Army canteens are the most profitable retail chains in India
What's the story
According to a report published in the Economic Times, India's most profitable retail chain is run by the Indian defence services. The chain in question is the Canteen Stores Department (CSD) belonging to the Indian Defence Ministry. The CSD has 3,900 stores across India for serving members of the Indian army, Air Force and the Navy, apart from ex-army personnel and their families.
CSD stores
A brief history of CSD stores
The Canteen Stores Department (CSD) was set up by the Indian Defence Ministry in 1948 to "ensure easy access to quality products of daily use, at prices lesser than market rates". The CSD stores, after their establishment, has thus served defence personnel in times of peace, war and natural disasters. The CSD stores serve 12 million customers annual as of now.
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Products for sale in CSD stores
The CSD stores sell over 5,300 products including alcohol. Interestingly, alcohol and toiletries account for nearly half of CSD stores' sales with alcohol accounting for 26% of sales and toiletries accounting for 23%.
Comparative profit analysis
CSD profits in comparison to big retail chains in India
According to data for the financial year 2014-2015, the CSD stores earned a massive profit of Rs.236 crore or $35 million. In comparison, in the same financial year, Reliance Retail earned a profit of Rs.159 crore or $23.6 million. Meanwhile, according to the same data, Future Retail, which runs chains like eZone and Big Bazaar, earned a profit of Rs.153 crore or $22.7 million.
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Annual turnover of CSD stores
In the financial year 2014-2015, the annual turnover of CSD stores stood at Rs.13,709 crore, while Reliance Retail's turnover was Rs.17,640 crore, and Future Retail's turnover was Rs.11,150 crore.
Operating margins
The operating margins of CSD stores
The CSD stores, being not-for-profit ventures, work on an operating margin of around 1%. In comparison, private retails work on operating margins of 8%-18% depending on the retailer. However, in spite of a lower operating margin, the CSD stores are more profitable because they do not have to pay for advertising. Furthermore, being normally located inside cantonments, they cut down on real estate costs.
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CSD's share in sales of big consumer goods companies
CSD stores account for 5-7% of the total volume sales of large consumer goods companies. For instance, CSD is the biggest customer of consumer goods giant Hindustan Unilever and liquor giant United Spirits in South Asia.