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Tag: Kishore Biyani

  • Global retailers like Wal-Mart, Tesco, Carrefour and others not buying India's FDI in retail story

    It’s wait-and-watch for Wal-Mart, Tesco, Carrefour…

    By Rasul Bailay & Chaitali Chakravarty

     

    Four months have passed since the government braved intense opposition to allow foreign supermarkets to enter India, but it has not received a single investment proposal so far as global retailers play wait-and-watch and seek more clarity about the conditions imposed on their entry.

     

    The delay is beginning to irk the government, which almost put its survival at risk over this controversial issue. A top executive with a global retailer said that in a recent meeting with a senior commerce and industry ministry official, he was asked when his firm would submit its proposal for opening multi-brand retail stores in the country. “We have done our bit, when will you do yours?” the official bluntly told him.

     

    “The authorities seem to be under some kind of pressure, after going through so much to open this sector. But we need some clarifications before we start here,” said the retail executive, who did not wish to be named.

     

    In September last year, the government allowed foreign supermarkets to own up to 51% in local ventures, but imposed stiff local sourcing conditions as well as investment restrictions.

     

    Kishore Biyani

    Kishore Biyani, who owns India’s largest homegrown retail house, The Future Group, said these riders are preventing electronics, fashion garments, and other retailers from firming up their India plans. “How can they source 30% of their goods from small-scale industries? Or even invest $50 million in the backend over three years? Fashion or electronics does not require that kind of investment in the backend,” he said. Biyani is looking for foreign partners for his retail businesses.

     

    The government has imposed two significant riders on foreign retailers. First, they will have to compulsorily source one-third of the products they sell from small and medium enterprises whose investments do not exceed $1 million in total. Second, they will have to invest at least $100 million, half of which has to go into backend infrastructure over three years.

     

    Foreign retailers, including Wal-Mart, Tesco and Carrefour, are seeking clarification on these riders. Sir Richard Broadbent, chairman of Tesco, met Commerce and Industry Minister Anand Sharma in Davos last week and sought clarity on the conditions imposed on the retail FDI policy. Walmart International CEO Doug Mcmillon also told the minister that his company was “excited about India”, but was currently studying the conditions. “We are looking at clarity on those conditions. All those conditions have certain implications on the overall business viability,” Sameer Barde, a spokesperson for UK supermarket chain Tesco in India, said.

     

    “Each one of them has to be clearly understood and then only we will be able to take a call on when to proceed with our plans.” A Walmart spokesperson in India said the company continued to study the requirements placed on FDI in multi-brand retail to better understand how its business would operate in a complex environment. Some retail experts, however, feel that foreign companies are deliberately going slow in India.

     

    “There is no real intention (on the part of large retailers) to enter the country at the moment. Had it been so, they would have lobbied hard with the government to ease rules like IKEA did,” said Harminder Sahni, MD of retail consultancy firm Wazir Advisors. IKEA, the world’s largest home furnishing retailer, was also confronted with strict local sourcing conditions under the single-brand retail policy. But it was successful in convincing the government to dilute these norms.  Abhishek Malhotra, partner at consultancy firm Booz & Co, said global retailers would wait for six to nine months to see how things pan out.

     

    “They are watching the political landscape and trying to figure things out,” he said. The vigorous resistance of BJP, India’s principal opposition party, to the entry of foreign supermarkets has come as a surprise to many observers and analysts. The party forced a vote in Parliament on the issue, and if the minority government of Manmohan Singh had been unable to muster the numbers, it could have decisively crippled the UPA coalition.

     

    Even now, the opposition of BJP and other political parties continues to be significant as the Centre has left it to state governments to decide whether they would allow foreign retailers to open stores in their respective states. Almost two dozen of India’s 35 states and union territories, including key states like Tamil Nadu, Karnataka, Gujarat and Uttar Pradesh, have decided not to allow foreign retailers.

     

    As per the FDI policy spelled out in September, global retailers such as Walmart and Carrefour are only allowed to open their stores in 53 Indian cities with population of a million or more. Due to the opposition from most states, retailers can only open stores in 18 of these 53 cities. In addition to India’s FDI policy and political complexities, global retailers are grappling with their own set of problems.

     

    Even though Walmart Stores has an understanding with Bharti Enterprises (the two companies are 50:50 partners in a wholesale retailing venture), the US retailer is currently preoccupied with its sweeping worldwide anti-bribery investigations that have brought negotiations and expansion in India to near-standstill. Britain’s Tesco Plc, which has a supply chain and retail technological partnership with the Tata Group, is busy fixing its struggling business in the home market before committing anything to India, said a person familiar with the UK retailer’s plans.

     

    Carrefour SA, which currently operates a fully owned cashand-carry venture in India, is bullish about the country’s $500-billion annual retailing market, but has been unsuccessful in finding a local partner for the last seven years.

     

    Source:The Economic Times

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

     

  • Kishore Biyani aims at $1 billion business from Future Fashion in 2 years

    Kishore Biyani aims to fashion a $1bn biz in 2 years

    By Samidha Sharma

     

    Kishore Biyani plans to re-build his fashion retail play into a $1-billion business in the next two years. The retail magnate who just unveiled a restructuring – de-merging of fashion , foods and FMCG, hypermarkets and supermarkets into three separate entities – hopes to list the retailer’s fashion arm, which is now named Future Fashion.

     

    Future Group founder Mr Biyani began his retail play with fashion but lost a big chunk of it when he sold department store chain Pantaloons to Aditya Birla earlier this year. Future Fashion will consolidate his other lifestyle retail assets, including Brand Factory, Central and a portfolio of 20 fashion brands, in a renewed push.

     

    The group’s core fashion business is estimated at Rs 2,800 crore post the sale of Pantaloons stores, in which he continues to be a minority investor.

     

    Mr Biyani’s FMCG brands and KB’s Fair Price will be housed under Future Ventures. Big Bazaar, Food Bazaar and gourmet retailer Foodhall will be parked under the erstwhile holding company Pantaloon Retail India, which is being renamed. Future Ventures and the Pantaloon Retail will remain listed on the bourses.

     

    “Over the last 6-8 years, Pantaloons and Big Bazaar became the overarching businesses for the group and the fashion brands were hidden behind these two mega brands. After the sale of Pantaloon Retail, we wanted to simplify the business and give it the push it deserves. The fashion play will enter a new phase of growth going forward ,” Mr Biyani said. He said the recent restructuring will help the group push its portfolio of fashion brands into e-commerce and also take some of these businesses international.

     

    “We have plans to take brands like Biba, Holii and Urban Yoga to neighbouring countries as they have reached a considerable size,” he said. There will be a separate strategy for each of the brands on the e-commerce front as well and some of the private labels will get standalone stores going forward.

     

    Mr Biyani’s other notable lifestyle brands include Scullers, Indigo Nation, Bare and John Miller. He also operates foreign brands Lee Cooper, Celio, Clarks and Manchester United apparel.

     

    “It is like going back to where he started. His core competency has been fashion and he understands how to build brands. There is a huge opportunity in the branded apparel space across all categories , so there is no reason he should not be able to scale this up,” said Arvind Singhal, chairman, Technopak Advisors , a retail consultancy.

     

    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

     

  • 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
  • Customers prefer private labels due to better quality, high food safety standards, international look and feel of products feels William Savage, chief merchandising officer, Bharti Walmart

    Private labels of retailers Bharti Retail, Future Group outsell national brands in own stores

    By Sagar Malviya

     

    Private labels owned by retailers such as Bharti Retail, Future Group and Aditya Birla Retail outsold several national brands in home care and packaged food categories at their retail stores as value conscious consumers opted for best bargain in an uncertain economic condition and soaring headline inflation despite consumer goods companies aggressively betting on modern retail to drive future growth rate.

     

    For instance, Bharti Walmart’s private brand ‘Great Value’ tops the floor cleaner segment with 50 per cent share and are in the top three selling spot in terms of market share in categories such as tea, wheat flour, rice and branded snacks according to Nielsen latest retail index service during July-September 2011 period for the India FMCG Private Label market.

     

    Customers prefer private labels due to better quality, high food safety standards, international look and feel of products feels William Savage, chief merchandising officer, Bharti Walmart, which has private labels owned by retailers such as Bharti Retail, Future Group and Aditya Birla Retail outsell several national brands in certain home care and food categories at their retail stores even as big brands push more sales through modern retail.

     

    Coming at a time when national brands increasingly bet on modern retail to drive their future growth, analysts say even large manufacturers such as Hindustan Unilever and Reckitt Benckiser are impacted.

     

    “In short term, national companies will have to either go for promotions or discounting to fight back market share,” says Gautam Duggad, an analyst at brokerage Prabhudas Lilladhar. “But it also means losing margins and that’s a trade-off call the companies will have to take,” he adds.

     

    While retailers attribute the success of their own brands to value offers, good packaging and their increasing credibility, consumer product makers say private labels are gaining mostly in low-involvement categories.

     

    QUALITY AT LOW PRICE

    “Customers have begun to like private labels due to better quality, high food safety standards, international look and feel of products, customized packaging created after customer feedback and the credibility of the retailer,” said William Savage, chief merchandising officer, Bharti Walmart, which has over 35 per cent market share in wheat flour segment, close to 22 per cent in tea and 20 per cent in salty snacks, or namkeen.

     

    Private labels are mostly priced much lower that branded products because of substantial marketing and distribution savings. Retailers make up for lack of media marketing through in-store promotions and prominent display.

     

    In Big Bazaar stores, which started selling own brands four years ago, private labels are among the best sellers in at least a dozen product segments. Future Group Chairman Kishore Biyani believes its brands such as Tasty Treat and Clean Mate are now established. “Three years ago, our private label sales grew mainly because of experimentation and trials by consumers. But now, sales are driven by repeat purchases,” says Biyani.

     

    “We have quality products packed innovatively, priced attractively and placed strategically at our retail stores. So the success of private brands is a combination of all four Ps,” he adds.

     

    Aditya Birla Retail CEO Thomas Varghese says its More Value and More Choice brands have got good traction after the firm repositioned its private labels two years ago. Its private label pickles, with the widest range of regional variants, outsell the likes of Mother’s Recipe and Priya Pickles in More outlets. Hand wash, toilet and floor cleaners and disposable tissues are among the other segments More brands are among the best sellers.

     

    MARKETERS UNFAZED

    While companies such as Dabur, Emami and Parle acknowledge that private labels are gaining ground, they say it’s on segments where product differentiation is low and have relatively lower shopper involvement in purchase decisions, and that it will be tough for retailers to challenge national brands in high-involvement segments.

     

    “When it comes to foods or personal and beauty care products, consumers have been loyal to branded items and will continue to remain so,” said George Angelo, Dabur India Ltd Executive Director-Sales. He expects retailers to reduce product launches and rationalise range in this space.

     

    Emami CEO Krishna Mohan said it will be difficult to make strong private labels in personal care and over-the-counter health care segments because they require stronger consumer understanding and brands will need to innovate to provide extra benefit to consumers. But he expects retailers to eventually get there. “We are sure they are working on the same and eventually will venture into these categories which are huge.”

     

    Private brands already account for close to 7 per cent of modern trade sales in India, compared to 1 per cent in China, according to a Nielsen survey that covered more than 50 countries last year.

     

    And the scope is huge. Private brands account for more than 40 per cent of the total sales of the world’s largest retailer Walmart. The rise of private labels comes at a time when modern retail is increasing its contribution to the top line of most consumer goods firms.

     

    For instance, the country’s largest consumer goods company HUL gets around 12 per cent of its Rs20,000-crore annual sales by selling goods at modern retail stores compared with just 5 per cent four years ago.

     

    Source:The Economic Times

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