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Tag: Future Group

  • Big Bazaar Direct marries the reach of the neighbourhood store with the weight of the Big Bazaar brand and the convenience of technology to home-deliver goods and discounts.

    Will Big Bazaar Direct hurt mother brand ‘Future Group’?

    By Kala Vijayraghavan

     

    Five years ago, the elder daughter of India’s retail man Kishore Biyani, had an idea to take all the promotional and discount deals offered by Big Bazaar, their flagship retail store, and pack it all into an outlet in areas not serviced by organised retail.

     

    Thus Future group, led by Ashni Biyani, set up a 600 sq ft store called Big Bazaar Best Deals in Mumbra, a suburb of Thane in Maharashtra, and started offering deals—in store, through a catalogue and via online retailing. That idea did not gain traction, but it has spawned another idea five years on: Big Bazaar Direct, which marries the reach of the neighbourhood store with the weight of the Big Bazaar brand and the convenience of technology to home-deliver goods and discounts.

     

    Kishore Biyani

    At its launch late last month, Kishore Biyani, CEO of Future Group, said: “If it works, it will be bigger than Big Bazaar”. The operative words here are two: ‘bigger’ and ‘if’. Big Bazaar is a Rs 11,000 crore operation, the mainstay of the Future Group, and the new business is essentially looking to leverage that brand name.

     

    After spending much of the last 18 months on defence, selling pieces of his debt-laden retail empire, Mr Biyani is back doing what he knows best: playing offence, testing another retail format. “I am confident about this one,” he says.

     

    “We are venturing into this after making most of the mistakes in the world.” Big Bazaar Direct (BBD) is the first of its kind, at least in India. Even competitors are admiring it for intricacies and ingenuity. They are watching keenly, but holding back judgement to see how it is execution unravels.

     

    “The idea is very solid, ambitious and very interesting,” says the CEO of a competing food and grocery retail chain, not wanting to be named. One man who has seen it from closer quarters, even shaped parts of it, is Damodar Mall. Till mid-2013, the chief customer strategy officer of Reliance Retail was in the Future Group.

     

    Mr Mall was a close aide of Mr Biyani and he even worked with 28-year-old Ashni on the Big Bazaar Best Deals concept. “If one gets it right, it can be very right,” he says. “But if it goes wrong, it can hurt the mother brand.”

     

    BBD invites people — anyone from shopkeepers to insurance agents — to become its franchisee by paying a deposit of Rs 3 lakh. Say, your local chemist becomes a franchisee. At your calling, the chemist will come home with a tablet, which has a listing of Big Bazaar products that have deals on them.

     

    You can see the deals and the chemist enters your order on his tablet. Instantly, this is transmitted to the BBD back office, and you receive an SMS. You pay the franchisee cash for the order, which is also acknowledged via SMS. The franchisee’s job ends there. Your order is now with Big Bazaar, which home delivers it in three to seven days.

     

    “We have realised that, even today in India, human intervention is required in e-commerce,” says Mr Biyani. Daughter Ashni calls it “aided e-commerce”. The BBD model, thus, is tying to join many dots by making it a win-win-win proposition. The customer, sitting at home, gets goods from Big Bazaar, at its prices and discounts.

     

    The franchisees earn a commission on sales for simply going door-to-door and punching orders on a tablet. The company gets a new sales force, one that capitalises on its local knowledge and contacts, and adds ballast to the Big Bazaar engine without the burden of organising working capital.

     

    Mr Biyani is leading this project himself, along with the Future Group’s start-up team. Flanking him are Vivek Biyani, his nephew, and a panel of five entrepreneurs who have worked with Mr Biyani closely over the years. Rakesh, Mr Biyani’s cousin and the other senior promoter, is involved in the project to the extent that the technology piece reports to him.

     

    According to Mr Biyani, a central thought behind BBD was their reading that Big Bazaar, today, has a greater mind share than market share. In other words, more people know about it than who visit it —primarily because a store is not in their town or is not close enough. BBD aims to bring Big Bazaar home.

     

    “Big Bazaar touches around 35-40% of the Indian population today,” says Mr Biyani. “BBD will be able to touch at least 70% of the population.”

     

    The new partners

    The franchisees will have to enable that touch. BBD has launched in Nagpur (where Big Bazaar has its national warehouse) and Amravati, both in Maharashtra, where it signed up 15 franchisees. Next up: Ahmedabad, Hyderabad, Mumbai and the National Capital Region. “The fulfilment should be checked in one market first before the scale-up happens,” cautions Mr Mall.

     

    BBD is currently inviting franchisee applications. According to Abhay Kumar, one of the five entrepreneurs, the applicants include kirana stores, homemakers, chemists, insurance agents and beauticians. But it’s not as if anyone who pays Rs 3 lakh will become a franchisee.

     

    The group of five entrepreneurs will vet and decide. This group is also selling BBD. So, for instance, it has targeted an interaction with 4,600 prospective franchisees in October across BBD’s upcoming markets.

     

    After the interaction and initial screening, this team meets with applicants in their operating locality to get a sense of them, their business and customer profile. “The biggest criteria we are seeking in our franchisees is entrepreneurship, their ability to collect customers,” says Abhay Kumar, a fabric distributor and garment manufacturer who has been doing business with Biyani for 27 years, and is part of the group of five.

     

    According to Mr Biyani, five things need to fall in place: product, brand, franchisees, technology and supply chain. The most critical and the biggest challenge, he adds, are the franchisees, who stand to earn 7-9% of the value of the goods sold through them. “They have to buy into the idea…and I am banking on them to sell the idea,” says Mr Biyani.

     

    “And believe me, the entrepreneurs who come and meet me ask a million questions about the venture. Their sign-in is not that easy.”

     

    The flip side

    Harminder Singh of Wazir Advisor, a retail advisory firm, feels the “biggest flaw” in the BBD model is the franchisee strategy. “Big Bazaar is not a business that has high margins. So, a partner may get impatient quickly,” says Mr Singh, founder and managing director, Wazir.

     

    “The partner is an individual with a mind of his own. To have control over one’s business model is a better idea.” Hasmukh B Rambhia, president of Mumbai Suburban Grain & Provision Dealers, a group of kirana stores in Mumbai, seconds that thought.

     

    “Maybe some years down the line, when modern retail distribution becomes stronger, it will make business sense to partner big retailers,” he says. “Today, local players have to play to their strengths, of the convenience of buying daily grocery products.” While a Big Bazaar store stocks, on an average, 30,000-40,000 products, BBD will offer 1,800 products in several categories, including non-food, apparel and accessories, furniture and home furnishing, packaged foods and electronics.

     

    It plans to keep adding products in time, and also offer foods and grocery, the back-end for which it is working on. It is also looking to reduce delivery time, the eventual aim being same-day delivery. While the sourcing team for the store and home delivery formats are the same, there are two separate teams on the supply side. “What deal entrepreneurs get will depend, to a large extent, on the supply chain and service levels,” says Mr Mall.

     

    “The machinery will have to deliver reliably given that it is a hi-tech business.” Adds Wazir: “If there are inconsistent supplies in a form that the Sahara Group experienced, customers will stop shopping.” And, as Mr Mall says, the resultant backlash could even hurt the mother Big Bazaar brand. The CEO of a rival firm quoted earlier says it will be an execution challenge to have several hundred diverse entrepreneurs buy into the same idea. “But then that is Biyani’s approach right from day one,” he says. “He hasn’t been afraid to take risks at all.”

     

    Source:The Economic Times

    Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

    Licensed to republish

     

     

  • Are points that consumers stockpile juicy enough to keep them coming back for more? Or does loyalty require another strategy?

    Whose Loyalty is it anyway?

     

    By G Seetharaman

     

    It could well have been just yesterday when you walked into your friendly neighbourhood kirana store and muttered to the shopkeeper the by-now-familiar line: “Kuch toh discount dijiye, main toh har baar idhar hi aata hoon.” The guy behind the counter perhaps wouldn’t be amused – particularly if he’s never seen you before – but he isn’t likely to show his irritation; instead he may well decide to reward you for your apparent loyalty by shaving a few rupees off your bill.

     

    Consumers love a bargain – and marketers love to show that they’re giving one. There’s a fair bit of role-playing with the shopper trying hard to show her loyalty and the marketer trying even harder to reward it. Those efforts manifest themselves in wallets swelling with loyalty cards of retailers, airlines and hotels. But are the points that consumers stockpile in the hope of encashing them one fine day juicy enough carrots to keep them coming back for more? Perhaps not.

     

    C Prabhakar, a Chennai-based company secretary, does not set much store by points-based loyalty programmes. “Rather than waiting for a really long time to earn enough points to redeem them for something I like, it makes more sense to just go ahead and buy it,” he says. Two years back, Mr Prabhakar became a member of the loyalty programme of the Landmark group, which has retail chains like Lifestyle and Home Centre. “Just because I have the loyalty card does not mean I’m going to go there again and again. If I happen to go there, I will use the card, that’s it,” he adds.

     

    Customers like Mr Prabhakar are a marketer’s nightmare and defy what companies are trying to achieve through loyalty programmes. Siddharth S Singh, associate professor of marketing at the Indian School of Business (ISB) who has researched loyalty management in the US and India, is not surprised. “Companies here have tried to imitate the West. Sometimes loyalty management firms that devise programmes for companies are not experts. They are just IT vendors,” he says.

     

    Not Very Loyal

    While some retailers in India handle their own loyalty programmes, most of them hire loyalty management companies to do it for them. The loyalty programme market in India is pegged at about Rs 5,000 crore; retail accounts for two-thirds of that, and travel and financial services for 10% each. The rest comes from other sectors including hospitality and also channel loyalty initiatives.

     

    Loyalty marketing research firm Colloquy estimates the number of loyalty programme members in India to be over 35 million. The points earned in a loyalty programme can be redeemed for discounts or other rewards like movie tickets, accessories and consumer durables. MS Ashok, chief operating officer of Accentiv India, a loyalty management company, says cost is a huge factor in the very limited nature of loyalty programmes.

     

    “Companies are not able to move their marketing budgets from ATL [above the line] to BTL [below the line]. Loyalty programmes should be a big part of any company’s marketing budget,” he notes. While advertising falls under ATL activities, loyalty programmes are under BTL.

     

    Bijaei Jayaraj, founder and chief executive of Accentiv’s peer Loylty Rewardz, says even globally loyalty programmes are not very evolved. “Loyalty programmes are much more than points. There are some associated things which companies do not do very well, like suggesting purchases based on a customer’s transaction history,” he notes.

     

    Loylty Rewardz runs programmes for banks like Punjab National Bank, Bank of India and the State Bank group. Vijay Bobba, managing director and CEO, Payback India, says a good points-based loyalty programme should see a redemption of at least 50% of the points: “There are very few such loyalty programmes here and no programme crosses 70%.”

     

    Not all brands need a loyalty programme. Those that are either truly aspirational or those that anyways provide total value for money for sure don’t. Mr Bobba gives the examples of Apple (aspirational) and Walmart (value-for money) that can afford to not have a loyalty programme.

     

    “Apple provides the most premium customer experience and has a huge following. Walmart sells at the lowest price possible.” For others who fall between these two ends of the positioning spectrum, loyalty cards are a great way to identify customers, adds Mr Bobba. Payback India runs a unified loyalty programme for several brands including Future Group, ICICI Bank and travel portal MakeMyTrip.

     

    Know Your Customer

    Srikanth Chunduri, co-founder of Emart Solutions India, which devises loyalty programmes for companies, says the problem lies in not understanding customers. “It took the guy at the coffee shop I visit regularly six visits to know me. My kirana store owner knows me better. He doesn’t give me discounts for being a loyal customer but gives me convenience of free home delivery,” he observes.

     

    Vinay Bhatia, vice-president, marketing and loyalty, Shoppers Stop, believes a piece of plastic does not create loyalty: “Points are just the transactional part of the programme. You have to go significantly beyond points.”

     

    He also says it is better to charge customers for a loyalty card than to dole out freebies. “When a customer pays, he takes interest and asks so many questions about the rewards. That’s what we want,” he adds.

     

    Shoppers Stop charges Rs 300 for a ‘First Citizen’ card. First Citizen along with Jet Airways’ ‘Jet Privilege’ is among the best known loyalty programmes in the country.

     

    Over 70% of Shoppers Stop’s revenues come from its 2.8 million First Citizen customers. Marketing professional Tanaz Makujina concurs with Mr Bhatia on the benefits of retailers charging customers for loyalty cards. A First Citizen member, she used to redeem her points but now does not visit Shoppers Stop because she does not like their collection. “I’m not brand-loyal when it comes to retail stores. As I’m not one of those people who will go to a particular shop just to earn points, I won’t pay for a loyalty card again,” says Ms Makujina who owns eight loyalty cards.

     

    Talking of the points she earns on her ICICI Bank debit card, she says that since she has to visit the Payback site to find out what her points will get her, she does not bother. According to a 2011 Cross-Cultural Loyalty Study by Colloquy, only 42% of shoppers surveyed in India belonged to a loyalty programme compared to 74% of Americans surveyed. Companies, expectedly, say points-based loyalty programmes are effective. “I don’t think there is disenchantment with the points system among customers. It works when you give significant value to your customers,” says Anil Ramachandran, who heads the credit cards business at IndusInd Bank.

     

    Devendra Chawla, president of Future Group’s Food Bazaar, says the group’s Payback programme has 1.1 million members. “One loyalty card across formats and different merchant establishments certainly works better for customers as they get points on almost every item they buy, and more points get accumulated,” he adds. Parag Rao, business head, card payment products, HDFC Bank, claims the bank’s credit cardholders have displayed the “highest rewards redemption behaviour in the industry”.

     

    HDFC Bank is the largest credit card issuer in the country, accounting for a third of the total outstanding cards. Kaushal Satam, head, Jet Privilege, says the relationship between accrual and redemption of points is a symbiotic one: “The ability to redeem points is as important as the opportunities to earn those and success in one area determines success in the other.”

     

    Points are Not Everything

    While marketers emphasise the need for points, they have also realised they have to think beyond points to get their customers to stick with them. Shoppers Stop, for instance, decided to expand its Durga Puja offers outside West Bengal last year and mined its First Citizen database for Bengalis in New Delhi, Mumbai and Bangalore and notified them about the offers.

     

    “We saw an incremental turnover of Rs 1 crore,” says Mr Bhatia. Apparel brand Louis Philippe also offers sweeteners beyond points to its “Upper Crest” members. “Events like theatre, golf tournament invites and red carpet invites to stores for wine and cheese evenings with Louis Philippe designers and marketing teams have been very well received by members,” says Jacob John, brand head, Louis Philippe India.

     

    Manisha Lath Gupta, chief marketing officer, Axis Bank, says points are a currency which should be used intelligently. She adds: “There should be different incentives for different customers. For instance, I could give people who have never swiped their debit card bonus points to get them to use their cards.” Axis Bank recently revamped its loyalty programme to make it a pan-bank loyalty programme which means customers can earn points not just on debit and credit cards but also on their savings accounts, internet and mobile banking. “Earlier, redemption of points was in lower single digits but now it is has gone up to 16-17%,” she says.

     

    Mr Chunduri of Emart Solutions feels companies should think of innovative ways to reward customers. “An online bookstore could send out invites to a book reading,” he says. Companies in India do not know how to leverage their database, according to ISB’s Singh. “That’s what Tesco and BestBuy have done. They focus on their most valuable customers,” he notes.

     

    Tesco and BestBuy are American and British multinational retailers respectively. Their loyalty programmes, along with that of Amazon’s, are considered among the best. With increasing options for customers for almost every product and service, retaining them is no walk in the park for companies. But such a scenario also provides them with an opportunity to make their loyalty programme stand out from their peers’. Only a handful have done that so far.

     

    Source:The Economic Times

    Copyright © 2013, Bennett, Coleman & Co. Ltd. All Rights Reserved

    Licensed to republish

     

  • Retailers say early signs are encouraging than the same season last year, although these are early days and total actual sales numbers cannot be predicted yet

    Good news! End-season sales lure shoppers back to malls & high streets

    By Rasul Bailay, Sarah Jacob & Sagar Malviya

     

    After a lull of more than two months, Indian shoppers are thronging malls and high streets once again, lured by the end-of-season discount sales, and bringing some relief to nervous retailers.

     

    Retailers say early signs are encouraging than the same season last year, although these are early days and total actual sales numbers cannot be predicted yet. “So far it has shaped better than last year,” said Kailash Bhatia, chief executive of Pantaloons department chain.

     

    Dipak Agarwal, chief executive of DLF Brands, that markets products of brands including Mothercare, Mango, DKNY, Alcott among others, said the average sales at the brands under the company’s portfolio doubled in the first week of July compared to the same period in June when the discount sales had not started.

     

    Retailers have been nervous about whether shoppers would open their wallets amid a slew of negative news on the economic front such as increasing fears of below-normal monsoon rains, slowest GDP growth rate in nine years, US President Barack Obama expressing concerns about India’s investment climate, increasing food prices and prevailing high interest rates.

     

    After lukewarm sales in May, many brands including Arrow, French Connection and Puma advanced the start of their end-of-season sales to the last week of June instead of the traditional July.

     

    Now, with a whole host of other retailers joining in with discounts, consumers are back in the street in large numbers, causing traffic jams in main shopping areas this weekend.

     

    At the Noida Sector 18 market near Delhi, for example, hundreds of shoppers were driving up and down this weekend looking for a parking space.

     

    “It seemed I was shopping in the US. The sale looked genuine. I bought two Lee and two Wrangler T-shirts, two pairs of Albatross leather shoes and five pairs of sandals for my six-year old from Lifestyle and I paid just Rs7,500,” beamed a shopper holding a clutch of shopping bags at The Great India Place, the largest mall in Noida.

     

    DLF Brands’ Mr Agarwal says many retailers were apprehensive of the slowdown and through early sales they were trying to avoid an inventory build-up. And he expects consumer spending to remain high in the coming months.

     

    Jitendranath Patri, head of marketing at Central, a department chain owned by Future Group, shared Mr Agarwal’s optimism. “There is a long festival season starting from August and consumers will have something to celebrate each month during Ramzan and Diwali,” he said.

     

    Others such as Arvind Lifestyle Brands CEO J Suresh and Indus League Clothing CEO Rachna Aggarwal, however, warn that the positive response to discount sales need not necessarily mean that the good run will continue post August when most of the sales are over. “End-of-season sales never gives the true picture,” said Mr Suresh. “It is more important to see if sales will stabilize after the discount sales period or if a slowdown will continue,” he added.

     

    Mr Bhatia of Pantaloons said more and more customers now wait to shop during the sales seasons. Almost 30 per cent of Pantaloons’ revenues are generated during the discount seasons for the last four-five years.

     

    While the footfall has grown this discount season, Mr Patri of Central said the average ticket size of a Central customer too has increased to 2,500 this from 2,300 last year, making it a double whammy.

     

    A spokesperson for German sportswear brand Adidas AG said the company was expecting double-digit growth at its like-to-like stores during the sales season and it has achieved that target.

     

    Lavina Rodrigues, marketing manager at Metro Shoes Ltd, which sells multi-brand footwear through 175 outlets across the country, said the company is yet to gauge the sales records for the two-day flat 50 per cent sale this year, but indications are it is same as July last year. She says Metro is generally able to sell almost 60 per cent of the old stocks during the sales periods. In some cities like Rajkot, where consumers are more receptive of the discount season, the company would get rid of almost 85 per cent of the old stuff.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • What excites kiranawallahs is the huge margin they get

    Kiranas dump big brands for high margin Bharti Walmart wares

    By Sagar Malviya

     

    A few months ago, Dhananjay Jain, a grocery owner at Vidisha Road in Bhopal, decided to stock two alien brands – Right Buy and Members Mark – because they offered much higher margins than national brands and had lower price tags. Today, these floor cleaners, tea and cornflakes brands contribute nearly 20 per cent to his monthly sales.

     

    Many of his consumers may still have no idea where these brands priced 10-30 per cent less than those of Hindustan Unilever, Dabur and PepsiCo are sourced from. Well, they come from the world’s largest retailer, Walmart.

     

    Mr Jain gets these brands from a Best Price Modern Wholesale outlet – run by Walmart’s joint venture with Bharti Enterprises – just two kilometres from his store.

     

    Walmart is not allowed to sell directly to Indian consumers yet, but its brands across some three dozen categories have started sliding into Indian homes, as its cash-and-carry venture becomes a hit among grocery shop owners.

     

    “The idea is that the reseller should make more profits by selling our brands than he does by selling national brands,” said Arvind Mediratta, chief operating officer of Bharti Walmart. He said the firm’s private labels adhere to all the quality norms despite their lower price tags.

     

    Bharti Walmart operates 17 cashand-carry format Best Price Wholesale outlets, selling products to licensed neighbourhood stores, schools, offices and large enterprises. It has more than 3 lakh members, who own grocery stores.

     

    The firm launched Right Buy and Members Mark after phasing out its earlier brand Great Value, which is now restricted to Bharti’s Easy Day supermarket chain.

     

    So far, Walmart has developed a network of 100 suppliers to make private label products ranging from groceries, home care and personal care products to apparel and stationery. And it may soon get into categories such as soaps, shampoos and detergent. “We are planning to add several more categories in coming months and open over 10 outlets by next year,” Mr Mediratta said.

     

    Company officials say its brands already control 20-22 per cent share in most categories at its members’ outlets. Some shop owners even say they have stopped stocking national brands. “In categories such as floor cleaners and dish washing, we have stopped stocking national brands as consumers just want the lowest priced products in these segments,” said Mohammed Fayaz, a storeowner at Guntur in Andhra Pradesh, where Walmart has opened two wholesale outlets.

     

    What excites kiranawallahs is the huge margin they get. For instance, a 500ml bottle of Walmart’s toilet cleaner brand sports a price tag of Rs55 but is available to a kirana owner at Rs37. That makes the retailer’s margin a whopping 48 per cent. National rivals such as Reckitt Benckiser’s Harpic and HUL’s Domex are sold at Rs58, with the grocer earning 12-15 per cent margin on an average. Bharti Walmart also provides 10-30 per cent higher margins than national brands on tea, colas and juices that allow shopkeepers earn 10-30 per cent higher margins than national brands. Consumer products companies have been increasingly fighting private labels of modern retailers.

     

    In fact, private labels outsell several national brands in home care and packaged food categories at the outlets of retailers such as Future Group, Reliance Retail and Aditya Birla Group.

     

    FMCG companies didn’t feel too threatened because modern trade accounts for just 7-10 per cent of their total sales. But now, with Walmart’s private labels finding place in consumer companies’ largest sales channel – the country’s ubiquitous neighbourhood stores – this trend could become a headache for them.

     

    “As Walmart and other similar players scale up their cash-and-carry operations, given the price consciousness of the Indian consumer and the fact that kirana stores are here to stay, it is likely that this trend will start to worry large consumer goods companies,” said Siddharth Bafna, partner at advisory firm Lodha & Co.

     

    Not everybody agrees. The chief executive of a leading consumer products firm, however, said such private labels would not challenge big brands in evolved categories such as personal care. “There are always some categories, especially commodities, that are more prone to losing out to private labels because of pricing. However, several brands in the personal care segment that keep innovating aren’t threatened by private labels even in markets where modern trade is evolved,” the person said, requesting anonymity because Walmart is one of its partners.

     

    Some shopkeepers say it’s not easy to make people try new brands. “We are able to convince some consumers to opt for lower priced Walmart brands. But there are still many consumers who want to buy popular brands from national companies even if the price is higher,” said Jas Karan Singh, a store owner in Amritsar, where Walmart opened its first cash-and-carry outlet four years ago. Private labels accounted for around 7 per cent of Bharti Walmart’s annual sales of Rs 1,876 crore last calendar at over Rs 130 crore.

     

    Worldwide, the US retail giant is performing well despite the slowdown. For the fiscal year ended January 2012, it increased net sales by 5.9 per cent to $443.9 billion and ranked first on the 2011 Fortune 500 list of the world’s largest companies by revenues.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Starbucks Coffee Co and its Indian joint venture partner Tata Group have plans to open around 40 stores by December

    Starbucks for festive season flag off in Mumbai

    By Arun Kumar & Rasul Bailay

     

    Starbucks Coffee Co and its Indian joint venture partner Tata Group have plans to open around 40 stores by December, half of those in hotels and the rest in high-street malls, a person with the direct knowledge of the plans said.

     

    The person said the 50:50 joint venture, Tata Starbucks, has so far lined up 14 properties in malls and high streets in the New Delhi capital region, Mumbai, Bangalore and Chennai and will make its India debut in September or October from the commercial capital, Mumbai.

     

    The firm will adopt a cluster approach to simultaneously open three to four outlets in each city they initially go to. Mumbai will be followed by the National Capital Region, Bangalore and Chennai. The properties finalised in hotels include the Ambassador and President hotels under the Vivanta by Taj label, a contemporary luxury chain just notch below the super luxury Taj brand of the Tata group.

     

    “We are looking at both Tata properties as well as non-Tata properties and will focus on how we can become part of the local community where we do business,” a Starbucks spokesperson said in an e-mail reply. The alliance is also in talks with non-Tata hotel chains such as Marriott Hotels to open their outlets.

     

    The joint venture will invest Rs100-150 crore this year alone and has a total budget of $100 million (around Rs 550 crore) to invest in India in the next two to three years, the person familiar with the plan said.

     

    He added that the Seattle-based coffee chain – the largest in the world – will manage the business and source many of its staff from the Tata-owned Taj Hotels. All the stores in the initial stage will have a combination of the lounge as well as takeaway facilities, he said.

     

    Starbucks operates more than 17,000 stores in almost 60 countries. The coffee titan has been exploring possibilities to enter India for many years. Earlier it had made an abortive attempt to foray into India before it called off a joint venture involving its Indonesian franchise and Kishore Biyani of the Future Group. In 2007, the joint venture withdrew its foreign investment proposal with the Indian government without citing any reason.

     

    Now, Starbucks is back with a new partner and is bullish on India, a country with one of the lowest rate of coffee per capita consumption in the world.

     

    Local chain Cafe Coffee Day and global chains such as Barista Lavazza, Costa Coffee and Gloria Jeans are among others currently operating around 2,000 outlets in the country.

     

    Industry estimates that the Rs 1,000 crore coffee-through branded outlets sector is growing at an annual rate of 20 per cent. “I don’t see Starbucks as a competition… I see them as a player who will make drinking coffee through outlets a routine business,” said Virag Joshi, chief executive of Devyani International, which operates more than 100 Costa Coffee stores in India.

     

    The company plans to invest Rs400 crore to add 400 more outlets in the next five years. “The market will keep evolving and will keep growing over the years,” he added.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • In recent weeks, the retail industry has been abuzz with speculation that the Future Group was in talks with India's richest man Mukesh Ambani to sell stake in its flagship Big Bazaar hypermarket network

    Kishore Biyani not to sell stake in Big Bazaar & Food Bazaar chains

    By Chaitali Chakravarty

     

    Retail magnate Kishore Biyani said that he is not in talks with anybody to sell stake in Big Bazaar and Food Bazaar chains because his Future Group has sorted out its debt crisis after three back-to-back deals in the past one month.

     

    “We are not in discussions with anybody. I don’t want to divest my core retail business now. I want to run it,” Mr Biyani told ET. “Our debt levels are very comfortable and divestment, if any, will only be in non-core assets,” the Future Group chief said.

     

    In recent weeks, the retail industry has been abuzz with speculation that the Future Group was in talks with India’s richest man Mukesh Ambani to sell stake in its flagship Big Bazaar hypermarket network, which contributes almost 65 per cent of revenues of Pantaloon Retail (India) Ltd, the listed entity of Future Group.

     

    Reliance Industries operates a nationwide network of retail chains under Reliance Retail and Mr Ambani sees this segment as one of the engines of future growth for the conglomerate.

     

    A Reliance Industries spokesman denied any negotiations with Biyani. “We deny that Reliance Industries has ever been in talks with Future Group or Mr Kishore Biyani for any stake sale,” he said.

     

    A person aware of developments in Future Group, however, said Reliance Retail and Future Group had explored the possibility of a partnership about three months ago. But the talks did not proceed because the AV Birla Group moved faster and agreed to buy Pantaloons department chain, helping Future Group improve its precarious financial situation.

     

    “At that time the priority was to bring money into the company and the Pantaloons deal addressed that issue,” the person said.

     

    The Future Group, which has been in an aggressive expansion mode, ran into a crisis with consolidated debt of Rs7,800 crore that weighed on its profitability. Pantaloon Retail has been spending more than Rs100 crore in interest over each of the past three quarters. This started to pinch as consumer spending slowed. That was when Mr Biyani started looking to sell assets to pare debt.

     

    Last month, the Future Group sold a majority stake in Pantaloons department chain to AV Birla Group’s Aditya Birla Nuvo for Rs1,600 crore that included Rs800 crore of debt transfer.

     

    Then, last week, the Future Group announced sale of its 53.67per cent stake in Future Capital Holdings to US-based private equity firm Warburg Pincus for Rs4,250 crore, which included Rs450 crore of cash payout and Rs3,800 crore of debt transfer. Pantaloon Retail also raised Rs 200 crore through a preferential share allotment last week.

     

    “In the past one month, Biyani has managed to reduce his debt by Rs 6,000 crore. Now, he is in no hurry to sell any of his core businesses,” the person close to Future Group said. A senior official of a rival retailer, however, said Mr Biyani will ultimately get a partner for his value chain. “The only question is if he will tie up with an Indian company or wait for foreign direct investment to be allowed in the sector so he can find an international partner,” the person said.

     

    Meanwhile, Mr Biyani plans to sell more non-core assets in a bid to make the Bombay Stock Exchange-listed Pantaloon Retail debt-free by March 2013.

     

    He plans to raise Rs1,650 crore by October by offloading shares in his insurance and stationery joint ventures, the consumer electronics chain and home furnishing network. This would include raising Rs1,000 crore by divesting stake in Future Generali insurance. This will help prune Pantaloon Retail’s standalone debt, which stood at about Rs5,500 crore at the end of March.

     

    The group also plans to shed 40 per cent stake in the electronics retailing business eZone when it merges it with Noida-based InTarvo Technologies, which specialises in providing technical support to large corporations and retailers. InTarvo could not be contacted for comment despite repeated attempts.

     

    Mr Biyani also plans to sell a minority stake in home furnishing and do-it-yourself chain Home Town network for about Rs 300 crore in the next two months.

     

    He said his group’s May deal to cede controlling stake in Pantaloons chain to AV Birla Group was a one-off transaction. The company will only sell minority stakes in any future deals in its core retailing business and will maintain majority stake in such ventures, he said.

     

    Mr Biyani added that he doesn’t want to touch Future Value Retail, which operates Big Bazaar and Food Bazaar, as the group’s debt situation can be controlled.

     

    The only way he wants to touch Big Bazaar is by undertaking some tweaking in the profitable 150-strong chain by introducing improved services and consumer-centric approaches, underscoring with a new tagline ‘Aapki Sewa Mein’ (or, ‘At Your Service’). Big Bazaar is changing its tagline months after it adopted ‘New India’s New Bazaar’.

     

    Source: The Economic Times
    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • With the overall economy looking weak, customers are tightening their purse strings amid low increments

    Big retailers offer discounts as growth slows

    By Dipti Jain

     

    Just like an unusual April in Delhi when temperatures remained below 40 degress, retailers are dishing out discounts and special offers to attract buyers in early summer. From Future Group’s Big Bazaar to Lifestyle and Marks & Spencer, almost all retailers are courting buyers through special offers as growth remained muted in March and April. With the overall economy looking weak, customers are tightening their purse strings amid low increments.

     

    Big Bazaar just concluded its first-ever public holiday sales, while Marks & Spencer is offering 30 per cent discount to liquidate stocks. Ditto for FMCG major Godrej that has announced offers for its furniture brand. Woodland says it has intensified its promotional activities, Lifestyle Retail is offering discounts and freebies and Shoppers Stop is offering higher rewards.

     

    Although retailers are choosing not to talk at the moment, numbers point to slower offtake. For instance, Shoppers Stop, which reported an 87 per cent decline in fourth quarter net profit, has seen a 3 per cent rise in transaction size, despite the average selling price going up 9 per cent. Even conversion rate is down 5 per cent despite footfalls rising 29 per cent during the fourth quarter.

     

    Spencer’s Retail says its same store sales growth has moderated from 12-13 per cent during 2011 to around 8 per cent during January-March 2012. Same store sales is a measure used to gauge how sales have been in stores that were operational in the previous year.

     

    While brands are aiming to revive buying sentiments, for some the offers are intended to make up for the backlog from the last season. A store manager at a Pantaloon Retail outlet in Delhi said while it had increased prices by 12 per cent last year, in some cases the company has been forced to slash prices by around 20 per cent to boost sales.

     

    “Buyers are waiting for the sale period to make purchases as things have become more expensive. We have to offer some incentives to retain customers even though our profit margins have reduced,” said the Pantaloon store manager.

     

    “It has become more challenging for a retailer to keep his customers engaged. Buyers are now more demanding and are always looking for offers and discounts,” said Harkirat Singh, MD, Woodland.

     

    Godrej Interio associate VP Subodh Mehta said offers tend to get customers to purchase. With sales growth around 25 per cent, compared to the 30 per cent target, the company is not just offering discounts of up to 20 per cent on furniture but is jacking up ad spend by close to 20 per cent. Godrejs’ same store sales grew 15 per cent (3 per cent below target).

     

    “Buying sentiments will remain choppy due to the uncertain economic scenario. Customers need to get back disposable income to start spending again,” said Ankur Bisen, associate director (retail) at Technopak.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Many now prefer young, unknown faces in their campaigns

    Brands like Mountain Dew, Airtel, ITC and others bypass celebrities for their campaigns

    By Sagar Malviya & Ratna Bhushan

     

    PepsiCo ended its association with top Bollywood actor Salman Khan to promote its lemon drink Mountain Dew on Tuesday.

     

    Its decision to part ways with the hottest star of the moment may have surprised some observers, but the beverages maker is the latest in a growing club of marketers becoming selective about using celebrities in their campaigns.

     

    Top telecom services provider Bharti Airtel, mobile phone and durables maker Samsung, leading retailer Future Group, watch firm Titan and hotels-to-consumer goods firm ITC have all either ended associations with celebrities or are using them for lesser number of commercials. Many now prefer young, unknown faces in their campaigns.

     

    “In some categories, youth are taking the lead as celebrities are not an embodiment for segments, especially technology, etc,” said Santosh Desai, CEO at  Future Brands.

     

    Last week, Future Group launched a campaign for Big Bazaar’s apparel business without cricketer MS Dhoni or Bollywood actress Asin who have been the supermarket’s brand ambassadors till recently. “While Dhoni and Asin worked well for us in the last two years, we didn’t renew their contract as we thought having regular faces could connect with today’s generation,” said Parwan Sardah, chief marketing officer of Future Group.

     

    Youngsters of below 25 years account for more than 54 per cent of the consumer base in India. The retailer, which is negotiating several divestment and fund-raising deals to pare debt of almost Rs7,800 crore, said its high debt has nothing to do with ending celebrity associations and that the company has spent more than Rs30 crore on the new Big Bazaar campaign.

     

    Titan too has ended its deal with actress Genelia D’Souza for its Fastrack brand. “Genelia’s contract expired last month and we mutually decided not to renew it as after marriage, it would be difficult in relating to college going kids,” said Ronnie Talati, VP and business head of Fastrack & new brands at Titan.

     

    “Even in case of Virat Kohli, we are rethinking as he has been busy with his cricket schedules but still haven’t decided anything yet,” he said.

     

    Overall, however, celebrity endorsements are on the rise. But when it comes to attracting younger generation, many companies now prefer campaigns without their big-ticket ambassadors.

     

    A case in point is Samsung, which uses Aamir Khan in campaigns for its Hero series of mobile phones, but not for Galaxy series. “The usage of the celebrity depends on the key message and the creative route that is used for a particular product,” Samsung CMO Rahul Saighal said. “In the case of the youth-oriented Galaxy series, we are focusing on the use of smartphone and the need to get ‘smart’. So we are using young models.”

     

    ITC, which has Sachin Tendulkar as brand ambassador, uses the master batsman only for a few variants of Sunfeast biscuits, which has close to 20 sub-brands. “Naturally, different sub-brands require different types of advertising,” said VL Rajesh, ITC’s foods division GM (marketing). ITC is using Sachin for Dream Cream and Milky Magic brands.

     

    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Analysts expect all leading FMCG companies to post strong results in the fourth quarter ended March and maintain their margins in the current fiscal

    FMCG players upbeat after Q4 sales boom

    By Ratna Bhushan & Sagar Malviya

     

    Consumer goods companies and retailers expect a spurt in demand this fiscal, buoyed by indications of better-than-expected earnings in the January-March quarter backed by a revival in consumer sentiment.

     

    Analysts expect all leading FMCG companies to post strong results in the fourth quarter ended March and maintain their margins in the current fiscal, even as gung-ho investors have pushed shares of most companies to their 52-week high on the Bombay Stock Exchange this month.

     

    “The last two quarters seem to have stabilised in terms of consumption though there have been price hikes,” said A Mahendran, MD, Godrej Consumer Products. The maker of Cinthol soap and Good Knight mosquito repellant expects its fourth quarter earnings to be better than analyst forecasts of 16-22 per cent increase in revenues.

     

    Growth in FMCG product sales signals revival of consumer sentiment over 2011 when market growth slipped to 8 per cent from 12 per cent the previous year.

     

    Companies now look to ride on high-margin products, rural demand and innovations to maintain the growth momentum without taking a hit on their margins.

     

    NO DOWN TRADING

    They are buoyed by the fact that there is no significant indication of down trading, or the trend of switching to a cheaper brand due to price increase, by consumers despite 5-10 per cent increase in prices of daily use items like soap, toothpaste and hair oil. “We have not seen downtrading,” Anand Burman, chairman of Dabur India, which makes Vatika shampoo and Amla hair oils, said. He added that a combination of rural consumption and growth from mass-priced products in urban markets were triggering demand for Dabur’s hair care and oral care products.

     

    But Harsh Mariwala, chairman and MD of Marico Ltd, which makes Parachute hair oil and Saffola edible oils, warned that margins may remain under pressure. “We expect healthy top line in continuation of the previous quarter…in terms of bottom line though, margin pressures will remain because of fluctuating raw material costs and complex global cycles,” he said.

     

    Prices of menthol have shot up 40 per cent over the past two months, while palm oil prices have surged 10 per cent in the last one month. But analysts expect margin pressure to ease with innovation gaining centrestage. Then companies will gradually increase their advertising and marketing expenditure, Edelweiss Financial Services research analyst Abneesh Roy said. “We expect margins to begin slow northward trajectory in the coming months as raw material prices cool off and rupee depreciation reverses,” Roy wrote in a report early this month.

     

    APRIL BOOM

    The country’s top retailer says that retail sales have picked up speed in the past two weeks and expects healthy demand to continue in the next two quarters. “While the January-March quarter was good and grew better than the same period last year with most retail segments growing by high single digits, we are seeing an upsurge in sales in the last two weeks across all formats,” Kishore Biyani, chairman of the country’s largest organised retailer Future Group, said.

     

    He said there is an upsurge in sales of even consumer durables April onwards, adding that Pantaloon, Big Bazaar and Home Town have witnessed high double-digit growth. Apparel, toys and footwear retailer Lifestyle International’s MD Kabir Lumba said its sales grew the most in the fourth quarter. “We have seen a lift from the lower trading conditions of September to November. While we grew 22 per cent overall last year, the fourth quarter grew faster,” he said.

     

    DURABLES STRUGGLE

    Makers of home appliances such as fridges and ACs are, meanwhile, reeling under the double whammy of late summer as well as price hikes. AC sales were down by 30-35 per cent year-on-year during the quarter, while there has been a marginal 3-5 per cent growth for refrigerators. “The overall market is down due to sluggish sales of cooling products. Temperatures are yet to rise to induce AC purchases, while the price increase for input cost and excise too have been a big dampener,” Kamal Nandi, VP (sales and marketing) at Godrej Appliances, said.

     

    Prices of products have gone up by 10-15 per cent due to input cost hikes, upgradation in star ratings for energy labelling and increase in excise duties in the Budget.

     

    While consumer sentiments had improved during the Republic Day period in January due to aggressive discounts and promotions by retailers, sales were muted in February and March. Whirlpool VP (corporate affairs and strategy) Shantanu DasGupta, however, said the new fiscal year has started in positive note. “April has started off okay, but it is early days yet,” he said.

     

    “Individual companies may be growing, but that’s not due to demand. Instead, it’s led by innovation in new launches and distribution gains,” Mr DasGupta added. Electronic firms are now betting more on LCD and LED televisions, washing machines and microwave ovens for growth.

     

    “Flat panel televisions continue growth momentum since this category did not see any significant price changes this year,” Samsung VP (audio-visual business) Raj Kumar Rishi said. Samsung expects sales of summer products like AC and refrigerators to gather momentum in the second quarter.

     

    (With inputs from Writankar Mukherjee and Sarah Jacob)
    Source: The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • Ms Rishi will join Max India as executive director, brand and human capital. She will report to Max India MD Rahul Khosla

    Max ropes in Vibha Paul Rishi for brand building & HR ops

    By Ratna Bhushan & Khomba Singh

     

    Healthcare and insurance group Max India has roped in Vibha Paul Rishi to take care of its brand building and human resources operation, two people aware of the development said.

     

    Ms Rishi, who quit retailer Kishore Biyani’s Future Group last month, will join Analjit Singh’s Max India as executive director, brand and human capital, later this month, they said. She will report to Max India MD Rahul Khosla.

     

    A person close to the development said since the company’s executive represents the image of a firm, the company decided to bring both the verticals under Ms Rishi. “Our people are the best ambassadors of the group,” a top company official said, defending its decision to make Rishi responsible for building the group’s brand as well as managing its talent, career and succession plans.

     

    Despite repeated attempts, Rishi could not be reached for comments. Max India too declined comment.

     

    Max India’s existing human capital director P Dwarakanath, who retires shortly, will continue as an advisor to the human capital function, the official said.

     

    Rishi, who worked with beverages maker PepsiCo for 17 years, returned to India in 2010 after close to seven years overseas and joined the country’s largest retailer Future Group as its executive director for customer strategy. But her stint at the firm lasted barely two years. “She had some issues and her decision to exit was mutual,” a Future Group official said on condition of anonymity.

     

    A mother of two, the 50-year-old Rishi was heading PepsiCo’s marketing in India before she relocated to New York in 2003. She had led Pepsi’s ‘Nothing official about it’ campaign during the 1996 cricket world cup, which took cola wars to a new high.

     

    An MBA from Delhi’s FMS, Rishi quit PepsiCo in 2007, after which she was associated with NGO Pratham.

     

    In the last few months, Max India has elevated Mohit Talwar to the position of deputy MD and appointed Rahul Ahuja as the group financial controller.

     

    Its hospital subsidiary Max Healthcare also appointed a new chief executive officer, CFO and chief services officer, while elevating two senior doctors to the post of vice chairmen. During this period a few executives including CEO and CFO of Max Healthcare left the group.

     

    Source: The Economic Times
    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved

     

  • The value retail chain is not just retailing grain, but grinding it, kneading the dough and even making chappatis for its consumers – at no extra cost

    Big Bazaar brings new recipe to boost sales

    By Sarah Jacob

     

    Future Group’s Big Bazaar is making its biggest move into Indian households yet. The value retail chain is not just retailing grain, but grinding it, kneading the dough and even making chappatis for its consumers – at no extra cost.

     

    Such services, including de-seeding pomegranate, grating coconut as well as cutting pineapple and jackfruit on the spot, are presently offered only at its prototype Rajaji Nagar store in Bangalore, but will soon be rolled out in all the 12 family Big Bazaar outlets across the country.

     

    “The idea is to take care of all the pains of cooking, to reduce the negative labour that families do not typically reward the women for,” said Ashni Biyani, director of Future Ideas, the innovation and incubation cell of Future Group.

     

    “The consumer is familiar with modern retail and is willing to move to the next level,” added Future Group Founder and Group CEO Kishore Biyani’s only child.

     

    Industry watchers say the move will help Future Group, which launched value retailing a decade ago, win the loyalties of working women, students and singles with the new services. “This will help the company not just be relevant to consumers as international competition increases, but also in smaller cities such as Aurangabad, where the consumer may expect such services,” said Raghav Gupta, principal at management consulting firm Booz & Co.

     

    Big Bazaar has a team of ‘sevaks’ at the Rajaji Nagar store, which opened doors on Wednesday, to offer different kinds of additional services. If it’s vegetables, they can be diamond cut, in cubes, for salad or sambar as per choice and zipped into a bag or chutneys can be whipped up.

     

    With grain, the store allows the consumer to buy, for instance, a kg of multi-grain such as wheat, jowar and bajra. Once billed, the consumer has the option of getting it ground, kneaded into dough and even made into chappatis either for the full weight or in parts.

     

    The store also has a tailor to stitch curtains and a vendor to dry clean carpets and provide after sales services for electronics. Future Group has also opened an office for citizen service centre Bangalore One, which allows consumers to pay utility bills within the store

     

    Source:The Economic Times
Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved
  • Contribution of premium items is growing in most FMCG categories, giving a breather to marketers fighting rising input costs and slowing overall demand

    Young urban users and modern trade boost demand for premium FMCG products

    By A Correspondent

     

    Makers of packaged food and personal care products are increasingly focusing on premium products as rising aspirations of young urban consumers and widening reach of modern trade help boost demand for high-value, high-margin products.

    Contribution of premium items is growing in most FMCG categories, giving a breather to marketers fighting rising input costs and slowing overall demand, particularly in rural areas.

    “Consumers are moving from value-added products to products that offer value benefits,” said Shirish Pardeshi, executive director and co-head, research, at Anand Rathi Securities.

    Big retailers play a key role in increasing demand for premium products within a category, by helping companies directly engage with consumers.

    Future Group, the country’s largest retailer, has reported premiumisation in the last several quarters. “Consumers are upgrading and there is not much impact of the external economic scenario,” said Devendra Chawla, president, Future group food and FMCG businesses.

    Mr Chawla said the trend of premiumisation is high in categories like soaps – the premium variants (priced above Rs 35 per soap bar) accounts for 40 per cent of sales at Big Bazaar – biscuits and detergents.

    Premium cream biscuits and cookies are growing 20-25 per cent a year, double the pace of mass variety Glucose and Marie biscuits, according to Parle Products, the country’s largest biscuit maker.

    Contribution of Glucose and Marie to the biscuit market has slipped to around 55 per cent from 65 per cent in the past one year, according to B Krishna Rao, group product manager of Parle Products.

     

    SUPERMARKET DRIVE

    Modern retail has been the saving grace for FMCG companies that had warned of slower growth this fiscal, more so after they had to resort to multiple price hikes of up to 15 per cent due to increases in commodity costs and pressures on margins.

    Retailers such as Future Group and Spencer’s Retail have reported rise in average purchase size of most product segments, confirming the premium drive.

    Anand Mour and Shariq Merchant, analysts with financial services firm Ambit Capital, wrote in a report in January that growth is moderating in rural India, but aspirational consumption of young urbanites is driving premiumisation. Expansion of modern retail, which accounts for less than 10 per cent of the country’s Rs2 lakh crore retail market, will facilitate this premium drive.

    A recent Nielsen study expects Indian shoppers to increase spending on FMCG at modern retail to $5 billion, or about Rs24,700 crore, by 2015 from $1.8 billion, or Rs8,900, in 2011.

     

    NEW PRODUCTS

    “Absolute price is no longer the only consideration, the price benefit equation is what needs to be managed,” says Jayant Kapre, president of McVitie’s India, a subsidiary of British confectionery firm United Biscuits. The firm has rolled out a premium range of McVitie’s Hob Nobs biscuits.

    Now Nestle is expected to launch a chocolate dessert called Fudge priced at Rs200, according to industry insiders. GSK has launched Horlicks Gold at a 30 per cent premium and within six months it has generated sales equal to 3 per cent of the more than Rs1,500-crore flagship brand. Marico, Dabur and ITC are all gung-ho about such products.

     

    Source:The Economic Times

    Copyright © 2012, Bennett, Coleman & Co. Ltd. All Rights Reserved