I’m a consumer goods firm, and not a retailer any more
Kishore Biyani, the man people credit for giving form to modern retail in India, is taking his Future Group through a major transformative phase—from retail to FMCG (fast-moving consumer goods), and from large supermarkets to small stores. In an interview, he lists his expansion plans and strategy to pare debt. Edited excerpts: You have been on a long reorganizing exercise. Every three-five years we keep reorganizing. Customers are changing, we have to change. You have Nilgiris’ store network in the south that gives you a gateway to that region. How does that format fit in with the existing Big Bazaar and Easyday formats? How do you build 4,000 small stores? We think we have cracked the technology for a digital way to do small stores. That is getting experimented with as we speak. This is in the Nilgiris business? Small stores. For us, a small store is a small store. Whatever banner we put (on it). Small stores are something we are very gung-ho about and we expect them to grow phenomenally for us. Our next round of growth will come from small stores. There are two growth areas for us—one is FBB on the fashion side. We want to open 500 more FBB stores. And we want to open maybe 10,000 small stores. Would it be fair to say that the small store is a format meant for a person who goes to a kirana store now, one she can upgrade to? We are visualizing the small store from a very different angle. We are calling it Pados ki Dukaan— your neighbourhood store. It will be like your Dubeyji— you can get everything that you want. We will touch 1,000 small stores this year. Given this strategy on the small store, where does your mother brand, Big Bazaar, fit in? Big Bazaar is going to grow at 25-30 stores a year. It’s in a great position. Apart from Patanjali Ayurved Ltd, you’re the big new entrant everyone is talking about. We are one year behind the top line of Patanjali. Whatever their numbers will be (for FY16-17), I will be one year behind. That is my numbers for next year. You said in an interview that multinational companies (MNCS) don’t understand India well. We have the ability to build brands, build products and to understand Indian consumers on their terms. We care about consumers. Other companies care more about their brand. MNCS would like to bring in the products that they have done elsewhere in the world. I think there is no culprit as such. They are designed that way. You can’t expect Colgate to build something in India, which is very different from what they have been doing globally. Among your food retail businesses right now, Foodhall will have the highest margins clearly because they’re doing the gourmet sort of business. But your entire food portfolio is also there. So do you think Foodhall might potentially play a larger role? We do not want to do Foodhall in large numbers because 30% of our Foodhall customers are expats. We don’t look at any location which can’t get us 30% expats. What are your overall store expansion plans? Central will be the largest expansion for us this year, with 16 Centrals coming up. Twenty new Brand Factories are coming up. How are you planning to finance it? We don’t need to raise any money for expansion. And at any rate you will be expecting some cash inflow with the Hometown and Fabfurnish.com sales. A lot of people have written on Hometown. We are working on how to look at speciality retail outside our system. So is it just a case of letting go of a non-performing businesses?
No, we might look at demerging it; we might look at selling it. It depends. In a recent interview you spoke about how the debt situation is better. You also spoke about the group being debt free in four-five years. It will become (debt-free) automatically. I don’t need to do much.
So how will that happen exactly?
We don’t have too much debt in any case. We are halving our debt within the next month, two months (This was said in March, and is about debt at group level). There has been a lot of talk of how D-mart compares with Big Bazaar. People say they have been steady with their business model, whereas you have had a lot of iterations with yours. What do you make of that sort of thought in the market right now? I think the Indian market can take a lot of other models. D-mart is a discount-led retail chain. We are moving more towards a lifestyle, departmental store chain. India can have a real hypermarket also, which is not there currently, where you do monthly shopping. For example—walmart, Carrefour, a regular hypermarket. We are not like that, nor is D-mart like that. D-mart is a deep discounting model. They have been very focused and very consistent. We are a kind of a variety departmental value store. I think there is lot of scope for a lot of models to emerge. Have you reduced your pace of growth? I have not reduced the pace of growth. We have become quite focused now because we have broken down the business into two— food and fashion. We are delivering these in various formats. You’re considered the father of modern retail in India. Now you have a burgeoning consumer business. Do you think it’s fair to say you’re shifting focus from retail as a core business to consumer as your core business? I’m a consumer goods company. I’m not a retailer any more. Retail is the distribution part of my consumer business. We are a brands company, having our own brands in food and fashion, and we are delivering it through our own retail chain which we control. In that sense, we are a consumer company.
Transformation phase: Kishore Biyani, chief executive officer of Future Group.