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New Delhi, Dec. 25: Subhiksha, the Chennai-based discount food and grocery chain, plans to open 90 stores in Calcutta by early 2007.

The retail chain has already started the groundwork to select the locations and build the supply chain in the city, according to Atul Joshi, senior president of the firm.

The stores and distribution network in Calcutta will be ready in the next four months. The Calcutta foray is part of the retail chain’s second phase of expansion, under which it will spread to five states — Bengal, Punjab, Madhya Pradesh, Uttar Pradesh and Haryana.

“We hope to hit the 1,000-store mark by the end of 2007, with an overall outlay of Rs 500 crore,” said Joshi.

Subhiksha, which follows a cluster strategy when entering a market, would be the first such retail chain in Calcutta unlike other players like Food Bazaar, C3 or Arambagh. The idea is to provide “neighbourhood presence to consumers” with a large number of stores in a particular location.

“Our mantra is to bet big while starting and then saturate the city with a slew of stores. If there are 100 post offices in Calcutta, we will have more than 100 Subhiksha stores,” said Joshi.

International retailers like Starbucks have followed the cluster strategy in areas that had a high density of potential consumers, thus ensuring that canibalisation of sales would be within the network of stores, rather than to other chains or independent outlets.

Calcutta offers a huge potential for a discount retail store like Subhiksha, since the organised retailers in the city account for barely Rs 10 crore in the Rs 300-crore-a-month market for food and groceries, said analysts.

Also, since the major competitors — Food Bazaar, C3 and Arambagh — put together are garnering only Rs 10 crore a month, it would be easy for Subhiksha to strengthen its foothold in the city.

Subhiksha has four verticals — fruits and vegetables, pharmaceuticals, FMCG and telecom — and follows the every day low price (EDLP) model. The retail chain’s direct supply arrangements with manufacturers, along with bulk purchase and cash transactions, considerably reduce supply-chain costs helping it sustain the EDLP model.

“Our proposition includes 10 per cent discount on all medicines, 8-10 per cent concession on consumer goods and loyalty programmes, which help a consumer save over Rs 500 every month on household purchases,” said Joshi.

The retail store also has an edge over its counterparts with its timing of 9 am to 9 pm.

A Subhiksha store typically spreads over 2,000 sq ft, way smaller than a Food Bazar or C3, but this enables it to be present in every neighbourhood. Subhiksha, formed in 1997, reported a turnover of Rs 330 crore last year, with a target of more than Rs 700 crore by the end of 2007.

The company has been profitable for the last eight years, and its revenues have grown by 25 per cent in the last two years.