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