New Delhi: Future Ventures India Ltd, the investment arm of Kishore Biyani’s Future Group, is looking to buy food and grocery retailers to expand its presence in the neighbourhood supermarket and convenience store formats, according to Damodar Mall, director of food strategy at Future Group.
Mall met potential franchisees for the company’s existing retail brands, including Big Apple and KB’s Fair Price, in Delhi and said that the company is looking at acquiring local firms in markets such as Delhi, Mumbai and Bangalore. In September, the company had bought Express Retail Services Pvt. Ltd, which owned the Big Apple stores, for Rs.61.35 crore.
“A lot of shopping happens in the neighbourhood. So any mainstream player in food and grocery space will need a neighbourhood presence,” said Mall.
Future Ventures also owns private labels in the apparel and food space. While its KB’s Fair Price is a daily needs store with an average shop size of 600-900 sq. ft, Big Apple is a large-format grocery store. The company’s food retail business has sales of Rs.400 crore.
Mall expects to add 180 shops in Delhi under KB’s Fair Price and Big Apple brands in the next 18-24 months. Currently, there are 38 Big Apple stores and 82 KB’s Fair Price stores in the city. The company has similar plans for Mumbai, Bangalore and the suburbs of Delhi.
Currently, the company operates 90 KB’s Fair Price stores in Mumbai and Bangalore. “We need to have scale to be able to integrate and leverage collective back-end capabilities,” he said.
The grocery segment will continue to see consolidation as foreign retailers have been allowed to own as much as 51% in multi-brand retailers in India, according to analysts.
“We will see a lot of consolidation happening in the industry,” said Debashish Mukherjee, a partner at consulting firm AT Kearney. Additionally, “density of operations are important for success, hence retailers with specific strengths in certain geographies will also be on the target list for larger retailers,” he said, adding finding new spaces in large cities will remain a challenge.
Rachna Nath, leader retail and consumer practice at consulting firm PricewaterhouseCoopers, said the challenge in scaling up such formats lies in the costs that can be taken out of the system.
“Since modern trade formats for food and grocery are low-margin businesses and highly competitive, overheads need to be low,” she said.
The retail industry has grown at an annual average rate of 10.6% between 2010 and 2012 and is expected to reach $750-850 billion by 2015 with food and grocery being the largest category within the retail sector with a 60% share.