The Japanese-owned, US-headquartered 7-Eleven generates nearly a third of its sales in the Asian country. The Future Group’s latest move will be pitched against round-the clock convenience store chain Twenty Four Seven, promoted by Modi Enterprises and In & Out, which is run by state-owned Bharat Petroleum Corp Ltd.

Seven & i Group and Future Group didn’t respond to queries.

“Future Group has a number of neighbourhood stores through their own format launches and through acquisitions. Some of them could surely be repurposed to 7-Eleven convenience stores, while there could be other franchisees appointed for specific sites or territories,” said Devangshu Dutta, chief executive at consultancy firm Third Eyesight. “However, becoming a franchisee entails costs and restrictions. The question is whether there is enough margin available in the business to allow for so many tiers of stakeholders.”

A partnership between the two will help Future Group reach out to buyers beyond their own outlets in the modern trade segment, analysts said.

Future Group, which runs 1,444 stores in 409 cities, generates most of its revenue from food and grocery retailing. It has three smaller store brands — Easy Day, Heritage Retail, and Nilgiri’s — that have been acquired in the past few years and contribute 15% to sales. A recent report by Antique Broking expects Future Group’s small-store business to breakeven at an Ebidta (earnings before interest, taxes, depreciation, and amortisation) level by the end of FY19. A year ago, like 7-Eleven to the mix will make the group more attractive to prospective investors, an analyst said.

“Future Retail has always maintained it is FDI (foreign direct investment) compliant, which essentially means they are looking to sell stakes. A portfolio of retail brands including an international chain brings more heft to the company so that it attracts invest-Trent Hypermarket, a joint venture between the Tata Group and Tesco exited its small store business that operated under the Star Daily brand.

Adding a brand name ments from global retailer. However, investors are also being cautious now due to changing regulation in the retail sector,” said Abneesh Roy, senior vice president, institutional equities, Edelweiss Securities.

Globally, corner shops including 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. Since 2012, most of the large grocery retailers in the country have reduced store sizes by 13-35% to drive more profit through higher revenue per square feet.

In India, smaller stores or kiranas still account for nearly 90% of the all consumer products sales. Future Consumer, which sells its own brands of snacks, cookies and other packaged foods at its Big Bazaar stores, gets about a quarter of its sales from about 120,000 general stores.

Source: economictimes

Written By Deepti Govind

P.C. Musthafa, CEO, iD Fresh Food India Pvt. Ltd. (Jithendra M/ Mint)

BENGALURU : Azim Premji-funded iD Fresh Food India Pvt. Ltd has an ambitious plan. The company’s founder and chief executive, P.C. Musthafa, believes his newly-launched coffee decoction business has the potential to grow to ₹100 crore in a year.

The company, which test-marketed the coffee decoction products in the last three months of 2018, expects the business to generate about ₹2.5 crore in revenue in February itself.

“We’re getting good feedback. The products are getting sold out on almost the same day; the travel pack especially is doing wonders for us. We got the product and the packaging right,” said Musthafa in an interview. He added that launching a ₹10 travel sachet pack was the “right decision”.

The company began operations in 2006 as a small store in Bengaluru selling fresh, branded, good quality idli and dosa batter. It is following the same strategy with coffee too. Rather than giving consumers a ready-to-use powder, it is retaining the freshness of its coffee by wet-grinding beans into a decoction.

About 8-9 months ago, the company had also launched vada batter in a pack that allowed consumers to make traditional doughnut-like South Indian vadas with ease. That has not been performing as well as expected due to supply chain issues, Musthafa said, adding that he is working to rectify the issue.

iD, according to Musthafa, used more than ₹100 crore of the ₹150 crore that it raised from PremjiInvest, the family office of Wipro chairman Azim Premji, in March 2017 to expand production capacity. While it currently has the capacity to make 1.3-1.4 million idlis per day, with the expansion, that number will go up to 4-5 million a day.

As for coffee, the company’s decoction has been test-marketed in 2,000-2,500 outlets across the country so far. Its overall distribution reach across products is around 10,000 outlets. Musthafa plans to launch all the company’s products in Delhi, Kolkata and Gujarat and also plans to introduce its decoction in some international markets.

The startup’s other new products include vada batter and an expanded superfoods range. This, along with geographical expansion, is expected to help the startup’s revenue to grow 45% in 2019-20, according to Musthafa.

He expects overall revenue to grow between 19% and 25% in the current 2018-19 financial year to around Rs220 crore.

But are the expectations too lofty? Devangshu Dutta, CEO of retail consultancy Third Eyesight, believes there are a bunch of people today who are not able to brew their own coffee—whether it is for lack of time, good raw materials or the know-how.

He concludes, “The challenge is of ensuring freshness and penetrating deeply. iD has the capability to penetrate fairly deep, and they’ve built up a reputation and a momentum for their products in the market. Based on the platform that they’ve built, it is not an unthinkable target.”

Source: livemint

Written By Aditi Shrivastava, ET Bureau

Myntra and other ecommerce retailers like Amazon have been bringing on board new seller entities so as to not flout the regulations which prohibit online marketplaces from owning equity stakes in sellers.

BENGALURU: Flipkart’s subsidiary Myntra, which drives a large part of its business through exclusive brand tie-ups and private labels, has clarified that it does not own any equity stake in sellers on its platform thereby complying with the new FDI norms. The move signals a significant restructuring at Myntra since the company continues to sell brands through third-party merchants instead of directly from its brand stores.

Myntra and other ecommerce retailers like Amazon have been bringing on board new seller entities so as to not flout the regulations which prohibit online marketplaces from owning equity stakes in sellers. The regulations also disallow an ecommerce marketplace from making exclusive deals with sellers.

Fast-fashion brand Chemistry is now sold on Myntra by Wiztech, while AKS and Anouk sell through FashionTech and Mango is sold by WandWagon. Other private labels are being sold by sellers including Unistand and Mayazen. In December last year, ET reported that Myntra’s top alpha seller Vector E-commerce showed a 90% revenue fall in FY18, indicating that the platform was reducing its dependence on its top few sellers. “This will mean a longer paper trail to be compliant, and a middleman to squeeze margins,” said one person aware of the restructuring.

Myntra holds stakes in brands including Chemistry and ethnic wear brand AKS through its accelerator programme launched in 2017, which it said would drive about 5% if its sales. The programme offered brands technical, design and financial support, and the company at that time had said it will partner with about 10-15 local fashion brands. The fashion etailer also has a strategic partnership with Spanish brand Mango along with holding stakes in celebrity fashion brands owned by Saif Ali Khan, Hrithik Roshan, Deepika Padukone and Alia Bhatt, which exclusively sell through their portal.

Flipkart confirmed the restructuring to ET in an emailed response. “We did not have any equity ownership issues to contend with in our seller base. We are committed to full compliance with the new regulations,” it said. “There will be an immediate impact on Myntra’s margins, since now an intermediary will be introduced, who will invoice consumers for a percentage of the transaction,” said Devangshu Dutta, CEO of Third Eyesight, a specialist retail consulting firm. “However, as long as Myntra doesn’t hold equity in the seller and the seller doesn’t get more than 25% of its business from Myntra, they should be in the clear,” he said.

Myntra’s former CEO Ananth Narayanan had said private labels drive 25% of the company’s revenues and the business arm is profitable. The firm also has about 30-40 exclusive brand partnerships, which indicates that these brands derive bulk of their online sales from Myntra. “By design, Myntra depends a lot on brand relationships to boost sales. Brands work closely with Myntra since the etailer helps them manage product pricing and positioning. Selling equity does not solve the purpose since majority of these brands see their sales still come from Myntra,” said an investor, whose portfolio company sells products on the site.

What is interesting is that Myntra also has a joint venture with Prateek Apparel, which manufactures some of its private labels, sources told ET.

Source: economictimes