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Case in point 10—Sustainable sourcing and procurement practices at Max Hypermarket

Working with local communities, sourcing locally and imparting best practices in farming enable Max Hypermarket to offer high quality fruits, vegetables, meat and fish to consumers

Factors for success

  • Commitment to working with local farmers/ producers

  • Ownership of robust processing unit

  • Time, effort, patience and dedication in communicating the importance of basic business practices (payment mechanisms, other general business knowledge, hygiene, adhering to quality standards, etc.)

  • All portioning, pre - packing and marinating of lamb and poultry is done at the stores to ensure freshness for consumers

The 2008 PricewaterhouseCoopers thought leadership study, The Benefits of Modern Trade to Transitional Economies indicates that farmers benefit from modern trade by being better integrated and linked into the food supply chain. Farmers and modern trade players can explore partnership models that benefit consumers (i.e., lower prices for produce since middlemen are eliminated), farmers (i.e., not exploited by middlemen, receive fair market wages for produce) and modern trade players (i.e., savings through direct dealings with farmers/producers).

In 2004, Max Hypermarket entered into an agreement with SPAR to retail food and non-food merchandise in India. We focus on Max’s sustainable business practices of working with local farmers and communities to procure fresh fruits, vegetables, meat and fish for consumers. These sustainable sourcing and procurement practices ensure that—

  • Suppliers receive a fair market price, are paid on time and regularly and are also educated on best practices in farming and business management

  • Max receives well-priced and high quality products that can be sold to consumers

  • Consumers receive price benefits from Max and also consume fresh and hygienic food that meets Max’s high standards of quality

Fruits and vegetables

  • Max maintains agreements with local farmers for the farming and procurement of fruits and vegetables. Seventy percent of the fresh produce in Max’s hypermarkets and large format supermarkets is sourced from these farmers

  • Max established a captive processing unit for fruits and vegetables; this processing unit is temperature-controlled with sufficient cold storage space

  • The 80 farmers that Max works with are located between one to two hours away from the unit

  • Max ensures freshness of product since it has a mandate of 24-hour fresh delivery—

    • 12pm, Processing center—Farmers deliver their produce

    • 12-7pm, Processing center—Fruits and vegetables are cleaned, sorted, graded, cut and pre-packaged

    • 7pm, Transport by temperature-controlled trucks—Produce is transported in the evenings to the outlets since temperatures are lower in the evening

    • 9pm, Max outlet—Produce is delivered to Max outlet and is kept in cold storage before being placed onto temperature-controlled produce section

    • 9am, Max outlet—Customer receives fresh produce

Lamb

Max buyers have deep and personalised relationships with suppliers which have been developed over the period of a few years. Lamb rearers are based in and around Karnataka; this required Max buyers to visit farms and check the antecedents of livestock. Suppliers send the live animals of a certain weight to government-approved slaughterhouses, after which the carcasses are transported to Max within two hours of slaughter. Max needed to educate the vendors regarding health and hygiene standards, etc. While this initially proved to be a bit of a challenge, buyers are in continuous contact with rearers and slaughterhouses to constantly ensure quality control, transparency of process, establish

communication, etc.

(Source: Primary research interview with Max Hypermarket Pvt. Ltd.)

Strategic Issues for Retail CEOs* : Perspectives on Operating in India’s Retail Sector

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