04qintals
in mustard , again, the packaging materials and labour charges
were the major costs in inventory which were found to be highest
(Rs. 315.70 and Rs. 124.31 ) in rice and least in mustard (Rs. 6.60
and Rs 14.19).however, the highest cost in packaging material
different from commodity to commodity. The total inventory cost
per quintals was highest in chilli (Rs. 361.56)followed by green
gram, tur dal, mustard , wheat and the least was found in rice (Rs.
106.30).
In fruits and vegetables, the maximum inventory was maintained in onion

(5.50 quintals) subsequently in tomato (1.50 quintals) and banana (1.10
quintals) depending on its prevailing demand/turnover and perish ability of
the products. The finished products were stored in maximum quantity for
1.90 days onion. There work in process and finished product inventories were
seems to be very little in banana as it is directly sold in the shop. The labors
charge and packaging materials were Rs. 268.35 and 230.89 in onion. Rs.

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76.67 and Rs 123.50 in tomato, respectively. However, no cold storage was
observed for both fruits and vegetables in Mangalore supermarkets. The unit
cost of inventory for banana was found to be Rs. 303.18, Rs. 162.00 for
tomato and Rs. 116.66 for onion .
5.5.1. 4 Belgaum it was noticed from table 4.21 that the storage period of
inventory by the supermarkets in belgaum was ranged from four to 4.5
days in almost all groceries except mustard wherein the storage period
was 15 days the quantity of inventory was found to be high in wheat
(2.58 quintals) followed by rice (2.33 quintals) tur da,(2.13 quintals),
green gram (1.49 quintals), chilli (0.19 quintals) and mustard (0.09
quintals) in groceries. The respective inventories valued at Rs.
3,935.15, Rs. 3,861.39 , Rs. 6,600.34, Rs. 6575.00 Rs. 1,359.69 and Rs.
223.72. among different types of inventories, the finished product
inventory was observed to be the highest in terms of quantity as the
supermarkets keep it ready for the sales counter. The work in process
inventory was found to be minimum in all the cases. The packaging
cost was found to be minimum in all the cases. The packaging cost was
found to be the prime cost in inventory as it was rs. 213.50 in wheat,
rs.155.53 in rice, rs. 134.93 in tur dal, rs. 78.28 in green gram , rs.
16.30 in chilli and rs. 4.89 in mustard. Packaging costs were observed
to be maximum because of the use of costly, durable and attractive
materials and printed attractive information on it to attract the
customers. The maximum shrinkage cost in green gram followed by tur
dal , wheat ,rice, chilli and mustard may be depends on the quantity of
stock they handled. However it was detected that the highest total
inventory costs in tur dal (rs. 333.46) and low in mustard (rs 15.32)
there was no sale of fruits and vegetables in belgaum supermarkets ,
the reason attributed like-lack of infrastructural facilities to handle
fruits and vegetables, lack of availability of fruits and vegetables
regularly, lack of manpower to look after fruits and vegetables as these
products were marketed in the everyday early morning at wholesale
market etc.
5.5.1.5 Hubli-dharwad
Table 4.22 represented that the storage period of commodities in inventories

by the hubli-dharwad supermarkets were 3.67 days in cereals including chilli
but the period was 15 days in mustard. The total quantity maintained in
inventories with their respective values were more in rice (4.46 quintals
worth of Rs. 7,705.77)followed by wheat (4.00 quintals worth of Rs. 6,277 ),
green gram (2.88 quintals worth of Rs. 12488.40), tur dal (2.61 quintals
worth of Rs.8378.10), chilli (0.26 quintals worth worth of Rs 1857.83) and
mustard (0.18 quintals worth of Rs. 456.21 ) depending on the turnover

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quantity as it is an important stage of inventory occupied maximum quantity
as it is an important stage of inventory to maintain regular stock at sales
counter. Similar to other cities, the work in process inventory was low in all
the commodities. Again the costs incurred on packaging materials followed
by labor charges were the major inventory cost components. The shrinkage
cost was found maximum in green gram followed by tur dal, rice, wheat,
chilli, and mustard depends on the quintal was in the order of chilli (rs.
337.14), green gram (rs. 200.78),tur dal (rs 170.04), mustard (rs 136.62),
wheat (rs 117.42) and rice (rs. 103. 66). No sale of fruits and vegetables in
hubli-dharwad supermarkets attributed to the facts as lack infrastructural
facilities to handle Fruits and vegetables, existence of professional local fruits
and vegetable vendors, fear of loss due to perish ability nature of the
products, less demand for the produce etc.
5.5.2 average costs of inventory and preparing the products for sale at
supermarkets in Karnataka at the costs of inventory and preparing the
products for sale in selected cities across karnataka presented in table 4.23
revealed the short time period inventories maintained in different
commodities by the supermarkets in the state. The inventory period was
ranged from between four to 4.5 days in all the groceries except mustard
where the storage period was 13.82 days. In case of fruits and vegetables,
the inventory period was one day to three days only because of their
perishability and demand for only fresh by the consumers.
The average quantity of inventories maintained in groceries were high in

rice(4.12 quintals) followed by tur dal(3.48 quintals), wheat (3.39
quintals),green gram(3.18 quintals),chilli(0.27 quintals) and mustard (0.26
quintals). The respective inventories were valued in accordance with the
quantity handled and the unit cost price of the products; however, the
respective values were Rs7,184.38, Rs. 11,474.77,rs 5,444.01,rs 14,894.80
.,rs 2,046.38 and rs.689.07 among inventories, the finished product
inventory was found to be highest both in terms of quality and storage
period as the product should be ready for sales shelves to maintain regular
and accurate stocks for the consumers. However the finished stocks were
2.58 quintals for rice, 2.34 quintals in tur dal 2.2o quintals in wheat 2.01
quintals in green gram 0.14 in chilli and 0.14 quintals in mustard . Next to
finished product inventory, most of the product was detained at work in sales
inventory . The storage period of work in process inventory was low in most
of the products that is 2.55 days in mustard, 1.08 days in rice, 0.75 days in
wheat, 0.69 days in chilli because as soon as the raw material comes it was
subjected to work in process inventory to make it ready for the sale at the
supermarkets and hence the inventory period is low. The packaging material
cost and labor charges for cleaning and packing were found to be the major
cost components of inventory management in all the commodities as the
packaging involve costly, durable, attractive material and printed information
on it to attract customers, the major costs include interest on working capital

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at the rate of 12.5 per cent and shrinkage/wastage of the product. However
at an average the total inventory cost per quintals was more in chilli (Rs.
361.37 ) followed by mustard (rs. 216.39), green gram (Rs. 202.53), tur dal
(Rs. 181.88), wheat(Rs. 140.51) and rice (Rs. 117.87)with respect to fruits
and vegetables , the quantity of inventories maintained and their values
were high in onion (5.60 quintals valued at rs. 2,034.93) due to their
turnover and demand. The quantity uphold in tomato and banana was 1.44
quintals and 1.22 quintals . The work in process and finished product
inventories kept in case of banana and apple was low due to their direct
selling at shop by just manual cleaning and grading of fruits. The finished
product inventories were maintained in highest quantity for long period in
onion compared to other fruits and vegetables because of its non-
perishability for some time. The raw material inventory was found maximum
in banana(0.63 quintals for 0.80 days) due to no grading and cleaning of
banana inmost of the supermarkets, shrinkage cost perceived to be the
highest cost in onion(rs. 357.65) followed by banana (rs. 202.07), apple (rs.
200.72) and tomato (rs. 102.91) at the inventories the cold storage cost was
highest in case of apple (rs. 613.93) follwed by banana (rs.215.31),tomato
(rs.208.69) and onion (rs.159.97) the table 4.24 indicated that the average
storage period of groceries was between 4.5 days groceries except wherein it
was 13.82 days. In case of fruits and vegetables, the storage period was
ranged between two to five days. It was noticed from the table that the
inventory period was varied across cities and commodities and found to be
high in mustard and low in tomato and apple due to their perish ability
nature and turn over of the commodities.
The maximum quantiy of inventory maintained in grocery items were found

in banglore (6.46 quintals of tur dal, 5.75 quintals of wheat, 5.54 quintals of
green gram, 5.52 quintals of rice , o.64 quintals of mustard and 0.48 quintals
of chilli) while, the least were found in belgaum (2.58 quintals of wheat, 2.33
quintals of rice, 2.13 quintals of tur dal 1.49 quintals of green gram , 0.19
quintals of red chilli and 0.09 quintals of mustard) depending on their size of
the supermarkets and turnover. On the contrary, the quality maintained in
Mysore and mangalore were different in some products. In case of inventory
cost packing material followed by labor charges, shrinking and interest on
working capital were identified as the cost components . The greater total
inventory costs and total costs were across cities were also noticed in
Bangalore in almost all the products. But these costs were varied across
cities and commodities. In addition , the quantity of inventories maintained
in spices. Especially in case of mustard was more among all the commodities
but inventory cost per quintals was noticed to be high of rs. 353.25 because
of its long storage period.
In fruits and vegetables, the highest quintity of inventory was found in

bangalore (12.50 quintals of banana and 1.39 quintals of apple) follwed by
mysore (10 quintals of onion , 1.33 quintals of banana, 0.80 quintals of

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tomato and 0.40 quintals of apple) and mangalore (5.50 quintals of onion,
1.50 quintals of tomato, 0.60 quintals of banana) depending on the average
size of the supermarkets and their turnover in the state. No sale of fruits and
vegetables were witnessed in belagaum and hubli dharwad due to lack of
infrastructural facilities to handle fruits and vegetables , existence of total
traditional friuts and vegetables vendors , non availibility of fruits and
vegetables. However the average total costs high in onion (Rs. 1.493)
followed by apple (Rs.549.47) and banana(437.80) nevertheless average
total inventory cost per quintals was as high as Rs. 620.07 in apple follwed
by banana (Rs.197.17 ) tomato (Rs. 190.30 ) and onion (rs.149.90) in that
order. It could be observed from table 4.25 that even though, the quantity of
inventory maintained was high in bangalore (47.33 quintals ) follwed by
mysore (25.24 quintals), mangalore (20.79 quintals), hubli dharwad (14.39
quintals) and belgaum ( 8.81 quintals ). the average inventory period was
highest (6.13 days ) in belgaum follwed mangalore (5.83 days) hubli-
dharwad (5.56 days ), bangalore (4.85 days ) and mysore (4.50 days).
Among different commodities. The quanity stored was maximum in onion
(12.50 quintals at banaglore, 10 quintals at mysore and 5.50 quintals at
managlore) in all the cities and minimum in chilli (0.48 quintals in bangalore.
0.21 quintals in mysore, 0.23 quintals in managlore, 0.19 quintals in belgaum
and 0.26 quintals in hubli-dharwad) depending on the respective demand for
the produce and turnover of the supermarkets. Next to the onion was tur dal
both in quantity and storage perod, with respect to cost components,
packaging costs were found to be the prime consitituet, on an averge it
accounts Rs.1141.77 in mangalore, rs 973.40 in hubli-dharwad and
Rs.603.43 in belgaum. The highest pacaking cost attribute and printed
information on it to the customers. The cold storage were nill in managlore,
belgaum and hubli-dharwad because of their recent evolution towards
conventional shops to supermarkets but seen only in case of tomato, banana
and apple in bangalore and mysore as they are very pershability and
demand for fresh produce by the consumers in this city.
6. Processing/value addition in supermarkets
1. Extent of activities only four steps or stages such as cleaning, grading,

bagging and labellings and sticking. The conditioning was not observed in
supermarkets since they have not undertaking long-term inventories.
The results of the table4.26 revealed that in the entire groceries cent per
cent of cleaning, bagging and labellings and sticking were undertake by all
the supermarkets to maintain good relationship with the consumers by
providing good quality products. In addition, it is very much necessary and
the only way to compete with the conventional stores. On the other hand,
these activities help in segmentation with price differentiation. However,
grading was observed in 66.67 per cent of the banglore supermarkets but it
was not seen in belgaum supermarkets since most of the supermarkets are

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un-organized in the city. In overall, cent per cent of supermarkets across the
karnataka followed cleaning, bagging and labeling and sticking activities
whereas 26.67 per cent of the supermarkets undertook grading activities.
In fruits and vegetables cleaning activities was observed in all the

supermarkets as it is a basic thing to differentiate from other stores which
are dealing with these products because of the existence of local fruits and
vegetables vendors in all the cities. In contrast to this, all the banglore
supermarkets followed grading,bagging, and labellings and sticking activities
since the consumers of these markets in the city are highly sophisticated
with high standard of living. At an overall, it accounts cent per cent of
supermarkets carried out cleaning activity and 33.33 per cent each followed
grading,bagging, and labellings and sticking activities across the state these
results are similar to the study conducted by arora et al (2004) while
studying the microbial reduction by washing vegetables in a rotary washer.
He reported that vegetable washing is an important primary process unit
operation for value addition of the produce at farm level washing is used not
only to remove field soil,dust,pesticides but also the surface microbial load.
2.Value addition in supermarkets for the selected products it is observed

from table 2.27 that in banglore supermarkets the average value added in
case of groceries was more in wheat(31.33 per cent)followed by rice(30.59
per cent) mustard (28.05 per cent),tur dal(23.45 per cent),green gram(19.94
per cent) and chilli (17.52 per cent) due to higher prices obtained and
relatively lower percent of wastage. In similarly,in mysore supermarkets the
per cent value addition was highest in mustard(26.47 per cent) followed by
wheat(24.23 per cent), rice (22.86 per cent),tur dal (19.67 per cent),green
gram(15.97 per cent) and chilli(15.45 per cent). In manglore the value added
was more in mustard (28.16 per cent)followed by rice(27.72 per
cent0,wheat(27.14 per cent),tur dal(18.00 per cent,chilli(16.82 per cent) and
green gram(16.04 per cent) because of highest prices for the products. The
per cent of value addition in mustard was found to be high (29.17 per cent)in
the case of belgaum supermarkets also due to high price for the produce
which is followed by wheat (26.07 per cent),rice(24.83 per cent),green gram
(20.27 per cent),tur dal(16.05 per cent) and chilli(15.50 per cent). Further, in
the supermarkets of hubli-dharwad, the value addition was found to be 20.32
per cent in green gram,18.58 per cent in tur dal and 15.21 per cent in chilli
depending upon their higher price realization on the other hand in fruits and
vegetables category the per cent value addition in bangalore supermarkets
was found to be the highest in tomato(64.78 per cent)as against 20.65 per
cent in apple. This indicated the benefits of use of different sources of
purchase for the produce such as direct procurement from the farmers and
own production will obviously enhances realization especially in case of
vegetables like tomato. Similarly it was 41.73 per cent in onion and 28.00
per cent in banana due to higher prices obtained. It may the attributed to the
lack of cleaning and grading activities of these produces in other markets.

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The indicated percentage of value addition in mysore supermarkets were 45
per cent in tomato,39.09 per cent in onion,25.00 per cent in banana and
21.14 per cent in apple. In respect of manglore too,the value addition was
maximum in tomato wherein the percentage value added was maximum in
tomato wherein the percentage value added was 37.83 per cent the banana
and apple occupied 35.00 per cent and 28.99 per cent accordingly overall at
the supermarkets across the state, the highest per cent of value addition was
noticed in mustard(27.68 per cent) among groceries and tomato(49.21 per
cent) in fruits and vegetables. The higher price realization from mustard was
due to absence of cleaning,grading of these produce in other markets as it
was due to absence of cleaning, grading of these produce in other markets
as it is less demanded from the consumers. The value addition in other
commodities were in the descending order of 26.99 per cent wheat,rice,tur
dal,green gram and chilli, and 38.61 per cent, 27.33 per cent and 22.90 per
cent in onion,banana and apple . However out of the selected cities. The
maximum value addition in both groceries and fruits and vegetables were
found in banglore because of higher prices of the producers in this market
7.FINANCIAL MANAGEMENT IN SUPERMARKETS
Various financial ratios were worked out for the year 2006-07 and presented
in table 4.28 to assess the financial performance of the supermarkets in
different cities across karnataka.
Solvency ratios the solvency ratios indicate the extent of amount borrowed
per rupee of owned in the business. Solvency refers to the ability of the
supermarkets to repay its outside long-term liabilities/total liabilities in turn it
indicates long-term stability of a concern. The solvency ratios analyzed
during the study were identified as total liabilities to owned funds ratio and
fixed assets to owned funds ratio. The ratio of total liabilities to owned funds
was found to be 0.798,0.600,1.905,3.535,0.345 in
banglore,mysore,manglore,hubli-dharwad and belgaum,respectively. Even
the ratio of fixed assets to owned funds was found to be highest in
manglore(1.731)followed by hubli-dharwad(1.367) and banglore(0.697). This
indicated that the amount of borrowed fund per rupee was highest in hubli-
dharwad followed by manglore,banglore,mysore and belgaum.this was
because the amount pooled by the hubli-dharwad and manglore market was
w when compared to other cities, on the overall across cities,it was 1,400
which indicates the soundress of the supermarkets business in the state the
recent conveversion of tradition stores to modern type of supermarkets in
these cities also made these supermarkets to be more dependency on
external funds. Therefore, the supermarkets should taken care for improving

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the own funds and volume of business to the need of improving financial
strengths of the supermarkets.
Liquidity ratios - Liquidity ratio indicates the continuous operation of the

supermarkets. These ratio are used to measure the ability of an institution to
possess adequate cash to meet immediate obligation. The liquidity position
of the supermarkets was examined using two ratios namely liquid assets to
total assets ratio and current assets to current liabilities ratio it was noticed
from the table (table 4.28) that in all the supermarkets the liquid assets to
total assets ratio was less than 0.5, which is 0.459 in banglore,0.404 Mysore
0,399 in manglore,0.157 in belgaum and 0.268 in hubli-dharwad and hence
the overall was 0.337 it indicated that more than 50 per cent of the assets
were not in liquid assets form. Therefore, all the units should increase the
proportion of liquid assets in the total assets so as to improve the liquidity
status of all the supermarkets the current ratio (ratio of current assets to
current liabilities)presented in the table indicated that the ratio was more
than one in all the cities supermarkets except Mysore,wherein the ratio was
0.994 it means to say the supermarkets had more than one rupee of current
assets per rupee of current liabilities the minimal acceptable level for value
of this ratio is two, hence, there existed a need for improving the liquidity
position of the supermarkets by reducing its dependency on the short-term
borrowings.
Profitability ratio - In the present study,the profitability ratios were analyzed

for measuring the efficiency of the firms in utilizing their resources for
generating profits. The profitability of the study supermarkets in this case
was analyzed through net profits to fixed assets ratio,net profits to total
assets ratio,net profits to owned funds ratio and net profit to total sales ratio
were calculated and presented in table 4.28 net profits to fixed assets ratio
were found to be high in Mysore wherein the ratio was 1.297 and least in
Bangalore(0.572)and in other cities also the ratio was more than 0.677. this
indicated that the profit generated per rupee of fixed assets was quite in all
cities in turn it indicates the efficient use of fixed assets by the
supermarkets. Similarly the overall net profits generated per rupee of total
assets was nearly 2.50 rupee which indicates the improved efficiency of
supermarkets in utilizing the total assets. The ratio of net profits to owned
funds ratio point outs the net profits for each rupee of own funds used in the
business, which were 4.621 in case of mangalore, while 1.773 in case of
hubli-dharwad and the least was observed in belgaum 0.537. this ratio shows
that the supermarkets were quite able tp products its equity. Net profits to

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total sales were also found to be very significant in all the cities across the
state indicating more than a 0.170 rupee contribution to per rupee total sales
and still there is a nedd for improving capacity utilization and sales
performance.
Turnover ratio - The turnover ration indicates the operational the efficiency of
the supermarkets in the study area. The efficiency of supermarkets in the
selected cities was compared using the such as working capital turnover
ration and fixed assets turnover ratios.
The working capital turnover ratio indicated the efficiency of a supermarkets

in utilizing its working capital for generating sales revenues. The ratio was
highest of 5.156 in belgaum sales revenues. The ratio was highest of 5.156
in belgaum followed by 1.890 in bangalore, 1.576 in managlore, 1.539 in
hubli-dharwad and 1.331 in mysore supermarkets. This indicates the
turnover per unit of working capital was higher in belgaum over all other
supermarkets and good in all other cities. This shows the lack of efficiency in
sales even with higher working capital in contrast, the fixed to turnover
ration were higher in the order of mysore, hubli-dharwad, managlore,
belgaum and in Bangalore.(6.784, 4319, 3971 AND 3.581 respectively).this
was because these supermarkets were able to achieve higher sales target
with less investment in fixed assets accordingly.
The above alll financial statues of the retailers were similar to the study bt
gustafson(2003). The study revealed that in Fargo. USA in an average, both
food manufacturing and food retailing small businesses ahead positive
financial characteristics. Although they were only marginally profitable and
liquid. They were highly solvent accounts receivable and inventory comprise
nearly half of food manufactures total assets and a third of food retailers
assets.
5.8 FACTORS CONSIDERD AND METHODS OF PRICE-FORMATION IN

SUPERMARKETS The results of the garret ranking analysis
conducted in respect of factors considers in pricing the products in
supermarkets by the retailers were presented in table 4.29 revealed that the
Bangalore belgaum supermarkets attracted significance importance to
quality of the products followed by price should ensure profitability because
of the sophisticated and high standard of living consumers in the city prefer
quantity products rather then price as it is undesirable from the point of
rational consumer hence they will decide the price in such a way that it

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should ensure profitability also. Next to these the factors considers were
nature of the products, completion, products life, price shoould not be high
availability of products, price shall convenience prospective consumer etc. in
mysore supermarkets attached first prefers to nature of the products and
least consideration to market segmentation. As the supermarkets fixes the
price based on the nature of the products like products etc. least importance
was given to market segmentation as the products availability of the
product. Price should not be high, competition etc were also considered in
pricing at manglaore supermarkets. The factors like price should ensure
profitability. Competition and price should not be high were considerd in their
order. In case of hubli-dharwad, quality of the products was considered as
the most important factors and long term pricing was given least imporatnce
in fixing the price fro the products at supermarkets. In the state as whole, the
quality factors like quantity of products, nature of the products were
considered as most important ones which are mostly consumer oriented as
he decides the fate of the business, whereas competitions, price should not
be high, price should ensure profitability wee firm oriented as these factors
decides his profit. The other factors such as availability of the products,
products life, relative price of the rival products, market force, price shall
convenience prospective consumers, market segmentation and long term
pricing were considered as important respectively in the above stated order.
While firms compete along many dimensions, pricing strategy is clearly one
of the most important. In many retail industries. Pring strategy can be
characterized as a wide range of products. It was found from table 4.30 that
absorption cost pricing and going rate pricing methods were followed to gain
some profits from the business after meeting their operating expenses. The
prices decide from business mwtjods are similar to the rivals products and
more competitive. These results are coincides the prevailing prices for
commonly available supermarkets products in France ,UK and USA the
results that some products have very similar or the same prices and
discounting pricing were adopted occasional to this target pricing and
discounting pricing were adopted occasionally to attract customers by
charging below the cost price of the supermarkets in mysore followed
absorption cost pricing and going rate ot market pricing and discounting
method of pricing for the above mentioned reasons. All the supermarkets in
managore adopted absorption cost pricing and going rate or market pricing
methods, whereas 66.67 per cent of them in the city also made use of loss
leader pricing to try and attract the customers. Apart from this 33.33 percent
of the supermarkets also went for penetration pricing, discounting and
destroyer or destruct or pricing methods occasionally to acquire market
share by pricng low to get hold of the product in the market if, it is new,
offering lower prices for a set of times especially during festivals and
charging below averge to drive out competition as the case may be. The
pricng and ging rate or market pricing methods by all the firms supermarkets
occasionally at the time of festivals. Similarly the methods employed by the
hubli-dharwad supermarkets were absorption cost pricing, discounting

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pricing and going rate or market pricing methods by almost all the
supermarkets. At an overall cent per cent of the
supermarkets in the state followed absorption cost pricing and going rate or
market pricing method in pricing the produces at supermarket bout 60
percent followed discounting pricing at supermarkets. While 33.333 per cent
and 26.6.7 per cent adopted penetration pricing and sol leader pricing
methods. A small proportion of the supermarkets also adopted target pricing
for selected products and destroyer or destruct pricing methods were used to
try and attract customers to the shopping at supermarkets.
9.PROBLES FACED BY THE FOOD RETAILERS; The problems in the

supermarkets business were many but the variation were governed by a few
dimensions. In order to formulate appropriate, it was necessary to identified
and assess the magnitude of association of these dimension which provide
deeper insights in knowing the phenomenon.
In the present study, there were 38 variable identified and grouped to

explain the problem of supermarkets across cities in the state. These
indicates were subjected to factor analysis. Out of them 25 indicating were
selected with factors loading by techniques of various rotation and considers
nine dimension which explained 92.38 per cent of tha total variation in the
problem for interpretation.
Table 4.31 shows the factor loading of the each variables under different
factors and the percentage variation explained by each factor loading ,non
availability of trained employees, banks for sources of fiance, demand for
credit from the customers and bargain from the customers were key to
problem among them, as the supermarkets businesses is new approach
toward organizes marketing hence require huge investment towards retailing
business. The credit and bargains from the customers are as usal in any
business activist. This indicated that there is a need to train the employees
as per supermarkets requirement and bring confidence of the businesses in
financiers to get the support . The other problems such as lack of
government schemes for finance towards this businesses, defaults from the
customers and non-availability of the credit facility from the wholesale were
found to be the other major problems. It indicates some schemes by the
government for this businesses as it is flourishing in recent years, providing
better service to the consumers in turn superior prices to the farmers, it may
alert the farmers towards production of quality produces. In contrast
advertisement rate and production of quality produces. In contest
advertisement rate and coverage of area. WTO impact on profit margin and
price of the products and market information from the wholesalers have
shown no impact. The variable affecting the businesses such as lack of
experience in the businesses, bad timing of advertisement, damage of
products from wholesalers, bribes to government authorities, tax charges by
the government and margin from the wholesaler were listed in the second

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dimension. The demand for discounts and offers from the customers, lactose
of the supermarkets, WTO impact on competition and existing laws of the
businesses were listed as the third dissenting problems. It may be due to
general tendency of the customers for discontinues and offers. As the world
is opened for Gerald competition it has an impact on the businesses; very
businesses has to undergo the prevailing rules and regulation and there is no
quid pro qua hence retailers felt these things as the problems, similar to this
result, study conducted by connor et al (1999) shown that new forms of
horizontals, vertical and geographical components have appear to challenge
the supermarkets of the format in US grocery redialing.
The other problems quoted by the retailers listed in subsequent climates

were VAT charges , demand for new products from the customers, land and
building financial resources, price variation the wholesaler, storage facilities
and agencies for supply of produced to supermarkets,delayed delivery from
wholesaler,existing location of the sut and availability of untrained
employees have conquest on the problems of the retailing. Nageshwar rao
and bramhanandan (2003) in their study on problems of retail trader in
guntur district of andhra pradesh found that rent on building was a problem
from the building owner side like high rent, frequently also faced many
problems on media like high rates, inadequate information and coverage of
area and timings problems.
Looking into th elicited problems the retailers must learn to cope up and
solve the problems to be the leader in the businesses. Rudolph et al (200) in
their study suggested that the food retailers risk a loss of image or even a
loss of the customer if they do not learn to react effectively to failure and
improve their service strategy.
10.Factors influencing the consumers to purchase the food products in

supermarkets due to urbanization, changing lifestyles,adoption of western
styles,strong income growth and favorable demographic patterns the food
consumption habit of Indian consumers habit of Indian consumers has been
changing over the years. the shift in cons habit to away form home food
products like fast foods. the whole concept of shopping has altered in terms
of format and consumer buying behavior,ushering in a revolution in shopping
in India. the consumers are also shifting from traditional local markets to
modern supermarkets because of the shopping experience this regard an
attempt was made in this study to ascertain the factors influencing the
consumers to purchase the food products in supermarkets by opinion survey
of the consumers across cities in the state.
The results of the opinion of the consumers to purchase at the supermarkets

in the study area were collected using three point scale technique based on
their importance as most,medium and less preference,the opinion obtained
in terms of scores were analyzed using cluster analysis and the results are
presented in table 4.32 it was observed that out of 30 variables,13 variables

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were found in the first aggregate cluster based on their similarity were found
in the first aggregate cluster based on their similarly within the
variables,among these 13 variables,convenient location of the
supermarkets,range of products availability,convenient for
purchase,availability of quality products were considered as the prime
factors influencing the consumers to go for purchase at supermarkets most
of these are concerned to the accessibility and products oriented factors
hence the group was named as accessibility and product quality
factors,second aggregate cluster comprised of major factors such as
reasonable prices,parking facility shopping is seen enjoyable at
supermarkets. Attractive packing,schemes and offers,concern about
health,welfare and the environment ,influence of peer group,availability of
range of brands most of which influences the consumers to opt purchases at
supermarkets and hence the group was named as influencing factors,the
third clusters group was named as product promotion factors since it consists
of promotional factors like payment methods,interest and taste in eating
foreign foods,home delivery facility,new products market
development,attractive advertisement,fresh fruits and vegetables and fresh
bakery products availability etc .this indicated the retailers to considers the
consumers views and make changes accordingly to attract prospective
buyers for efficient and effective retailing to make profit since consumer is
the ling who decides the fate of the supermarkets
VI summary and policy implication

6.1 Introduction
Food accounts for the larger share of consumer spending food and food
products account for about 53 per cent of the value of final private
consumptions share is significantly higher than in developed
economies,where food and food products account for about 20 per cent of
consumer spending,significant spending on food and increasing out-of-home
food consumption represents opportunities for food retailers and food-service
companies (www.tata.com) to cater to their needs retailing is one of the
larger industries in India and second largest employer after agriculture. The
retailing industry provides employment to over 18 million people .one out of
every 25 families in India is engaged in the business of retailing with the
ownership and management predominantly family controlled,however,in
sharp contrast to developed countries,unit average size of retail outlet in
india is very small here,the majority of food consumption is still at home .
Nevertheless,out-of-home food consumption is increasing local market and
small-scale retailing continue to dominate India's food retail sector unlike
most other countries,India retail sector is highly fragmented and bulk of the
business is in the unorganized sector(97 per cent) local 'wet' market
vendors,roadside pushcart sellers or tiny kirana (grocery) stores however,the
share of modern organized retail sector is likely to grow from its current three
percent to 15-20 per cent over the next decade.

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Retail growth in the coming five years is expected to be stronger than GDP
growth,driven by changing lifestyles and by strong income growth,which in
turn will be supported by favorable demographic patters and the extent to
which organized retailers succeed in retailing lower down the income scale to
reach potential consumers towards the bottom of the consumer pyramid
growing consumers credit will also help in boosting consumer demand. A
large young working population with median age of 24 years nuclear families
in urban areas,along with increasing working-women population and
emerging opportunities in the service sector are going to be the key growth
driven of the organized retail sector in india. The structure of retailing will
also develop rapidly. shopping malls are becoming increasingly common in
large cities,and the number of department stores is growing much faster
than overall retail supermarkets have been taking an increasing share of
general food and grocery trade over the last two decades.
Organized food retailing is a relatively new phenomenon in india,with small

western-style supermarkets only starting to appear since 1990s. Thee
country gas witnessed a retail revolution in recent years. Significant
development has been taking place in urban areas in the form of organized
retailing mega stores or malls more so in the south of the country in the
major cities of banglore,chennai and hydrebad,as well as new delhi and
mumbai in the north. it is expected that the tier II cities would take another
five years to absorb modern retailing opportunities moreover the case for
Indian retailers to explore rural markets in also strong due to the size of rural
population and agriculture income growth in last couple of years . The major
formats being followed for organized food retailing in india are supermarkets
, discount stores,fresh product outlets,specially stores,convenience stores
and off price retailers.
The organized food retailing sector in India is on the a=verge of a boom and
expected to undergo further change with perspective new domestic and
global foreign entrants and the takeover or exit of some existing participant
analysts believe that hypermarket will determine the future of organized food
retailing over the short to medium term traditional grocery are also gradually
redefining themselves by increasing floor space and introducing self-service
format and value added services such as credit and home delivery
(anonymous 2004)the study conducted by the rabo India finance Pvt. Ltd.
Says that south Indian states of tamil nadu,andhra pradesh amd karnataka
have taken a lead role in establishing modern food outlets. The growth of
organized retailing has shown particular vigor in chennai and banglore where
an estimated 40 per cent their grocery requirements were met through
modern retail formats karnataka is one of the leading states in organized
retailing in india as there are more than ten organized retailers (firms) with
more than 100 outlets including metro AG operating in banglore city alone
due to increasing urbanization and expanding service sectors like software
banking insurance and business process outsourcing (BPO) which has taken a

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metropolitan city status more recently has led to increase in income of the
consumers. Apart from banglore cities such as mysore manglore,hubli-
dharwad and belgaum in karnataka are also growing rapidly in terms of
urbanization,income and organized retailing with local food markets as they
are converting unorganized retail outlets into organized form because of
strong demand for convenience products and better educated consumers
concerned about health,nutrition,food safety, and the environment as
income rose and shoppers sought both convenience and new tastes and
stimulation,supermarkets were able to expand the products offered. the
global economy has changed,consumer demand has shifted,and retailers
operating system today are infused with far more technology than was the
case in the past. it was observed that lot of progress have been achieved in
the food retailing in the past decade through organized food stores such as
supermarkets,discount stores,fresh product outlets,specially
stores,convenience stores and off price retailers,but still there is a lot of
scope for the food retailing state is experiencing rapid structural change with
the emergence of huge retail firms with massive buying power and
concomitantly concentration in the manufacturing sector an effort was made
in the state to study the entire business aspects of organized food retailing in
general and supermarkets in particular. In addition,consumers study was also
undertaken to know the factors to be considered while purchasing their food
products in food retail outlets. The specific objectives of the study were as
follows
• To document the supermarkets existing in the study area to study the

organizational structure in supermarkets
• To evaluate the investment pattern of supermarkets
• To evaluate the financial management of supermarkets
• To study the procurement management in supermarkets
• To study the inventory management in supermarkets
• To study the management of processing/value addition in supermarkets
• To ascertain the methods of pricing in supermarkets
• To study the constraints or problem faced by the retailers.
• To identify the factors influencing the consumers to purchase the food
products in food supermarkets/food retail outlets.
Limitation of the study ; The study was purely based on the data given by
the owners/executives of the food retailing companies/outlets who are
generally suspicious of the motives of any investigation because of fear of
taxation and competition. In addition,due to non-availability of time series
data with respect to the business performance indicators over a period of
time,only recent year's data (2006-07) was used to analyst the
performance,the investigation was confronted with various drawback in
ascertaining the data. in case of companies having chain of outlets/units,only
one unit/outlet data was used to assess the overall objectives of the study.

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Hence greater care was taken to collect the data and it was also cross
checked to get unbiased data as accurately as possible.
2.Methodology ; The present study is mainly concerned with the food

retailing activities of the supermarkets across selected five cities in particular
and karnataka state in general.
To fulfill the objectives related to the supermarkets operations of the study a

multistage random sampling technique was used. In the initial
stage,karnataka state was selected as it is one of the leading states in
organized retailing in india.at the second stage,five cities across karnataka
such as banglore,hubli-dharwad,manglore,belgaum and mysore were
selected as the majority of organized retailers were existed in these areas.
Recently,most of the local retailers in these areas also modernizing their
stores in the form of modern formats like supermarket the last stage,three
supermarkets (one outlet/branch) from each city were selected randomly,so
that the total sample size selected for the study were 15 among the number
of supermarkets existing in these areas,only three supermarkets who were
agreed to provide the date are selected. however, supermarkets which
selected and their performance were studied for the last financial year 2006-
07 .In addition to study the factors influencing the consumers to purchase
food products in these supermarkets/retail outlets, ten consumers from each
selected supermarkets/retail outlets (30 from each city) were interviewed
randomly,so that total number of consumers accounts to 150. Since, it is
difficult to study the overall operation in all the products only two products
from each agriculture commodity like rice and wheat in cereals,tur dal green
gram in pulses,dry chilly and mustard in spices,banana and apple in fruits
and finally tomato and onion in vegetables were selected based on their
volume od sales in supermarkets.
Data collection;The detailed information required for the study was collected
from both primary and secondary sources in order tp accomplish the various
objectives of the study the primary data on roles and responsibility of each
individuals in the hierarchy and the pattern of investment like fixed and
working capital were collected in detail to know the investment pattern and
organizational aspects like different assets and liabilities,owned
fund,inventory,working capital,sales and returns were collected from their
records like balance sheet,profit and loss account and trade account were
collected to know the financial status of these supermarkets . The
information on procurement aspects like channels of procurement of raw
materials,quantity procured,costs of procurement and inventory aspects like
quantity and value of different inventories maintained at different stages and

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their cost of carrying were collected to understand the procurement and
inventory in processing cost incurred in processing considered in evaluating
the performance of the supermarkets and they mainly point out of relative
importance of the selected items. The financial statements used in this study
correspond to the financial year of the supermarkets April to march of 2006-
07. the ratio analysis technique has been heavily repaid upon, to test the
solvency, liquidity, profitability, turnover and sals of the supermarkets . The
multivariate statistical technique, principle component analysis was
employed to ascertain the major problems faced by the supermarkets in the
business of food retailing. The cluster analysis is a formal multivariate
statistical procedure was used in identifying the factors influencing the
consumers to purchase food products at supermarkets
Finding of the study
1.It was observed from the study that majority of the organized
supermarkets (multi outlets ) existing and operating only in big cities like
Bangalore and mysore . These organized supermarkets have multi outlets
operating under the single management and accounts for huge turnover. The
un-organized recently established supermarkets were found in Mangalore,
belgaum and hubli-dharwad . In these cities, the big local and conventional
store owners have converted their indigenous general stores into the modern
type of stores called supermarkets to cater the changing needs and
expectations of modern consumers which have consumers familiarity that
from generation is one big advantage for the traditional retailing sector.
2.The more organized form of supermarkets found in Bangalore city based on

their number of outlets were shubhiksha (40) followed by foodworld (33),
fabmall (23) smart (18), namdhari's fresh (14) and nilgiri dairy farm Ltd (12) .
all these supermarkets have their head offices at bangalore.
The famous indigenous supermarkets in the mysore city were loyal world,
arithanth super bazaars, mohan bhandar, shivananada supermarket, A-Z
supermarket and foodworld, however , the organized supermarkets
like foodworld, nilgiris shubhiksha and fabmall have penetrated the city more
recently and most of these had theirr head office at banglore. The family
owned un-organized supermarkets such as baliga stores supermarkets .
Andy's supermarket apna bazar. Jimm's supermarket, misbah supermarket,
move N pick, noor super bazaar Ruby's supermarket, sadhar bazaar were
well known in the city. Pick n pay, sangram food basket, day 2 day, needz
supermarkets and eshan super shoprr were the only five supermarket in
hubli dharwad city. Similarly the supermarkets in the belgaum city were hans
raj supermarket, neena supermarket, quality supermarket, rex supermarket
and shoppers paradise.

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The average area of the supermarket outlets inn different cities were found
to be 4333.33 square feet, 2833.33 square feet, 1833.33 square feet in and
1200 square feet in Bangalore, mysore, hubli-dharwad, mangalore and
belgaum, respectively usually size is an advantage because a large store
designed and build has the capacity to deal with the expected number of
customers in the neighborhood.
4.The fixed capital drastically varied from city to city higheest was found in
banglore (Rs. 255.30) and leasst in managlore (Rs.13.00 lakh). However the
overall average total fixed cost per outlet was Rs.78.42 lakh for the state as
a whole. In case of working capital, raw materails were the prime costa
contributed about 67 per cent of the capital as the retailing business
(supermarket) itself is to reseeeling of commodities and quicker conversion
of inventory into cash. At all overall the averge totoal costs required to
establish a supermarket in the karnataka was Rs.261.33 lakh. The higher
costs in big cities was due to higher labour costs, social security to
employees, high quality real estste, much bigger premises, comfort facilities
such as air conditioning back up power supply, taxes etc., it is more so
incase of organizes retailing.
5.It was observed that the organized supermarkets or supermarkets in multi

outlets (chain of supermarket) firms/companies followed line, line and staff,
and the functional categories of oganizational structure wheras line
organization was commonly follwed in unorganized supermarkets or
supermarket not in chain. Most of these unorganized supermarkets are
family owned
5.Two types purcahsing pattern such as centralized or store level purchasing

pattern were follwed in supermarkets for procuring both groceries and fruit
vegetables products. All the Bangalore supermarkets folllwed centralized
purchasing pattern due to their multi operations and form retailing. On the
other hand. Most of the supermarkets in other cities, followed store level
purchasing because of their single outlwets operation and unorganized
structure of retailing in maglaore and belagaum cent per cent prefferd store
level purchasing. However 66.67 per cent of supermarkets in mysore.
Prefferd store level purchasing and 33.33 per cent have gonr for centralized
purchasing and the reverse was found in hubli dharwad depending upon
their mode and size of operation. In mysore and manglaore fruits and
vegitables purchased through wholesale market only.
7.No sale of fruits and vegetables were witnessed in belgaum and hubli
-dharwad supermarkets due to lack of infrastructural facilities to handle fruits
and vegetables, competitation from the existing local, traditinal fruits and
vegetables vendors,non availability of fruits and vegetables regularly, fear of
losses due to the pershabilty nature of fruits and vegetables.

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8.The ovrerall monthly averge quabtity and value of products procuremnt
across cities in karnatka revealed that the average frequency of purchse in
groceries was ranged from four to five times a month but it was only 2.2
times in mustard. The cost per quintals was highest in chilli(Rs.6739.79)
while least in rice (rs.1.688.05) it was also reported that the APMC was the
only source of purchse for groceries productrs as it is the onlt govenrig body
for marketing of agricultural commodities. The existing polices of the
government may also prevent sources.
9.With respecct to fruits and vegetables in the state, the purchase frequency
was more in tomato (10.83) and banana(10.00) due to their perishability
nature of the products in general and tomato in particular and also to avoid
wastages during storage. In case of friuts and vegetables. Toamto was
procures In highest (14.63 quintals) quantiy follwed by onoin and banan
(12.60 quintasl each) and apple (5 quintasl)
10.The quantity purchased was also found to be more in rice (0.85 quintals )
followed by tur dal (0.77 quintals ) green gram (0.71 quintals ) wheat (0.54
quintals ) and mustard (0.12 quintals ). this is attributes to the fact tha the
turnover in cereals and pulses waas much more when compared with spices
as these products are daily use items by the consumers and hence the
demand was more in these commodities.
11.On the average tur dal was produced in highest (6.46 quintals ) quanity
followed by green gram (5.54 quintals ), rice (4.48 quintals ) wheat (4.29
quintals ) , mistard (0.64 quintals ) and chilli 0.46 quintals ). the average
total amount spent on these items were found high in green gram
(Rs.25.275.56) follwed byt tur dal(Rs.21.271.60), wheat (Rs.8.832.14), rice
(Rs.9605.18), chilli(Rs.3.458.43) and mustard (Rs.1603.34) . However the
average price per quintals was highest in chilli (Rs.7258.33) and lowest in
rice(Rs.1719.29). the main sources of purchase for groceries was APMC only.
12.State as a whole , rice (3.85 quintals ) next were tur dal (3.47 quintals ),
green gram (3.18 quintals )))) and wheat 2.45 quintals ) were the major
groceries procured by the supermarkets as these are the daily use items by
the consumers and hence the demand was more in these cases. The sales
tax was found only in species and it was Rs.46.93 in chilli which is follwed by
mustard.
13.Similarly in case fruits and vegetables, the purchase was highest in

banana (13.83 quintals ) subsequently tomato (12.50 quintals ) onion (9.33
quintals ))) and apple (5.50 quintals ) depending on their demand
prevelence.
14.In all the commodities, quanity procured and their unti cists were found
high in bangalore alone.it may be due to higher averge size of the

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supermarkets and high turnover of thr commodities in contrast, the
commodities procurent ws found to be less in belagaum due to the existence
small sized unorganized supermarkets and their small turnover.
15. In friuts and vegetables the quanity prcoured was maximum in

banana(13.83 quintals ) follwed bt toamto (10.38 quintals ) onion (9.33
quintals ) and apple (5.50 quintals ) depending upon their incurred were
more in apple (Rs. 5487.50 quintals ) and Rs. 30.222.50 total cost). It was
also observed that friuts and vegetables procured from various sources such
as wholesale market, own production and direct ourchae fron farmers, except
bangalore alnost all the cities purchased fruits and vegetables from
wholesale market only. The transport cists detected high in tomato
(rs.712.50) and banan (Rs 708.33) as the quantity procured was high in
these commodities.
16.City wise averge monthly cost incurred in procurement of commodities by

the supermarkets found that the monthly total quanity procuremnt was high
in bangalore (67.65 quintasl ) follwed by mysore (59.77 quintals )
managalore (31.80 quintals ) hubli dharwad (13.13 quintals ) and belagaum
(8.14 quintals ) as the supermarkets size and the turnover were maximum in
the city. Except tomato. Total costs per quintals in all the commodities were
also found to be high in banglore only. This is manily because of the reason
that he supermarket sin banglaote procuring toamto from diffent sourcess
like direct procurel=met from the farers and whiolaslaes auction of riuts and
vegetables were also observed in few supermarkets.
17.The costs of inventory and prompting the products fro sale in selected
cities across Karnataka revealed the short time period inventories
maintained in different commodities by the supermarket in the state. the two
inventory approaches followed by these supermarket are material
requirement panning (MRP)due to their turnover and demand . The finished
product inventories wre maintained in highest quanity for long period in
onion comapaeed to fri=ts and vegetables beauawse of its non perishability
for some time.
18.Shrinking cost perceived to be the highest cost in onion (Rs.357.65)

followed by banan (Rs.202.07) apple (Rs.200.75) and tomato (Rs.102.69) at
the inventories.
19.The maximum quanitiy of inventories maintained in groceires items were

found in bangalore (6.46 quintals of tur dal , 5,75 quintals of wheat 5,54
quintals of geen t=gram 5.53 quintals of rice, 0.64 quintals of mustard and
0.48 quintals of chilli while the least were found in belagaum (2.58 quintals
of whrat . 2.33 quintals of rice ,2.13 quintals of tur dal , 1.49 quintals of

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green gram, 0.19 quintals of red chilli and 0.09 quintals of mustarddeoending
on their size of the supermarkets and turnover.
20.In case of inventory paching materials follwed by labour charges,

shrinking and intrest on wotking caoital wer identified as the cost
componets. The higher packaging cost was due to use of good packaigng
material embrossed with trademark as most of the supermarkets have own
brand names. The greater total inventory Cost and total cists were also
noticed In bangalore in almost all the products. But these coasts were vaied
across cities and commodities.
21.In fruits and vegetables the highest wuantiy of inventorey was found in
Bangalore (12.50 quintals of onion, 4.88 quintals of toamto , 4.17 quintals
and 1.30 quintals banana, 0.80 quintals of toamto aand 0.40 of apple) and
managlore 5.50 quintals of onion 1.50 of tomato 0.60 quintals of banana )
depending on the avergae six=ze of the supermarkets and their in the state.
22.The quantity of inventiry maintained was high in bangalore (47.33

quintals folllwed in mysore (25.24 quintals ), mangallore (20.79 quintals )
hubli dharwad 14.39 quintals and belagaim 8.81 quintals quintals quintals
quintals the avergae onventory period was highest (6.19 dys ) in belagaum
folwed by mangalleo(5.83 days ) hubli -dharwad(5.56 days) bangalore (4.58
days) and mysore (4.50 days )
23.With respect to invetory cost componets. Packagibg costs were found to

be th eprime constiotutes on an averge it accounts Rs 2868.84 in bangalore
follwed by Rs.1375.77 in mysore , Rs.1141.77 in maglore , Rs.973.49, hubll
dfharwad and Rs.1141.77 in belgaum. The highest pachaguing cost attributrs
and printed inforamtio on it attract the customers.
24. The results revealed that in the entire groceries dealing cent per cent og
cleaning , bagging and labellling and sticking wee undertaken by all the
supermarkets to maintain good relationship with the consumers by
providing good quality products.in additon it is very much neccessry and
th eonlt way to compete with the conventional stores. On the other hand
these activities help in matrket segmentation with price diffencaitio.
However grading was observed in 66.67 per cent of the Bangalore
supermarkets but it was not seen in belgaum supermarkets since most of
the supermarkets are unorganized in the city. In overall cent per cent of
supermarket acros the karmnataka.
25.In fruits and vegetables cleaning activity was observed in all the
supermarkets as it is abasic thing to diffreciates from other stores which are
dealign with these prducy=ts becquse of the existance of loacl fruits and
vegetables vendors in all the cities.in conrats to this,a ll the bangaloe
supermarkets follwed grading, bagging and markets in the city are highly

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sophisticated with high stanadard of living. At an overall it accounts cent of
supermarkets carried out clening axctivity.
26.. It is observed that in bangalore supermarkets the averge value added in

case of groceries was more in wheat (31.33 per cent ) follwed bt rice (30.50
per cent) mustard (28.05 per cen) tur dal (23.45 pecent) bgreen gram (19.94
per cent) and chilli(17.52 percent) due to higher prices obtained and
relatively lower percent of wastage.
27.The other hand. In fruits and vegetables categories trhe per cent value
addition in bangalore supermarkets was found to be highest in tomato (64.78
per cent ) as against 20.65 per cent in apple. This indicates the benefits of
use of difernet from the far,mers and own productio will obviuosly enhances
realizaation especially in case of vegetables like tomato.
28. At the overall supermarkets across the state , the higher per cent of
value additon was noticed in mustard (27.68 per cent) among groceries and
toamto (49.21 per cent ) in fruits and vegetables. The higher price
realozation from mustard was due to absecnce of cleanign , grading of these
produce in other markets as it is less demaned from the consumers. However
out of the selected cities, the maximum value adddtion in bothgroceries and
fruits and vegetables were found in bangalore because of higher prices of
the products in this market.
29. The ratio of total liabilities to owned funds was found to be 0.798, 0.600,
1.905, 3.535, 0.3.45 in bangalore, mysore, mangalore, hubli -dharwad and
belgaum respectively.the ratio of fixed assets to owned funds was to be the
highest in mangalore (1.731 follwed by hubli-dharwad(1.367 and
bangalore0.69733). It was noticed that in all the supermarkets, the liquid
assets to total assets ratio was less than 0.5 which is 0.459 in banglore ,
0.404 in mysore, 0.399 in mangalore, 0.1657 in belgaum and 0.268 in hubli-
dharwad and hence the overall was 0.337.it indiactes that more than 50
percent of the assets were not in liquid assets form.
30. The current ratio presented in the table indicates that the ratio was more
than one in all the cities supermarkets except mysore , wherin the ratio was
0.994 it means to say supermarket had more than one rupee of current
assets per rupee liablities.
31. Net profits to fixed assets ratio were found to be high in myosre. Wherin
the ratio was 1.297 and least in bangalore (0.572) and in other cities also the
rato was more than 0.677. this indicates that the cities inturn it indicates the
effiecnt use of ifxed assets by the supermarkets. Similarly the ovelalll net
profits to total assets was 2.4999 which oindicates thath profit generated per
rupee of total assets was nearly 2.50 rupeee which shown trhe improvwed
effeciency od supermarkets. The ratio of net profirt to owned finds ratio

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which were 4.621 incase wasobserved in belagaum 0.574. this ratio shown
that the supermarkets were quite able to total sales were alsi found to be
vey signifiecnt in all the cities across the state indicating more than a 0.170
rupee contibution to per rupee total sales.
32. The working capital turnover ratio was highest of 5.156 in belagum folle
by 1.890 in bangalore, 1.576 in mangalore , 1.539 in hubli –dharward,and
1.331 in mysore supermarkets. This indicated the turnover per unit of
working caoital was higher in belagaum over all othrer supermarkets and
good in all other cities. In belagaim over all ht efixed assets to turnover ratios
were higher in the order on mysore, hubli-dharwad, mangalore, belgaum and
in Bangalore (6.784. 4.319 3.971 . 3.931 and 3.581 respectively). This was
because these supermarket were able to achieve higher sales targets with
less investment in fixed assets accordingly.
33. State as whole the factors considerd while pricing the products at
supermarkets attached significance importance to the quality the products
and the nature of the produts.
34. It was found that absorption cost pricing and going rate pricing method
were adopted by cent per cent of the bangalore supermarkets. All the
supermarkets in mangalore adopted absorption cost pricng and going rate or
market pricng methods, wheras 66.67 percent of htem in he city aslo made
use of loss leader pricng to try and attract the customers. The pricing in
Belgaum supermarkets was done through absorption cost pricng and going
rate or markrt pricng methods by all the firms’ together with discounting
pricing by 33.33 per cent of the supermarkets occaisnally at the time of
festivals. Similarly the methods employed by the hubli -dharwad
supermarkets were absorption cost pricing, discounting pricing
35. At an overall cent per cent of the supermarkets in the state follwed
absorption cost pricng and going rate or market pricng methods in pricng the
produvcts at supermarkets about 60 per cent follwed discounting princing
during special days like festivals while 33.33 per cent and 26.67 per cent
adopted penetration pricng and loss lweader pricng method. A small
proportion (13.33 per cent and 6.67 per cent ) of the supermarkets also
adopted target pricng for uused to try and attract customer for the shoppiing
at supermarkets.
36.The problems in the supermarkets business were many but the variation
were govened by a few dimentions. Non availibilty of trained employess,
banks for sources of fiance, demand for credit from the customers and
bargain firm hence there may be a lack of availibikty of trained marketing
and business requres huge investment and unsertainity of the seccess may
restrain finacual toward retailing businesss. The credit and bargian from the
customers are as usal in any business activities. In contrast, advertisemnt

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rate coverage of area. WTO impact on profits margin and price of the
products and market infornation fron the wholesale have shown impact.
37.The other problems quoted by the retailers listed in subsequent

dimensions were VAT charges, demand for new products from the customes,
land and building and finacial resouces, price variation by the wholesalers,
storage delayed and avilibilty of untrained employees have consequences on
the probles of the retailing.
38. It was observed that convenient loaction of the supermarkets, range of

produts availibilty, conbenient pf purhse. Avialibilty of qulaity products were
considerd as the prime factors influencing the consulers to go for purchse at
supermarketrs most of these are concerned to accessibilty and oriented
factors. Influencing factors cluster comprised of major factors such as
reasonable prices, parking facility, shopping is seen enjoyable at
supermarkets. Attractive packing , schemes and offeras, concern about
health welfare and the enviromentinluence iit consist of protion factorslike
payemnt methods interst in eating foreign foods, home delivery facilty, new
products market development, attractive advertisement, fresh fruits
vegetables and fresh bakery products avilibity and frsh bakey products
availibity etc..
Policy implications:
1. Since most of the supermarkets in the state are unorganized (except

bnagalore) there is a lot of scope for the supermarkets business to shift from
unorganized to organization from of retaing by reasons of increaded
urbanization and income. Change in culture in culture, Food habits, taste and
preference, lack of time for shopping due to incresed working women and
shopping pattern of the consumers.
2.New entrance into this business have to adopt the models used by leading
to Increase thier own effeviency, while companies enreing the market have
to undego an apprenticeship with regard to the different cultural background
and cosumer preference and necessarily make certain adjustment.

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3. It would be better if larger sized supermarkets created at the outset
because size is an advantage or a nesessity. A large store is designed and
built have the capacity to deal with the excepted number of custoemr in the
neighborhood but a small selction with other nearby supermarkets.
4. Since investment in establishment ,modernization and expansion are

capital intensive in supermarkets local companies and local foreign joint
ventures seems to be the suitable strategic than the purly foregin organized
india's retailing industry.
5. Due to an ongoing of increaing organization and implemention of

information technology, the retail sector has to adopt a new form of
relationship with suppies and needs to develop a wide range og knowledge
with their vhangoong the habbits towards the consumers of power in the
productive from industry to retail.
6.The growing cometion between outlets with the same format.as well as
between diifernt types of store should introduce codt reduction programs and
measures to rationalize opetions as well as to differentiate services in order
to increase customer base.
7.In order to establish and effective a unifrom procedure for the handling of
purchasing matters to obtain the most suitable serives and
puchasingpromote the best possibel means of excercing finacial control over
expenditures, the centralized purchsing system should be adopted by the
supermarkets having replenishment. Those firms operting in within these
enviroment need an atute inderstanding of the chains the herarchy of
channels members and hteir relative poston.
8 .As it was observed from the study that the total costs incured in
procurement of tomato was less at banglaore when compared to other cities
because of the use of various sources like direct procuremnt from the
farmers and own production .it is highly recommended that the
supermarketers to go for these sources to get wholesale margin in bulk and
are also the producers . If it is from the farmers it alets them about the
importance of production of quantiy produce in turn for their benefits.
9. Specila emphasi smust be placed on the computerzed of the sector

whhich help to improve the effecincy in opertions of procuremnt and
mangent which is in turn providing greater knowledge on products flows and
efficiency gains in the producers retailers chain.
10.Even after accounting for competion and supply side characteristics,

demographical characteristicssuch as density of the population averge food
expenditure, invome og households averge households size, number of store

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in the area ,size of the store etc., should be taken care before plays a
significant role in the choice of the products by the consumers.
11.The solvency and liquidity ratiosof the supermarkets were found to be

very negligible andhence should be taken care for improving the own funds,
volume of business and liquidity position to the need of improving financial
of the supermarkets.
12. food retailers risk a loss of image or even a loss of the customer if they
do not learn to react effectively to the problems uncounted in the process of
the business as ascertained during the investigation which may lead to
failure, hence, they should concentrate to the latest retailing strategic to
improve their services to the customers and to make profits.

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Final Thesis

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Dear Suheal

I have received your synopsis as well as confirmation that I would be your

Admission Office: IIPM Tower,419,100ft Road,Koramangala,Bangalore-560034,

PROFESSOR TAREQUE LASHKAR

Doctorate in food retailing

INDIAN INSTITUTE OF PLANNING AND MANAGEMENT

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ID NO: B0709SS 10056

THESIS TOPIC APPROVAL (Marketing)

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I am grateful to Mr. Tareque , HOD of Indian Institute Of Planning

I am also grateful to Mr. K.B. Ramappa, Operations Head of Safal for

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6) Summary and Policy Implications

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Admission Office: IIPM Tower,419,100ft Road,Koramangala,Bangalore-560034,

Retail, according to concise Oxford English Dictionary, is the ‘sale of

Retailing is derived from the French word ‘retailer’ meaning ‘breaking

This is relatively a recent development, taking place mainly over the

The retail sector is broadly classified in to two groups, Organized and

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Globally, retailing is a big business; its turnover is fast marching to 6.6

There are many Multi National companies operating in the retail

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The traditional forms of independently owned small business and co-

Hypermarkets-These are mainly located out of town covering an area

Supermarkets- It mainly based on the classical self- service system.

Mass Merchandisers- The mass merchandisers have cross country

Discounters- Aimed mainly at bargain buyers, they are different from

Convenience stores-They are located at convenient points like petrol

Specialty stores- These are moving towards ‘consultative shopping’

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The Indian Scenario:

Trade or retailing is the single largest component of the services sector in

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Com pa ri t iv e pe nit ra t io n of org a ni z e d re t a il Traditional

Evolution of Retail Market in India.

In music Segment Planet M, Music world and in books Crossword and

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Table: 1. Journey of Organized Retail in India

Year Growth Function

2000 First Phase Entry, Growth, Expansion, Top line focus

End to end supply chain management, Backend operation,

Few of India's top retailers are:

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Karnataka is one of the leading states in organized retailing in India as there

Rapidly in terms of urbanization, income and organized retailing with local

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1. To document the supermarket existing in the study area

2.To study the organizational structure in supermarket.

3.To evaluate the investment pattern of supermarket

4.To evaluate the financial management of supermarket

5. To study the procurement management in supermarket

6.To study the inventory management and its costs

7.To study the management of processing/value addition in supermarket

8.To ascertain the methods of pricing in supermarket

9.To ascertain the constraints/problems faced by the retailer.

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Objectives of the study;

Presentation of the study;

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2.1 documentation in food industries

2.2 organizational structure and investment pattern in agro-industries

2.3 financial management in food industries