admin
February 16, 2013
Taneesha Kulshrestha, Outlook Business
New Delhi, February 16, 2013
When
the first Debenhams outlet opened in India in October 2007, the
British retailer was more than optimistic about the road ahead.
Never mind that the store — opened in partnership with Planet
Retail at Gurgaon’s Ambience Mall — was nearly 18 months
behind schedule. Debenhams’ international director, Francis
Mcauley, declared that he would be disappointed if the company
did not have 30 stores in India over the next 10 years, by when
the Indian operations could be the retailer’s biggest outside
the UK, he predicted. Now, six years later, those forecasts are
nowhere close to realisation — the department store has just
three stores across India, two in the national capital region
and one in Mumbai. The brand also has a new partner in Arvind
Lifestyle Brands, which bought out Planet Retail’s interest
in November 2012. Expectations are rising again, although they
are considerably more muted than the last time. “I am confident
that within the next five years, we will have around eight Debenhams
stores in the five biggest cities,” says a company spokesperson.
At the other end of the spectrum, several high-end brands, too, have switched partners or changed business models. In 2009, the Murjanis parted ways with Jimmy Choo and Bottega Veneta, both of which moved to Genesis Colors. Aigner, meanwhile, dumped Genesis Colors in 2010, while last year, Versace and Corneliani ended their franchise agreements with Delhi’s Blues Clothing. Again last year, Giorgio Armani quit its joint venture (JV) with DLF Brands and moved to Genesis Colors. DLF terms the termination a “strategic” one. “The luxury business cannot be scaled up in India as fast as we previously believed. So, for now, we will focus on the premium segment of the fashion and retail business,” says DLF Brands CEO Dipak Agarwal, adding that Armani, too, has scaled down its expectations. “The move to end a JV and enter a franchisee model shows that the brand has narrowed its business interests in India,” he adds.
Despite the promise of a big consumer market — a growing middle class with rising disposable incomes, growing awareness of international brands and trends and an increasing willingness to spend on them — many international fashion brands have been forced to rethink their India ambitions. Research by Delhi-based retail consultancy Third Eyesight shows that since 2006-07, some 50-odd brands, including Next, Guess, Gas, Etam, Rifle, Morgan, Saville Row, Lerros, Corneliani and S.Olivers, among many others, have either exited India or have restructured their operations in the country. And the trend continued in 2012, despite the government allowing 100% foreign ownership for single-brand retail outfits in January last year. Brands such as Versace and Alfred Dunhill are said to be eyeing the exit sign currently. How did so many brands get their India strategy so wrong?
Misreading the market
Since 2005, there has been a four-fold increase in the number of international fashion brands entering the Indian market, triggered by the government decision to allow 51% FDI in single-brand retail in January 2006. It didn’t hurt, either, that import duties on apparel came down sharply from about 100% in the 1990s to 35% currently. The result: the organised fashion retail market more than doubled from about Rs 1,000 crore in 2005 to Rs 2,500 crore currently and is expected to touch Rs 6,000 crore by 2015, according to Technopak.
At the same time, for many brands, finding the right business model and understanding the Indian consumer has been an uphill task. “Some find India too complex a market. Besides, partners also tend to have differences when it comes to dealing with the marketplace, the waiting time and investments required to make things work,” points out Devangshu Dutta, CEO, Third Eyesight.
Ankur Bisen, VP, retail and consumer products, Technopak, offers
another reason. “The mistake many people make is they think
of India as one big market, when it is actually many markets in
one.” For instance, Delhi starts buying winter clothing when
it is still hot in Chennai. And people in the north have different
colour and style preferences than those in South India. “Add
to that poor retail infrastructure — the lack of trained
manpower, high rentals etc. — and you know why brands have
been finding it tough.”
Consider Marks & Spencer (M&S). The British retailer entered
India in 2000 with a franchisee agreement with Planet Retail,
positioning itself as a luxury brand although it was just a high-street
label back in the UK. All merchandise was imported from the UK
and, not surprisingly, was substantially overpriced. In 2009,
M&S switched to an equal JV with Reliance Brands and has started
sourcing and manufacturing 60% of its merchandise in India and
South Asia, which has brought down its prices by almost 20-30%.
The store has also repositioned itself as a mid-market retailer
and is making clothes more suited to Indian preferences —
longer lengths, higher necklines and more colour options. “We
have a better understanding of local taste and style now and our
range has been tailored to suit these,” says Venu Nair, MD,
Marks & Spencer India.
Similarly, in October 2012, Esprit broke its seven-year licensing and distribution deal with Madura Fashion & Lifestyle after reportedly suffering losses of Rs 20-25 crore every year. German brand Lerros, which had a JV with House of Pearl, too, met a similar fate in 2008 and switched to Numero Uno instead.
Like M&S, these brands also misread the market completely, charging way too much and trying to pass themselves off as premium offerings when their international positioning was more middle market. British brand Next, too, signed up with Arvind Lifestyle recently, breaking a seven-year relationship with Planet Retail.
As it is, most exits or change of Indian partner have some common threads — increasing cost pressures with aggressive expansion of the brands at expensive locations; high pricing due to costly merchandise imports and little or no local sourcing; and the inability to position and price a brand correctly and communicate it to the target customer group.
That’s what happened with Benetton. The iconic Italian fashion
brand was one of the earliest entrants into India, with a 50:50
JV with the DCM group in 1991. In 2004, it split with DCM and
began operating as a wholly-owned subsidiary. But by then, Benetton
was already seen as a T-shirt company that was always on sale
— the company advertised heavily during its two annual sales
but did virtually nothing the rest of the year; it didn’t
help that the ads showed products that weren’t available
in India. The Italian parent brought in a new team, focused on
increasing local sourcing and made the product offering more up
to date. “Earlier, there was a view in the company that the
Indian consumer did not have the same sensibilities for fashion
as international customers. That was a mistake,” concedes
Sanjeev Mohanty, Benetton’s MD in India. Now, the Indian
stores are on par with stores in London, Paris and Milan, with
the same clothes and visual merchandise effects, although all
manufacturing is done locally. There’s also been a change
in how Benetton sells in India: the company is now a pure wholesale
player in India, catering to over 500 stores across 110 cities,
with reported sales upwards of Rs 650 crore. “We own no stores
and have instead appointed master franchisees that distribute
our products,” says Mohanty. “We do have a complete
grip on design, marketing and guidelines for selling our products,
though.”
The Local edge
Where Benetton and M&S have realised the need to source locally, many brands falter by insisting on importing merchandise. “This alone can push up costs by 30-35%,” says Third Eyesight’s Dutta. If the retailer can’t pass on the increased cost to the customer, margins are immediately hit. Several international brands have faced this problem and are now increasing their local sourcing or giving licences to Indian partners to manufacture on their behalf. At Lacoste, for instance, long-time partner Sports & Leisure Apparel has the licence to manufacture and retail the French company’s apparel in India. “Manufacturing in India has helped in cutting costs, allowing us to maintain a better bottomline. We are also able to get new designs and clothes to the market faster,” says Rajesh Jain, CEO, Lacoste India.
It’s not only about cost; importing apparel also means limited scope to adapt sizes and styles. “India has very local aesthetics and some brands don’t allow for that. They try to plug and play and that’s where the trouble starts,” says Max India executive director Vasanth Kumar. The Dubai-based Landmark Group’s value clothing brand has a design team of 20 people working in India to adapt Max’s global lines to local sensibilities. That hasn’t saved it from mistakes, though: over the past six years, the chain has grown to over 70 stores but has also closed outlets at places like Jalgaon and Nanded. “It takes time to understand the different tastes and needs of consumers across the country,” points out Kumar.
Trouble is, foreign brands can be rather impatient and their
haste to expand can backfire. High-cost rentals were part of the
reason Gas exited India the first time and it’s also a key
reason why S.Oliver is yet to make a profit here. The German brand
entered India in 2007 through a joint venture with Orient Craft
and opened large stores — 5,500 sq ft on average — in
prime locations; the brand reportedly signed a long lease for
a 7,000 sq ft store in Delhi’s Select Citywalk mall for Rs
3 crore. In May 2012, Orient Craft sold its 49% holding in the
JV to Design Pod India. The new strategy includes halving the
size of outlets to 1,200-2,400 sq ft. While clothes will still
be imported, they will be procured directly from hubs like China,
Bangladesh and Hong Kong instead of being routed through Germany.
Prices are also being slashed by almost 30-40% to bring the brand
in line with rivals like Zara, Benetton and Mango.
Equally dissatisfied
It’s not only the foreign brands that are unhappy with how their Indian operations are being run. In May 2009, at a luxury conference in Delhi, Mohan Murjani, chairman, Murjani Group, took everyone by surprise when he declared the termination of the Murjani Group’s JVs with brands such as Gucci and Jimmy Choo, citing unfavourable terms of trade. Most foreign brands did not partner the Indian owner for losses, but wanted all profits to accrue to them in the form of royalty and profit share. “Sadly, brand owners have pursued one-sided and imbalanced agreements, which have now started to unravel,” Murjani noted at the conference.
But some of that problem also stems from the fact that Indian partners oversold the India potential to their own peril. That’s the reason DLF Brands snapped its four-year-old ties with Ferragamo and Armani in 2012. “We found that we could only open five or six stores for these brands and there isn’t much potential for the luxury market over the next five or six years. So, we have decided to focus on mid-market and premium brands such as Mothercare, Alcott and Boggi,” says Agarwal. Incidentally, Mothercare is another foreign brand that’s switched partners in India — the British chain came into India through a franchisee agreement with Shoppers Stop but changed to a 30:70 JV with DLF in 2009, which has since been expanded to a 51:49 arrangement in favour of Mothercare.
There’s also trouble when the Indian partner underestimates just how deep its pockets need to be to develop a fashion brand. Blues Clothing was started by Dinesh Sehgal in the mid-1990s to sell suiting material from premium international brands such as Cadini and Canali at the family’s stores in Delhi’s posh South Extension. Since 2005, the company signed on a number of brands such as Corneliani, John Smedley and Versace but has suffered heavy losses. While Versace has moved on to a partnership with Majgenta Fashions, Corneliani has formed a JV with OSL India, which also holds dealerships of BMW and Volkswagen.
Unfortunately, the list of failed marriages is a long one when it comes to the luxury business. But the good news is that, despite the stumbling blocks, foreign brands are a long way from breaking ties with the Indian market. M&S plans to open 10 more stores by Summer 2013, its biggest expansion in a single year after having been in the country for over a decade. India is among the four biggest emerging markets for Lacoste globally — the Indian operations grew 33% last fiscal and Jain is confident of maintaining the pace this year as well. Benetton, Levi’s and Max have stuck on over the years and now have turnovers in excess of Rs 650-800 crore. Market research firm Booz & Co expects organised apparel retail — which accounted for 17% of the $36 billion market in 2010 — to grow to 25% of the market by 2015 as the apparel retail industry, too, continues to grow by 5-10% in the same period. That means an opportunity of nearly $10 billion awaits apparel industry players who hang around for the next few years. Surely that’s reason enough to cultivate a little patience and tolerance.
admin
February 14, 2013
Mayu Saini, WWD
New Delhi, February 14, 2013
The
Indian government on Wednesday approved foreign direct investment,
or FDI, in single-brand retail by four retailers – French brands
Promod, Decathlon and Le Creuset and U.S. firm Fossil Inc.
The four companies will invest a total of 7.5 billion rupees, or about $140 million, in India, according to an official of the Foreign Investment Promotion Board.
According to officials, Fossil Inc. and Decathlon, both of which already are present in India, applied for 100 percent FDI. Promod, which first entered India with a franchise agreement that was changed to a joint venture with Indian company Major Brands in 2012, continues to look at a joint venture model. Promod is in nine locations at this time, including New Delhi, Mumbai, Pune and Bangalore.
Decathlon, the giant sports retailer, will bring in foreign equity of 7 billion rupees, or $130 million, officials said. Promod and Fossil are smaller, at 300 million rupees, or $6.1 million, and 220 million rupees, or $4.1 million, respectively.
"The move to invest directly in the Indian market for all three brands is a demonstration of longer-term commitment and confidence," said Devangshu Dutta, chief executive of Third Eyesight, a specialist consulting firm focused on the consumer products and retail sector. "For these and other brands who have joint ventures or subsidiaries in India, the engagement goes beyond the financial investment, it also needs a commitment of senior management time and attention."
He said that Promod’s move from a distribution or franchise arrangement to a joint venture has "been in the pipeline for a while. Fossil has also been distributing through various channels, and a fully owned retail business will enable them to take direct control of how the brand interfaces with the discerning Indian consumer. Decathlon entered the market about three years ago with a fully owned cash-and-carry [wholesale] venture, which has given them an advance insight into the market; the change to a retail business will now enable them to directly tap into the growing consumer demand for sporting goods and sportswear in the country."
Allowing foreign direct investment in retail has been a politically
sensitive issue for the last decade, and 100 percent FDI in single-brand
retail was permitted only in September 2012. Global retailers
are now looking at the Indian market with a different perspective
to evaluate the long-term gains and the potential of a retail
market that is still growing at more than 20 percent a year.
admin
January 17, 2013
Vishal
Krishna, Business World
Bangalore,
January 17, 2013
In
February 2010, Future Group founder and group CEO Kishore Biyani
delivered a lecture at Coimbatore’s Bharathiar School of
Management and Entrepreneur Development. He said his business
ideals were driven by LSD (Lakshmi, Saraswati and Durga). Unless
we create wealth for all strata of society, learn from experiences
and create a strong identity, we will never become an economic
superpower, he told the audience.
That lecture echoed in May 2011, at a meeting to discuss a new
initiative with select senior executives at the group headquarters
in the SOBO Central Mall, Mumbai. At the end of the presentations,
Biyani told them in chaste Hindi, “Is mein dhan hi dhan hai.”
Translated into English, it means “there is enormous wealth
in this”. Translated into reality, it is a Rs 10,000-crore
opportunity for the Rs 15,000-crore Future Group; besides having
the prospect of creating thousands of livelihoods.
What Biyani was referring to is now taking shape at a 110-acre
site 100 km north of Bangalore, in Tumkur. This Rs 500-crore food
park — the first of two that he intends to set up by early
2014 —is at the heart of Biyani’s push to backward integrate
his group by creating a parallel FMCG business which, he hopes,
can be scaled up to be among the biggest in the country.“We
want to be one of the top three FMCG players in this country,”
he says.
At play here is Biyani’s ingenious instinct: If India is
changing, so are eating habits. “The future is in value-added
food. We see our customers evolving this decade because of the
changing economic conditions,” he says. He
defines value-added food as: TV dinners, frozen foods, ready-to-eat,
baked items, packaged fruit and vegetables, food pastes and curries.
With the food park, Biyani is also challenging the current norm in the retail industry where large rivals such as Reliance Retail, Bharti Easyday and Aditya Birla More source white label and private label products from contract manufacturers rather than getting into manufacturing themselves. So why is he going against the grain? Logistics is 13 per cent of the retail cost of food products. If the food park could reduce this to 5-6 per cent, the group stands to create a lot of “dhan” since food business accounts for 50 per cent of Biyani’s Rs 15,000-crore annual revenue. Eventually, like Walmart, Biyani will hope to sell at least 50-55 per cent of his products through white or private labels as against 35 per cent today. Private label food products earn an average net margin of 65 per cent versus 10-15 per cent from branded products. “We have the customer knowledge from our retail stores that allows us to take this bet,” says Biyani.
“For Biyani, an idea can mean not just a business opportunity but a way to bring investors together to make that product scale to potential,” says B.S. Nagesh, Biyani’s friend, and vice-chairman of the Rs 2,000-crore Shoppers Stop.
To Make It Work
These are hectic times for Biyani. He is pacing up and down in one of the Future Group’s conference rooms in Bangalore, even as he makes multiple phone calls and sips green tea. When sitting, he multi-tasks between an iPad, a Samsung smartphone and a BlackBerry. He tells the person on the other end of the phone to not think negatively and to get on with the work as planned. During his conversation with BW, he is mostly on his feet; he takes a break to listen to executives explaining the progress at the Tumkur project. At times, he slips into deep thought. Often, he runs out to acknowledge a business associate, holds a discussion, and then returns to the conference room.
When it goes live in 2014, the Tumkur park will connect farmers spread over a 300-km radius to six agri cooperatives or collection centres. The produce will go from the collection centres to the food park, where it will be sorted and graded. Some of this will reach stores while the rest will go into processing. The food park will also house pulping, milling, flouring, spice and dal (lentil) units. It will have an 80,000 sq. ft cold store to supply fruits and vegetables round the year. Biyani has also planned a manufacturing centre for 60 medium-sized food processing companies that can make ready-to-eat food for group company Future Ventures using raw material supplied by the food park.
“No one in India has created an integrated food park business, and the country needs this to generate employment in manufacturing and to create a new consumption boom for people,” says Biyani. It will be the job of Future Ventures to transport the products to the kirana network across India, and to the group’s 600 stores through Future Logistics.
But this is just the food aspect of the new business. For non-food
FMCG, the business plan envisages bringing in manufacturing units
of large FMCG majors such as Hindustan Unilever (HUL) and ITC
(talks are on with both), as well as large FMCG contract manufacturers.
For the latter, Biyani plans to provide ready-to-use infrastructure.
If required, the bulk of the responsibility for raw material sourcing
and logistics will be taken care of by various Future Group entities.
The plug-and-play infrastructure could be of immense value to
foreign retailers as the new FDI policy requires them to spend
50 per cent of their investment in backend infrastructure. With
the food park, the foreign retailer need not buy expensive land.
Instead, it can sub-lease it and set up manufacturing operations.
This move satisfies the backend investment requirement of the
FDI policy, and allows foreign retailers to focus on frontend
retailing.
Re-Inventing The Group
Biyani has come a long way in planning the park. At the beginning of last year, analysts considered Future Group a sinking ship. Its biggest company, Pantaloon Retail’s revenue was rising but net margins were almost flat — in the 0.5-1 per cent range. The group is yet to file its annual results for 2011-12 because of a restructuring and will file 18 months’ results in February 2013. It had also piled up a massive debt of over Rs 7,600 crore, whose interest burden had been taking a toll on its profits.
Biyani has managed to pare the debt. He hived off equity in various group entities, even selling businesses such as Future Capital Holdings (which carried 50 per cent of Future Group’s debt) and the Pantaloon fashion format. The biggest move came when he raised Rs 1,600 crore by selling 49 per cent stake in the Pantaloon format to the Aditya Birla Group in 2012.
The financial restructuring brought debt down to less than Rs 1,200 crore by November 2012. “It is good to be out of it,” says Biyani. Then he turns around to the presentation board and, after some thought, says, “That era was different. The business environment and opportunities were different. It was Future Capital Holdings and its NBFC debt that created a lot of confusion for us. I am not just back on track, I have been so for some time now.”
Biyani’s eyes are now focused on the Tumkur park. Work is in full swing at the 110-acre parcel of land acquired from the Karnataka Industrial Development Board. Land is being levelled before construction can begin for the fruits and vegetables centre, the cold store and ripening chambers. Amid the chaos and din, Praveen Dwivedi, a former ITC veteran of the farm supply chain initiative and cigarette business, is busy speaking to farmers and contractors on the project’s execution. Since he is solely responsible for the project as the president of Future Ventures, he works with an iron fist.
Dwivedi is used to inadvertent delays. He makes frequent calls to government officials, keen as he is on securing the 10 MW of power required for the food park immediately. He also wants to have everything — from water to drainage lines — ready in eight months. The project report says the park will need 500,000 litres of water, drawn from the Hemavathi river in Tumkur, and for which a reservoir is being readied. A few farmers are threatening to stop the movement of Dwivedi’s trucks. But he is not perturbed. “This project will eventually employ more than 2,500 people. It will change the way food processing is envisioned in this country,” says Dwivedi.
The Unique Selling Point
The idea of a food park is actually borrowed from China. The Chinese industry is 18 times the size of India’s $70-billion food processing business. An average food park in China is 200 acres in size and has investments of close to a billion dollars each. China has over 30,000 large food processing companies that process everything from meat to cheese and from raisins to nuts. China exported over 500 million tonnes of dry milk powder in 2011 alone. The Chinese industry is projected to reach $2 trillion (from $1.2 trillion) by 2018.
In India, Future Group’s Tumkur project is one of the 15 projects to take off from the posse of 30 mega food park schemes floated by the ministry of food processing. These projects are entitled to a government grant of Rs 50 crore and have been floated as a special purpose vehicles, with government representation on the board till they are commissioned.
Projects that have been commissioned include the 147-acre Srini
Food Park in Chittoor, Andhra Pradesh, with an investment of Rs
200 crore by five promoters; the 80-acre Patanjali Food Park in
Haridwar, Uttarakhand, with Rs 100 crore invested so far; and
the 70-acre International Mega Food Park in Chandigarh, with Rs
150 crore from International Farm Fresh. A couple of these projects
are for pulping fruit and processing vegetables for export and
are betting on revenue from leasing land. The Patanjali Group
is also promoting ayurvedic products of Baba Ramdev.
“Reliance, Spencer’s and Aditya Birla (Group) have connections
with farmers, and a huge private label play. But no one has done
food processing on their own,” says Pinakiranjan Mishra,
national leader of consumer markets, Ernst & Young. He adds
that low margins in manufacturing will be offset by retail sales.
Reliance Retail’s grocery business is close on Future Group’s
heels. It achieved Rs 4,000 crore in food and groceries in under
six years of operations from 600-odd stores. The company’s
total retail business generated revenues of Rs 7,600 crore. Sources
say that the company sources at least 30 per cent of its fruits
and vegetables from farmers. That the company is serious about
its retail business is evident from the fact that the group has
infused Rs 12,000 crore in the retail business and will spend
another Rs 13,000 crore over six years.
Similarly, Bharti Retail’s Easyday format has over 200 stores, and is working with 2,000 suppliers to increase its private label content from 25 per cent to 40 per cent by 2015. Its partner Walmart works with 20,000 suppliers in China alone and sources 95 per cent of the products locally. The Bharti group has already committed Rs 9,000 crore for the retail business.
But the competition does not deter Biyani because he already has the retail scale, and the food processing business will focus on value-added products, which will be largely exported; only about 30 per cent will be for domestic use.
“The world is looking to India for food processing with the Chinese food industry under scrutiny for not maintaining quality. Imagine the scale we can build on,” says Dwivedi. And scale is the question that Dwivedi has to find an answer to. He cites the example of an industrial pizza machine that can make 20,000 pizzas an hour, saying there has to be commensurate local consumption, which is unlikely to happen. “Can we use the same machine to make chapattis, parathas, rotis and other baked items, besides pizzas? This will allow us to utilise the machine to the fullest instead of letting it sit idle,” he says. Scale is essential because the food park will eventually have a major portion of its business contributing to exports. “Eventually scale will be possible only through exports,” says Dwivedi.
Getting Retail Into Play
Even though he will rely heavily on exports, Biyani has his entire retail chain of more than 600 supermarket and hypermarket stores backing him in rural, semi-urban and urban regions of the country to utilise the production from the food park. He has 315 Big Bazaar and Food Bazaar stores in major cities; 200 KB’s Fairprice shops; 38 Big Apple Express stores; and 37 Aadhaar stores. “There is a larger opportunity in retailing with KB’s Fairprice shops,” says Biyani.
He adds that he wants to empower the kirana as a franchisee and is identifying 10,000 franchisees to open KB’s Fairprice shops over this decade. Till now KB’s Fairprice shops were limited only to Delhi, Mumbai and Bangalore. “We are also going to acquire or take over many more small retail stores in a couple of years,” says Biyani.
A few years ago, Nilgiris, a retail chain owned by UK-based PE fund Actis in Bangalore, mooted the idea of experimenting with the concept of empowering small entrepreneurs to use its brand name. The project did take off with at least 50 successful small entrepreneurs who understood modern retailing. But it is intrinsically difficult to find local entrepreneurs who can work with corporate processes across every city. Nilgiris’ small entrepreneurs were usually retired executives or businessmen who wanted to experiment with retailing. But it was Nilgiris that provided the backward linkages and supplies. If such a plan is executed by Biyani, he would have the largest network of stores that he can supply to from the food park.
And this is something that other food parks do not have access to. Along with subsidiary companies like Future Supply Chain and Future Logistics, he hopes to complete the farm-to-fork loop. “India is a fascinating country to do business in. And with such a young population, it is only the beginning of what we as a group can achieve,” says Biyani.
Between The Cup And The Lip
Despite enormous planning, Biyani still has a few issues to grapple with. More than integrating farmers into the food park, it would be a challenge to convince large FMCG players such as PepsiCo, Dabur, HUL and Britannia to set up shop in the park.
“There needs to be commonality in a food park, much like in an automobile cluster, which has a large anchor, if the project has to succeed,” says Devangshu Dutta, CEO of Third Eyesight, a retail consultancy. He adds that there is a business case if the Future Group can create an ecosystem in the food park where each entity works towards a common benefit.
About seven years ago, various state governments had asked individual entrepreneurs to set up food parks with a subsidy of Rs 4 crore. Many local businesses bought the land, but failed to open food parks. In Karnataka, small mango pulping units (30 tonnes-a-day capacity) started but remained operational only for about six months of the year. Similarly, textile parks became a real estate play. In many cases, the units set up functioned in silos rather than with a unified vision.
“These businesses were set up without market linkages, so they didn’t take off,” says Biyani. He says that Capital Foods, in which he has a 43 per cent stake, will be one of the larger private food processing companies in the park, and will act as anchor with a 100,000 sq. ft factory.
“Since the Future Group is back to pure-play retailing, it can focus on new businesses such as food processing that can supply food products to its retail formats and also create new markets with exports,” says Harminder Sahni, managing director of Wazir Advisors, a retail consultancy.
Perhaps, this is the beginning of the emancipation of Biyani the entrepreneur. Always a risk-taker, he is now ready to take bigger risks in a journey that will determine whether he is as successful in FMCG as he has been in retail.
admin
January 10, 2013
Nupur
Anand, DNA (Daily News & Analysis)
Mumbai,
January 10, 2013
It’s
not even mid-January yet, but a "flat 50% off" sale
is already on at an apparel brand outlet at Mumbai’s poshest mall.
This unseemly break with tradition – the two-week-long ‘sale’ season used to start in the third week of January, offer nominal discounts initially but jack them up later towards half price is not a case in isolation.
Sale, that four-letter word with the power to smoke out even
the tight-fisted shopper from self-imposed shopping exile, is
now plastered across all kinds of retail outlets at malls.
What’s more, several brands are already offering ‘flat 40-50% off’ in the first week of their sale. And no one knows how long this year’s sale season would last.
Abhishek Ranganathan, analyst at Phillip Capital, says the trend of advanced sale started last year due to infrequent ringing of cash registers. “This was expected to correct from this season. But that was not to be. As a few brands launched their ‘sales’ early again this year, others had to follow suit. For, if you don’t, then you’ll end up losing business to the store next door.”
Retail industry observers say premium fashion brands started the season with deep discounts. Agrees the manager of the apparel outlet at Phoenix. “We’ve realised that we do better business in the sale month of January than we do in July-December. So, in order to attract customers, we’ve started with a flat 50% off.”
There’s more to it, says Devangshu Dutta, CEO of Third Eyesight, a retail industry research firm. “New stock typically starts coming in from mid-February. Since slow economic growth has affected sales for the entire year, companies had to start with deep discounts in order to free up cash.”
Early starts, prolonged duration, deep discounts from the word go… such aspects of 2012 sale had caused concern to the retail industry. And it’s no different this year.
Experts say discounts help inboosting volumes but eat into margins. Worse, a relatively longer sale season was also driving away customers who are not essentially bargain-hunters.
As a result, retailers had started correcting their strategy. Analysts point out that in the past six months, attempts have been made to check inventory and forecast demand. “We’ve been trying to shift to a quicker inventory churn so that we could curtail the sale season, but it may take a quarter more,” says the CEO of a multi-brand outlet.
Retailers say that the extent of footfalls in the first two weeks of the sale season will decide how long the discount period may be extended.
If sales fail to pick up in spite of discounted sales, the sale period may well stretch to a month like it happened last year, say experts.
admin
January 6, 2013
R Krishna,DNA (Daily News & Analysis)
Mumbai, January 6, 2013
Unity
in diversity is one of those maxims that makes no sense in India,
except in the rarest of contexts. Chai, a colonial import, is
one such factor that Indians can identify with regardless of class
and religion. That’s why it’s surprising that there
are few places that serve good tea outside of our homes. Tea from
vending machines tastes artificial. At hotels, the decoction is
rarely fresh. And though tapris do serve good tea, they are over
boiled and sickly sweet.
“If I ask you to recommend one place in Mumbai that offers
great tea, you won’t be able to come up with a clear answer,”
says Amuleek Singh Bijral, founder of the Bangalore-based tea
chain, Chai Point. According to him there is a demand for good
chai that is not being met. “In terms of sheer volumes, tea
is consumed far more than coffee in India,” says Bijral,
“It is just that nobody has given it the kind of branding
that coffee enjoys. There is an opportunity for organised players
to come in to address this need.”
A challenge Starbucks faced
However, tea chains like Chai Point, which have come up in the last five years or so, face an uphill battle. Tea’s popularity in Indian homes, in fact, acts against its image. Coffee is considered a lifestyle statement, while tea is ordinary. It’s easy to convince a consumer to spend upward of Rs 80 for a cup of coffee. However, even Rs 30-40 for a cup of tea is considered expensive. Bijral is aware of the problem. “Starbucks had a similar challenge almost 30 years ago when they opened their chain in the US. Coffee was a drink every American prepared in his home. But they created a brand that convinced Americans to spend money on a cup of coffee,” says Bijral. Over the years Starbucks and other coffee chains developed a model such that the coffee chains’ popularity has less to do with the beverage itself, and more to do with the whole experience. Tea chains, on the other hand, are blazing a new path.
Chai Point, for instance, targets the white-collar worker. “Nobody in office takes a cappuccino break. We take a chai break. Office-goers are not looking for a lounge,” says Bijral, “Our outlets are in areas with lots of offices around. We want our customers to come to our outlets several times in a day to have a freshly brewed cup of tea at a hygienic place.”
Delhi-based Tea Halt has put up kiosks in colleges, marketplaces and in office areas. “We first wanted to introduce customers to various kinds of teas before putting up cafes which add to the cost,” says Ankur Agrawal, co-founder, Tisane which runs Tea Halt, “The range of teas we offer depend on the area in which we have put the kiosks in. For instance, near colleges our tea starts at Rs10. Near offices, we offer teas that are more expensive.”
Variety holds the key
While both Chai Point and Tea Halt stress on convenience, Golden Tips, the Kolkata-based tea company has taken a different approach with their own tea lounge, Tea Cosy. “We want to make tea glamorous by offering large variety of teas, as well as sell equipment such as infusers and teapots, stuff that people haven’t tried before,” says Bala Sarda, vice president, business development, Golden Tips.
Sarda says that customers can sample white tea, oolongs, and other varieties of tea at Tea Cosy, and buy the leaves of the ones they like. The leaves can be a blend from different tea estates or sourced from a single estate from different regions in India and the world. “Consumers can get a simple cup of tea at home. What we want to do is to introduce them to the world of tea. The sheer variety of teas on offer and the growing awareness about tea’s health benefits is attracting younger consumers (18-30 age bracket) to our outlets,” she says.
Still, tea chains attract a miniscule crowd compared to coffee chains. But if global trends are anything to go by, things can only get better. Earlier this year Starbucks paid $650 mn to take over the tea company, Teavana. Just two weeks ago Starbucks CEO Howard Schultz announced that apart from introducing Teavana products at their own outlets, the company would open standalone Teavana stores to “do for tea what it [Starbucks] did for coffee”.
It is some such move that will make tea chains contemporary, says Devangshu Dutta, chief executive of consultancy firm Third Eyesight, “It would have been easier for tea chains 20 years ago when coffee was not present in the urban market. Things could change in the future. But if past experience is anything to go by, it will not be an Indian company that will cause the turnaround. Tea chains will need an approval stamp from the West.”
