MxMIndia

Tag: Tesco

  • Noel Tata is the man helping build the Tesco-Tata retail partnership in India

    This Tata forges welcome to Tesco

     

    By Suman Layak

     

    Rajiv Gujral, a former honcho at the Taj group of hotels, ran into Noel Tata at Bombay House on a Saturday evening last month – he rarely gets that privilege these days. Mr Gujral recounts how Noel let on that he’s been travelling 25 days a month, and finds little time for anything else.

     

    The younger half-brother of Ratan Tata – and now the only member of the top brass with that surname in the group, Noel is managing director of Tata’s trading arm Tata International. But that’s not the only hat he wears; also keeping him on his toes are the vice-chairmanship of retailing arm Trent Ltd – where Noel was managing director till three years ago – and the chairmanship of Tata Investment Corporation, a non-banking financial company that makes long-term investments.

     

    FDI Hurdle.

    If Noel is hard-pressed to find time to race down highways in a Tata Safari – his passion five-six years ago – it’s because he’s as busy plotting Tata International’s growth (particularly in Africa) as he is ironing out the Tatas’ partnership with British retailing giant Tesco.

     

    Consider: In the first week of May 2013, Noel and Tesco CEO Philip Clarke met Union commerce minister Anand Sharma. The goal was to seek some leeway from the minister on the stiff norms set for foreign direct investment in multi-brand retail in India.

     

    In India, the Tatas and Tesco have been partners since 2008 in the limited sense of partnership that was allowed in retail at that time. Tesco’s wholesale business supplies merchandise to Star Bazaar, the hypermarkets of Trent.

     

    In December 2012, Mr Clarke had hurried down to Mumbai to meet Ratan Tata in the last month of his tenure as chairman of the Tata Group. Mr Clarke was also upbeat after Mr Sharma’s announcement two months before Tata’s retirement that FDI norms in multibrand retail would be relaxed.

     

    A little over a year has passed since Mr Sharma’s announcement, and Tesco has yet to make its move. In fact, the norms are so stiff that no foreign retailer has made a move in multi-brand retail as yet. However, after the Walmart-Bharti split, all eyes are on the Tesco-Tata partnership.

     

    In May, a week after Noel Tata and Mr Clarke met Mr Sharma, the Department of Industrial Policy and Promotion (DIPP) gave Tesco a major boost. It said that although multibrand retailers with FDI in India will have to source 30% of their products from medium and small-scale manufacturers, the norm would not apply to farm produce and dairy. Tesco had sought clarifications as it claimed that almost 85% of its offerings would be in the farm and dairy category. That was a win for the Tata-Tesco team.

     

    However there are many more hurdles to go before FDI can flow into the partnership for multi-brand retail in India and sources say that Noel has been a frequent visitor to the DIPP offices in Delhi in recent times.

     

    Growth of a Salesman

    At Trent, where Mr Tata gave up his executive role in 2010 to move to Tata International, he is still the moving force as vice-chairman. The company has a CEO in Philip Auld who has been deputed by Tesco and there are other people running the show on deputation from Tesco.

     

    “Noel Tata is a pucca retailer,” says an executive who has worked for the group when Tata used to lead Trent as managing director. “He is someone who would happily spend hours at a store, tinkering, observing and even selling. He has grown up in the retail business unlike someone moved into it at a strategic level. He immensely enjoys retailing.”

     

    When the Tesco-Tata partnership was forged in 2008, while Tesco people took on the task of managing the stores and the front end, the Tatas managed the areas that needed local knowledge – real estate and property as well as warehousing and human resources. Noel continues to oversee these functions.

     

    And then to live out his retail dream a little more, at Tata International Noel started footwear retailing in India through a chain named Tashi. Tata International also acquired a Portuguese footwear retailer Move-On that has a presence across Europe. However, the Tashi chain had to be closed and the company is now thinking about focusing on footwear branding and distribution instead.

     

    African Safari.

    Sources indicate that Mr Tata intends to take his retail business to Africa too, where Tata International is the distributor and after sales service provider for Tata Motors.

     

    It also owns hotel assets in major locations like Cape Town that are managed by the Indian Hotels Company Ltd. The Africa plans are clearly keeping Mr Tata busy, too and he has been travelling frequently to that continent.

     

    Noel, who was once considered a contender to succeed Ratan Tata – he is married to Aloo, sister of Tata Sons chairman Cyrus Mistry – today has a wide canvass of businesses to oversee, a chunk of it in Africa.

     

    Tata International’s largest subsidiary, Tata Africa Holdings, is headquartered in South Africa and has led various Tata businesses into that continent, from luxury hotels to commercial vehicles. And then there’s the retail push back home – at least till Trent-Tesco can gets its frontend act together.

     

    Source:The Economic Times

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

    Licensed to republish

     

  • The outlet will make use of UK firm Tesco's retail expertise and back-end support

    Tesco gets closer to propah entry as Tata opens ‘Star Daily’ neighbourhood convenience store in Pune

    By Sagar Malviya

     

    Barely a week after the world’s top retailer Walmart ended its association with Bharti Group, its British rival Tesco has moved a step closer to entering the $450-billion Indian retail market with the Tatas launching a neighbourhood convenience store format modelled on Tesco Express.

     

    Tesco Plc, the world’s third largest retailer, has a partnership with Tata Group’s Trent under which it provides back-end support and retail expertise to the Indian conglomerate’s Star Bazaar hypermarkets.

     

    Tesco Hindustan Wholesaling, the Indian unit of the British retailer, supplies merchandise including some of its own labels, to 15-odd Star Bazaar outlets, sized anywhere between 40,000 sq ft and 80,000 sq ft and selling food and grocery to apparel to consumer durables.

     

    The new format, Star Daily, is completely different. The first Star Daily outlet, opened in Pune last week, is just about 1,800 sq ft in size and stocks mainly fresh foods, groceries and essential items, a person aware of the store launch said. “Similar to a kirana store, Star Daily is kept open almost 15 hours starting at seven in the morning,” the person added.

     

    Both Trent Hypermarket and Tesco did not respond to an email query. Globally, corner shops — such as 7-Eleven in Japan, Taiwan, Thailand and Singapore, Lawson in Japan and Oxxo in Mexico — are among the largest retailers in their respective markets, reflecting the growing business of small outlets in several countries despite the presence of international supermarket and hypermarket chains. Even Tesco runs more than 1,500 convenience stores averaging 2,200 sq ft in small shopping precincts in residential areas and countryside in the UK.

     

    In India, ubiquitous kiranawallahs generate more than 90 per cent sales of consumer products industry.

     

    Analysts say high sales volume will be the key to Trent’s success in the convenience store space. “The newer format can help them (Tatas) penetrate better catchment areas, but volume needs to be maintained to compensate for the higher overhead costs including real estate,” Devangshu Dutta, chief executive at retail consultancy Third Eyesight, said.

     

    So far, Trent Hypermarket has been relatively conservative in its retail expansion despite rivals adding hundreds of stores each year. In fact, it did not open a single Star Bazaar store last financial year, but managed a 21 per cent increase in total revenue to Rs 801 crore.

     

    It reported loss of Rs 72 crore. There are speculations in the market that the Tatas will take the acquisition route to expand its retail business. “There can be a good acquisition opportunity for Tata in the form of Bharti Easy Day, which has a similar format, if they decide to sell it off,” an industry veteran said on condition of anonymity.

     

    Interestingly, Trent is entering the neighbourhood grocery market after some of its rivals have already burnt their hands in this space. Retailers including Reliance Fresh, Aditya Birla More and RPG Group’s Spencer’s Retail started expanding into smaller formats few years only to shut dozens of such outlets and shift focus to big-box stores or hypermarkets.

     

    For instance, Mukesh Ambani-owned Reliance Retail has decided not to expand its 2,000-sq ft Reliance Fresh stores in the neighbourhood and instead focus on 7,000-9,000 sq ft Reliance Super stores. Future Group, the country’s top retailer, has invited kirana store owners and local entrepreneurs to operate its small format KB’s Fair Price stores. “The economics of operating a neighbourhood store is very complicated as real estate and catchment areas in urban areas is pretty complex,” Rakesh Biyani, joint managing director at Future Group, said.

     

    The group plans to scale up from 200-odd stores now to 1,000 in the next two years. Others, too, now plan to return to this market, with some caution. Spencer’s Retail, which was forced to shut over 64 small-format stores in the last three years, had indicated to remodel its existing 105 stores and future ones on the lines of the kiranas and global convenience stores like 7-Eleven.

     

    Similarly Aditya Birla Retail, which has shut more than 100 stores in the last two years, plans to open 100 supermarkets this fiscal.

     

    Source:The Economic Times

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

    Licensed to republish

     

  • 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

     

  • A number of people have been proudly putting out ‘I am at Starbucks!’ tweets. And to think it's just a bloody coffee joint, writes Anil Thakraney

    Anil Thakraney: Starbucks: Power of a brand

    By Anil Thakraney

     

    The night before Starbucks opened its gates to India, I was dining with some friends at Trishna (Kala Ghoda). After we finished with our prawns and fish, we decided to drive by Horniman Circle to check if Starbucks was already in operation, and whether it looked as fancy as some media reports had suggested. The outlet was still to be born, but I was stunned to see all the crowds that had collected there, the heavy action that was underway to give the coffee shop the finishing touches. With major light and sound rehearsals, stuff that even Shah Jahan would not have conceived of when the Taj was first thrown open to the public.

     

    And of course, the social media has been going crazy over the event. A number of people have been proudly putting out ‘I am at Starbucks!’ tweets. The maha excited reviews in the media have only just begun. And to think Starbucks is just a bloody coffee joint! Although I am not a coffee drinker, I did try out their stuff once on a visit to New York City. And must say I found the potion to be utterly expensive and totally distasteful. Though the loo was quite clean, so I didn’t really leave the place in a huff.

     

    This tells me two things about us desis: One, that we are still a wannabe nation, nothing much has changed in the last two decades. Then, I spotted a long queue at Linking Road in Bandra, when McDonald’s opened shop in India. And it’s ditto at Horniman Circle today. Two, that we are a brand-starved nation. Clearly, India’s teeming masses want the best of the world, there is heavy demand but poor supply. This is great news for all those multi-brand retail outlets who want to come here. I can already see huge crowds inside and outside Wal-Mart and Tesco. Not to speak of IKEA. Now if only our short-sighted, small-minded politicians would let it all happen.

     

    ***

     

    PS: Very interesting article on whether media companies must list down social media usage guidelines for journalists, even if they happen to be freelancers. My belief is that they should. Because whether we like it or not, tweets and Facebook updates posted by journalists do get associated with their employers by most readers. Even if the journos choose to be in denial of it.

     

    Link: http://publiceditor.blogs.nytimes.com/2012/10/17/after-an-outburst-on-twitter-the-times-reinforces-its-social-media-guidelines/

     

     

  • It is building a crack team in Bangalore as shopping goes online and supply-chain efficiencies become more critical in keeping prices affordable

    Tesco expects Bengaluru to up competitive edge

    By N Shivapriya & Harsimran Julka

     

    The proposal to permit FDI in multi-brand retail may have come a cropper but as technology becomes the next big battleground for retailers, India may well be where these battles are fought.

     

    Tesco, the world’s third-largest retailer, is building a crack team in Bangalore as shopping goes online and supply-chain efficiencies become more critical in keeping prices affordable.

     

    From scheduling transportation in Thailand to floor planning for its stores in UK, there’s a bit of Bangalore in everything Tesco does, and its Chief Information Officer (CIO), Mike McNamara, only sees that growing in the days to come. “Digital and technology will be big battlegrounds within each of the markets,” McNamara told ET in an exclusive interview, and he sees the Bangalore office playing a central role in giving it that competitive edge.

     

    The centre started in 2004 and Tesco was one of the first retailers to set up a captive unit here. The world’s largest retailer, Walmart, also followed setting up Walmart Labs in Bangalore but only a few years ago. Both of them, as well as other global retailers, use Indian service providers for parts of their IT and analytics.

     

    Mr McNamara himself is averse to calling Tesco’s centre a captive because he finds it subservient. “We’ve watched it blossom from a fairly solid operations centre into something that’s doing this very sophisticated work,” he said.

     

    The centre employs over 6,000 people, who work on functions as varied as online advertising, mobile applications, store design and transport scheduling, in addition to IT and back-office functions.

     

    A team of mathematicians in Bangalore and UK work on algorithms for sophisticated supply chain systems that take into account everything from weather patterns to sporting events and seasonal variations. “If we don’t get the mathematics exactly right for the fresh foods, it goes waste. Getting it right is a tricky business – it’s a huge leverage on profitability,” said Mr McNamara.

     

    Mr McNamara, who is on Tesco’s executive committee, wants to centralise all the skills Tesco has learnt from its 100 years of retailing experience in UK at its facility in India and run the supply chain for its Asian markets from here. These markets are relatively newer for Tesco but they are already key markets from a revenue point. Korea, where it is the second-largest retailer, is also its second-largest market after UK.

     

    In US, where its business is struggling, the Bangalore office helped to launch a loyalty scheme, which is entirely digital. Most of the IT for US is done entirely from Bangalore. “The US team is very small,” said Mr McNamara. Overall, 70 per cent of the IT across the Tesco Group is from India and that’s likely to increase rather than decrease, he added.

     

    The centre currently services every single country in the Tesco Group, including new businesses such as banking, where it has built new systems and completed a massive programme to migrate over 2 million credit card customers. Over time, he expects the banking business, which is relatively younger, will do more work out of India.

     

    As CIO for Tesco, most of Mr McNamara’s time is now spent in marketing and commercial functions as compared to five years ago when it was mostly operations and productivity. “It’s not so much a digital strategy any more but a retailing strategy that is becoming digital. And that’s a very important distinction,” he says, “It’s not just about applications selling things on the internet but about helping people buy things in shops as well.”

     

    While many global companies are looking to cut down on IT spending, retailers such as Tesco are increasing it. “It’s a good time to be an IT guy in retail. In other industries, IT budgets are under more pressure. In retail, because we need to meet the consumer need for mobile apps, for social views, for all of these things, spending is on the rise.”

     

    Tesco has switched investments from property to technology, says Mr McNamara.

     

    “We would typically invest in the billions in property. You don’t have to shift too much of that into technology to make a difference. We have increased our technology spends quite significantly. And much of that increase is going into customer facing technology,” he added.

     

    Tesco is also unique because it is one of the companies, which has a former CIO, Philip Clarke, as its CEO. Mr McNamara describes Mr Clarke as a retailer by background who’s a technophile and himself as technologist who loves retail. “He (Clarke) has a very deep understanding of what technology can do for business. It’s a huge positive when there’s somebody else in the executive team who speaks the same language as you.”

     

    In retail, the tough part is to get economies of scale in operations, says Mr McNamara. “You can get them in buying, no doubt. But to leverage your operational skill across countries, that is difficult. Just because you manage supply chain well in UK, doesn’t mean you can do the same China,” he said.

     

    And this what Mr McNamara is trying to do through Tesco’s India centre – put the skills in one place where it can service Europe and China and leverage the operational skill across the entire group, rather than teach it in every country. The battle lines are being drawn.

     

    Source: The Economic Times

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