What has been the im­pact of the rise of su­per­mar­kets on business?

HT Estates - - FRONT PAGE - Pankaj Ren­jhen ht­es­tates@hin­dus­tan­times.com

The re­cent ac­qui­si­tion of the Hyper­city brand by Kishore Biyani’s Fu­ture Group is one of the many in­stances high­light­ing a key on­go­ing trend in the re­tail in­dus­try - cross-cat­e­gory con­sol­i­da­tion. Re­tail­ers are in­creas­ingly ex­it­ing busi­nesses that drag down their prof­its and fo­cus­ing on strength­en­ing their core busi­nesses to in­crease their mar­ket share and cre­ate value for their share­hold­ers.

Ear­lier this year, on­line re­tail gi­ant Alibaba picked up­stakes in Chi­nese su­per­mar­ket chains Hema and Bailan. Ama­zon bought out gro­cery chain Whole Foods for a whop­ping $13.7 bil­lion.Last year, the world’s largest brick-and-mor­tar su­per­mar­ket chain Wal­mart bought out US-based e-com­merce com­pany Jet.com for $3.3 bil­lion

In In­dia, Fu­ture Group ac­quired Hyper­city for $107 mil­lion and ef­fec­tively added around 1.4 mil­lion square feet of re­tail space to their ex­ist­ing 13.8 mil­lion square feet. So, why are su­per­mar­kets out shop­ping?

TO GAIN SCALE

Fu­ture Group al­ready has pres­ence in 221 cities after a se­ries of ac­qui­si­tions over the past cou­ple of years. Last year, it ac­quired 124 re­tail stores of Her­itage Fresh in Hyderabad, Ben­galuru and Chen­nai. It also ac­quired re­tail group chain Sangam Direct, Easy Day and Nil­giris, sig­nif­i­cantly ramp­ing up its pres­ence in South In­dia. The merger with Bharti Re­tail and ac­qui­si­tion of Big Ap­ple ef­fec­tively added 250 stores to its port­fo­lio in the North.

This approach has not only boosted Fu­ture Group’s or­ganic growth in terms of ge­og­ra­phy Fu­ture Group’s strat­egy has slowly evolved from a pure play re­tail model to a FMCG model. Con­sol­i­da­tion in the gro­cery space will fur­ther help them push their own prod­ucts over private la­bel con­sumer prod­ucts. The re­cent ac­qui­si­tion of Hyper­city is Biyani’s at­tempt at con­sol­i­da­tion in the fash­ion and food cat­e­gory. While most peers tried to go the FMCG way by out­sourc­ing food pro­cess­ing and man­u­fac­tur­ing to smaller firms, Fu­ture Group in fact out­smarted them all with the cre­ation of Food Parks.

TO GET ON­LINE AND OFF­LINE

The on­go­ing con­sol­i­da­tions in the food and gro­cery business gives out strong sig­nals of con­ver­gence in on­line and off­line In­dia is the world’s sec­ond-largest pro­ducer of fruits and veg­eta­bles and sixth-largest food and gro­cery mar­ket glob­ally, with the re­tail sec­tor con­tribut­ing 70% of the sales. Food has also been one of the largest seg­ments in In­dia’s re­tail sec­tor and is, ac­cord­ing to the Union Min­is­ter for Food Pro­cess­ing In­dus­tries, ex­pected to reach $895 bil­lion by 2020.In 2016, the mar­ket size of the food and gro­cery sec­tor was 30,25,218 crores (or $472.7 bil­lion), with the or­ga­nized share ac­count­ing for 2.4%. The In­dian

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