THE RE­OR­GA­NI­ZA­TION OF FU­TURE GROUP

While there is plenty of move­ment within the group, there is lit­tle clar­ity on what Kishore Biyani’s main­stay re­tail busi­ness, Fu­ture Re­tail, will look like

Mint Asia ST - - News - BSY OUMYA G UP TA

Kishore Biyani does not like the word “re­struc­tur­ing”. Through the du­ra­tion of an in­ter­view with Mint, he was care­ful to re­it­er­ate that his sprawl­ing re­tail and con­sumer prod­ucts em­pire, Fu­ture Group, has sim­ply been re­or­ga­niz­ing.

“We are al­ways re­or­ga­niz­ing”, Biyani said at his of­fice in Tardeo, south Mum­bai, one of two that the com­pany op­er­ates out of in the city. The other is in Vikhroli. “The con­sumer is con­stantly chang­ing, we have to change too. We re­or­ga­nize ev­ery three-four years.”

But this re­or­ga­ni­za­tion has been un­der way for al­most a decade.

The trade­mark of Biyani’s com­pany is rapid, in­or­ganic growth. In the last decade, Fu­ture Group has mu­tated con­sid­er­ably through a stream of ac­qui­si­tions, sales and spin-offs. Year-on-year com­par­isons have be­come so dif­fi­cult that most an­a­lysts track­ing the group’s five listed en­ti­ties have stopped cov­er­age. Con­sider the events of the last few months. In May, Biyani an­nounced he was tak­ing fbb, the group’s mass fash­ion re­tail chain, to Oman, through a joint ven­ture. In the same month the two arms of his fur­ni­ture re­tail busi­ness, Home­town and Fabfur­nish, were de­merged into a sep­a­rate en­tity, and he trans­ferred own­er­ship of Lee Cooper, one of Fu­ture Group’s big­gest fash­ion brands, to a sep­a­rate en­tity. Only a cou­ple of months be­fore this, Biyani had an­nounced a joint ven­ture with Amer­i­can or­ganic food firm Hain Ce­les­tial that would sell veg­etable chips and other snacks in In­dia. Mean­while, he has fi­nally fin­ished re­or­ga­niz­ing his re­tail arm, Fu­ture Re­tail Ltd, af­ter ac­quir­ing Su­nil Mit­tal’s Bharti Re­tail and south In­dian re­tail chain Her­itage.

De­spite Biyani’s at­tempts to down­play the con­stant re­struc­tur­ing, the group is un­der­go­ing a ma­jor re­ori­en­ta­tion, from be­ing pri­mar­ily a re­tail busi­ness to a con­sumer goods com­pany. “I’m a con­sumer goods com­pany,” he said. “I’m not a re­tailer any­more. Re­tail is the dis­tri­bu­tion part of my con­sumer busi­ness.” Fu­ture Con­sumer Ltd al­ready has close to 30 brands in food, bev­er­age, home and per­sonal care, all part of the group’s listed com­pany.

While there is plenty of move­ment within the Fu­ture Group, there is lit­tle clar­ity on how Biyani’s main­stay re­tail busi­ness, Fu­ture Re­tail, will look. An­a­lysts are wait­ing to see how Fu­ture Con­sumer manages to in­te­grate with the group’s re­tail fo­cus. In ad­di­tion, while Biyani has said he wants to con­sol­i­date all his re­tail of­fer­ings un­der Fu­ture Re­tail, his ap­parel brands firm, Fu­ture Lifestyle and Fash­ion Ltd (FLFL), and owns and op­er­ates two ap­parel re­tail chains, Brand Fac­tory and Cen­tral.

What will the Fu­ture Group of the fu­ture look like? Is the lat­est move one re­struc­tur­ing ex­er­cise too many? The jury is still out.

Rise of the small store

In 2012 Biyani sold Pan­taloons, his first suc­cess­ful re­tail chain, to Aditya Birla Nuvo Ltd to de­fray some of the Rs5,800 crore debt the par­ent com­pany had. Since then Fu­ture Re­tail has changed be­yond recog­ni­tion through ac­qui­si­tions, merg­ers and re­struc­tur­ing.

In 2016, Bharti Re­tail be­came part of the group. Bengaluru-based re­tail chain Her­itage, pre­vi­ously owned by Andhra Pradesh chief min­is­ter N. Chan­drababu Naidu, was added to the busi­ness in Novem­ber 2016. Biyani spent nearly Rs800 crore on these ac­qui­si­tions. The group now op­er­ates in seven re­tail for­mats: the large gourmet store chain Food­hall, smaller ones in­clud­ing Bigbazaar and Easy­day, along with the fur­ni­ture and fash­ion store chains. Its largest re­tail brand is Bigbazaar, with 235 stores in 124 cities cov­er­ing 10.18 mil­lion square feet of re­tail space, as per data from the Fu­ture Re­tail an­nual re­port for fis­cal year 2017 (FY17).

Now Biyani wants to fo­cus on smaller stores.

“Our next round of growth will come from the small store,” said Biyani. “We vi­su­al­ize it from a very dif­fer­ent an­gle. We call it the Pa­dos ki Dukaan, your neigh­bour­hood store.” The group’s small stores, Easy­day, Her­itage Fresh and Nil­giris, will cover most of In­dia, un­der brand names known to those re­gions lo­cally, he said.

“It will be like your Dubeyji,” said Biyani. “You can get ev­ery­thing that you want. We want to open maybe 7-8-10,000 small stores.” He be­lieves it does not mat­ter what name a small store op­er­ates un­der, as long as it is well-planned and func­tions smoothly.

Af­ter ac­quir­ing the Easy­day chain of con­ve­nience stores, Biyani be­gan merg­ing his own small store for­mat, KB Fair Price, with the rest of the chain. “Easy­day stores, Her­itage Fresh and Nil­giris will all be small stores,” Biyani said. “We will touch 1,000 stores this year. That’s huge.”

Biyani’s strat­egy is built squarely on his ac­qui­si­tions from the past fis­cal year. First was Her­itage, then Nil­giris, another south­ern In­dian gro­cery store chain. Fi­nally came Easy­day, with stores heav­ily con­cen­trated in north In­dia. He is clear he wants to con­cen­trate on the small store for­mat.

Biyani plans for these stores to op­er­ate on a sub­scrip­tion model. “It’s a mem­ber­ship pro­gramme,” he said. “For ev­ery neigh­bour­hood store we want to have 1,500 mem­bers, not more. We will serve these 1,500 mem­bers the way they want to be served. You tell me what you want and we will get it, at 10% less than mar­ket price.”

“It will be more tech­nol­ogy-driven t han one can imag­ine”, he said. Data an­a­lyt­ics will help each store mon­i­tor con­sumer be­hav­iour and man­age in­ven­tory.

Re­tail an­a­lysts say in­vest­ing in set­ting up a small store net­work in In­dia will pay off in the long term, par­tic­u­larly in newer ur­ban cen­tres. “Or­ga­nized re­tail is now grow­ing at dou­ble-dig­its in In­dia,” said Pankaj Ren­jhen, man­ag­ing direc­tor of re­tail ser­vices at real es­tate con­sul­tancy JLL In­dia, in an in­ter­view. “With the in­tro­duc­tion of hy­per­mar­kets, con­sumers are get­ting smarter. They are open to the idea of shop­ping in a bet­ter en­vi­ron­ment, and the mar­ket is set be­cause con­sump­tion is grow­ing fast in In­dia as well. Now if re­tail chains move to the hub and spoke model (a pared-down net­work in which smaller cen­tres are con­nected to large dis­tri­bu­tion sta­tions), you take the ex­pe­ri­ence of the big stores to the con­sumer’s doorstep.”

While this may not re­place the tra­di­tional ki­rana store for con­sumers ev­ery­where, Ren­jhen said or­ga­nized small stores like the one Biyani is set­ting up can work best in “new” ur­ban ar­eas, where mom-and-pop stores are not om­nipresent. These in­clude cities like Gu­ru­gram and Noida in the Na­tional Cap­i­tal Re­gion, and newly de­vel­oped ur­ban fringes of cities like Pune.

“The story is set for small for­mat stores, es­pe­cially in ma­ture mar­kets,” said Ren­jhen. “In some cases, if mom-and-pop stores are able to com­pete and dif­fer­en­ti­ate, they will (sur­vive). In some cases, they can even do bet­ter, be­cause they can align to their lo­cal mar­ket: they might be able to cus­tom­ize bet­ter be­cause they know what sells best in that neigh­bour­hood, or can give their cus­tomers a bet­ter ex­pe­ri­ence.”

One ex­am­ple of where ki­rana stores score over or­ga­nized re­tail is that they are will­ing to make sales on small lines of credit to loyal, lo­cal cus­tomers. Biyani’s sub­scrip­tion model seems an at­tempt at em­u­lat­ing this.

Un­fin­ished busi­ness

So where does Fu­ture Group’s iconic Big Bazaar, the large su­per­mar­ket chain, fit in in this new push? Biyani has not thought that as­pect through.

“We will work that out,” he said. “We’ll take our cus­tomers’ opin­ions into con­sid­er­a­tion, but not in the first phase (of re­or­ga­ni­za­tion). In the sec­ond phase (of re­or­ga­ni­za­tion), yes.”

This does not mean the group will re­frain from ex­pand­ing. Biyani says he will open be­tween 25 and 30 Big Bazaar stores ev­ery year. “It’s in a great po­si­tion,” he said. But Biyani is also shift­ing Big Bazaar’s po­si­tion­ing, mov­ing from the “cheap and best” month­lyvisit su­per­mar­ket slot to a “lifestyle de­part-

In­vest­ing in set­ting up a small store net­work will pay off in the long term, an­a­lysts say

INDRANIL BHOUMIK/MINT

Or­ga­nized re­tail: Kishore Biyani says his group will not in­vest in an om­nichan­nel strat­egy for its phys­i­cal stores for now. Fu­ture Group’s big­gest brand is Bigbazaar, with 235 stores in 124 cities cov­er­ing 10.18 mil­lion sq. ft.

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