Future-ready partnerships
The recent tie-ups of Future Group’s food and consumer goods arm are at the core of its goals to turn it into a ~20,000-crore business by 2021
The recent tie-ups of Future Group’s consumer goods arm are at the core of its goals to turn into a ~20,000-crore business by 2021. RITWIK SHARMA writes
Last month, Future Consumer Limited (FCL) tied up with the Indian wing of Japanese firm Nissin Foods with an aim to take its packaged foods beyond the company’s own outlets by tapping the latter’s distribution strength. The food and FMCG arm of Future Group also entered into a joint venture (JV) with New York-based food company Hain Celestial around the same time to manufacture, market and distribute various food products in the health and wellness category.
The recent developments are in tune with a three-pronged strategy that is at the core of the stated goals of Future Group founder Kishore Biyani to turn FCL into a ~20,000crore business by 2021.
Citing the recent tie-ups, Rahul Kansal, chief business strategy and marketing, FCL, says Future Group has been able to stitch up healthy partnerships across food and nonfood categories. “FMCG companies stick to a few chosen areas, whereas we have launched 20-plus brands and have many more on the anvil. The reason why we are at the forefront of retail play in India is because the company constantly innovates and rethinks its own models, and is willing to ditch an old idea if it’s past its sell-by date.”
According to Kansal, FCL’s broad strategies are — a raft of product ideas across food and HPC (home and personal care) in the company’s own stores, store expansion, and moving beyond its own stores to others in modern and general trade.
The group runs 800-odd stores through Future Retail and FCL. Through its large and expanding retail footprint, the group’s FMCG business plans to build strong brands. FCL, which offers a range of products in the food and HPC segments, distributes its items through group retail chains like Big Bazaar and also other hypermarket stores.
Unlike a majority of companies which build relatively low-end value brands, FCL, Kansal argues, doesn’t want to restrict itself but focus on new and highly differentiated offerings that could cater to an emerging consumer class that is highly experimental. “Inevitably, as India opens up to new ideas or foods, most new brands first need to be set up through the modern trade. Besides, we are sitting on a robust modern trade platform ourselves.”
He points out that something as exotic as wasabi, which until recently was considered suited only for a select palate, is lapped up in the form of products like bhujia which FCL had launched recently. “With such an openness to experimentation, we would rather be the ones to introduce consumers to all these interesting foods.”
Second, the group’s retail network is poised for growth, following mergers and acquisitions of retailers such as EasyDay, Nilgiris and Heritage. The group plans to roll out several stores in all these formats.
Third, FCL is pushing its products through other stores, both in modern and general trade. “The value of the brands we are making have been conceived keeping modern trade customers in mind, whether it’s Kosh, Sunkist, Sangi’s Kitchen or Desi Atta. And gradually, we are taking them to the general trade market as well. So there are multiple opportunities for growth,” points out Kansal.
The idea of selling house brands through other stores us relatively new for the group. Kansal stresses that for FCL, the needs of the brand come first. “If the brand has legs and a potential beyond our stores then the needs warrant that we seek a larger market. So it is not being led by our retail thinking, but led by brand thinking.”
In the FMCG space, a conglomerate like ITC has aimed a turnover a ~1 lakh crore turnover by 2025. As Harminder Sahni, founder and managing director of Wazir Advisors, points out, for FCL how consistently and effectively they are able to push house brands beyond their retail network would be critical. He adds that bringing together all brands, especially when you do not have an umbrella brand, also is the most difficult part.
“Future Group has a supermarket business, with almost 50-60 per cent of the organised supermarkets under their belt. But if you look at this business it cannot survive on the basis of selling brands, as margins are too low and costs are too high. So they had to do private label. The moment they started doing this, and parallel to that saw an opportunity with others launching new brands and becoming successful I think they have latched on to that. There is a space for creating own brands since you have your own retail network. The real business today for Future Group is actually building their consumer brands and using the retail network to promote them,” he adds.