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The 8.8% reason and more

Retail has the potential of revolutionising India. This potential relates not only to economic growth but also to social and cultural equality and physical well being of the Indian populace. The Government has just announced that the Indian economy grew at an astounding 8.8% in the April-June quarter just gone by. There have been fears that we may not be able to sustain such a clip for long. This growth is riding on strong industrial and farm output chasing demand resulting from income growth. The whole cycle is greased by infrastructure of which retail forms a critical part. Fetter retail for whatever reason and you restrain growth.

Growth has exposed some of the divides in India and the cleavages are many. The fault lines lie between India and Bharat, the caste divide which refuses to be overlooked, the ‘boom’ gainers and those that remain untouched, male domination and women’s aspirations, metro growth and small city indifference, urban well being versus tribal destitution, etc. Retail does not recognize social stratification and tends to spread a common cultural heritage across vast geographical spreads.

The recent order of the Supreme Court to the Government to distribute food grains to the poor for free rather than leaving them to rot underlines how public control is not necessarily the better way. Properly incentivised, the private sector can move items of public consumption even better. This goes for distribution and retail for sure. The Government should not leave any further time in unfettering the retail industry.

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Looking Ahead

Indian economy on a good wicket
Future Group & Star join the TV home shopping bandwagon
Wholesale cash-and-carry market goes into overdrive
Yum! Brands aim $100mil profit in India by 2015
Lifestyle expected to post first profit after ten years
Apparel exporters turning attention to domestic retail

The stock market surge, which following global cues last month, underlined the good wicket that the Indian economy finds itself in. On the 19th Aug, the Sensex rose by 1.1% to a new 30 month high of 18,455 points while the Nifty rose by 1.1% as well to a 31 month high of 5,540. The food inflation, still high dipped to 10.35% in the year on Aug 7. It eased from the previous week's annual rise of 11.40%. Perhaps the only one doing better was our Northern neighbour. China surpassed Japan in second-quarter (ending June) GDP figures ($1.399 trillion) to become the second largest economy after the US. This is likely to translate into China remaining at number two even at the end of the year when the full 2010 figures are compiled. The gap between the Chinese economy and that of the US is still too large ($5 tr Read More

Strategy Refinement

Raymond plans major expansion in non-metros
Genesis Colors betting on new tie-up with Burberry
Brandhouse Oviesse launches Italian brand ‘OVS Industry'
Blue Clothing Company targets airport retailing
Big Bazaar's five-day Independence Day sale bonanza

Short of a COO with the recent exit of Deepak Khetrapal, Raymond is still game for major retail expansion. Having saturated metros (but not malls), the company feels it is ready to make a major presence in class IV and V towns. Premium luxury brand marketer Genesis Colours is gleefully pushing its luxury brand Burberry although others (such as Murjani, SSIPL) have come a cropper in this segment. S.Kumar’s Brandhouse Retail is serenading foreign brands, this time the Italian brand Oviesse. Blues Clothing sees a bright future in airport retailing, a segment where experience is sorely required for Indian retailers. Closer to the ground, Big Bazaar has declared its Independence sale a resounding success.

Textiles maker and retailer Raymond Ltd has res Read More

Expansion & Growth

Vimal to add 38 stores this fiscal
HyperCity Retail to set up 10 more malls
Pantaloon rides robust sales at Central malls
Parag Milk Foods to launch 150 own stores

The retail industry is seeing not only expansion of the specialty store such as Vimal and Parag but also of high investment, large format stores such as HyperCity and Central. In fact, retailers are feeling more confident about larger formats since it offers a ‘difference’ in the buying experience for customers as compared to local outlets with lower operational costs.

Vimal, the flagship textile brand of Mukesh Ambani led Reliance Industries, is in plans to add 38 stores to its retail network in this fiscal. Anand Prakash, RIL President (Textile Division) reportedly said, “We have 380 stores in the country and plan to increase this by at least 10% in FY 2010-11.” He added that the Company would continue to support franchisees to enhance the Vimal bran Read More

International tie-ups & JV’s

THE GAP sends team for India retail talks

The Gap has sent a business development team to renew talks on finding a local partner to enter specialty lifestyle retailing in India. The team had meetings with a number of retailers including Reliance Retail and Madura Garments. However, the talks are reportedly still at an exploratory level and any closure will take up quite some time.

Tirupur exporter acquires Swiss leisurewear brand Switcher

Prem Durai Exports Private Limited, the export arm of PGC Industries and Group, Tirupur, has acquired a controlling stake in Swiss leisurewear Switcher Holdings, to which it has been a supplier for over twenty years. Switcher Holdings owns brands such as Switcher, Respect and Whale. D. Prem, Chairman, PGC Industries and Group, said in a press statement that the new development would benefit both parties. It would enable PGC to gain a strong foothold in European markets such as Germany, Switzerland and Austria and Switcher Group would gain from lower costs in various activities such as warehousing, IT, logistics, product design and development. Aadith D. Vikram, Vice-Chairman and Managing Director of the company, said that as Switcher was a well-known player with operations in Germany, France, Aust Read More

Jubilant Food keen on partnering global brands

Jubilant FoodWorks Ltd, earlier known as Domino's Pizza India Ltd, is in talks with many global brands to bring them into the country. It is being speculated that it will be a partner for the US coffee chain Starbucks' entry in India. The company runs fast food chain Domino's Pizza in India with over 320 stores. It plans to add 70 Dominos stores this fiscal.

Next, Gap, M&S in major sweatshop scandal with Indian suppliers

An investigation conducted by the Observer, UK has exposed vendors of British high street brands Next, Gap and Marks & Spencer (M&S). The report contends that workers at the vendors’ premises were working up to 16 hours a day. M&S, Gap and Next have all launched their own inquiries into the abuses and pledged to end the practice of excessive overtime, which is in flagrant breach of the industry's ethical trading initiative (ETI) and Indian labour law. Workers did come forward to claim that they were paid at half the legal overtime rate. Gap, which uses the same factory as Next, confirmed it had found wage violations and gave its supplier a deadline until Saturday midnight to repay workers who lost out. Workers have reported that those who refuse to work the extra hours have been told to find new jobs or were fired. The offenders had offered an apology and agreed to reinstate workers who lost their jobs. They are making amends. Several of th Read More

Government & Legal

UK Gov’t body to adjudicate in supermarket/supplier disputes

The UK Government has taken a step forward in establishing an adjudicating body for disputes between supermarkets, suppliers and farmers. The Groceries Code Adjudicator (GCA) would investigate disputes falling under the Groceries Supply Code of Practice (GSCOP). The Department for Business will bring forward new legislation in order to set up the GCA, which will reside within the Office of Fair Trading (OFT). The GCA will have the power to receive complaints about the way supermarkets interact with their primary suppliers from anyone in the supply chain at home or overseas, and deal with them anonymously. This includes farmers who may not directly supply the large supermarkets.

Although non-governmental organisations, trade associations and other organisations cannot lodge complaints directly, they still have a useful role to play in offering advice and assistance to their stakeholders.

New Gov’t rule might affect Bharti Wal-Mart partnership

The partnership between the world’s largest retailer Wal-Mart Stores Inc and billionaire Sunil Bharti Mittal’s Bharti group may be subject to restructuring if the controversial new rule governing wholesale trade is implemented by the government. The new rule on wholesale trading, introduced by the government in April, restrains transactions between group companies, wherein a wholesale trading company cannot sell more than 25% of its sales to a group company and that amount should also be only for internal use. Raj Jain, Bharti Wal-Mart CEO, said that the clarification from the government has been sought, failing which the changes may be necessary in the corporate structure. Bharti Walmart Private Ltd is an equal equity JV between Wal-Mart and Bharti group, which runs a cash and carry or wholesale Read More

Indian retailers abroad

Dabur acquires Turkish personal care firm Hobi Kozemtik
Pantaloon considers launching own labels outside India
Amira Foods in distribution deal with Dubai chain

Shifting Indian retail abroad may be a big step. However, there are many other ways in which the Indian footprint can go overseas. Many Indian brand marketers are actively acquiring brands abroad or are planning to expand the geographic spread of its existing brands overseas. Three such recent examples are given below. Dabur International Ltd, the overseas subsidiary of Dabur India Ltd has acquired a 100% stake in three firms of Hobi Kozemtik Group, a Turkish personal care products company, for $69mil. Hobi Kozmetik is a market leader in the hair gel category with 35% market share and its products are sold across 35 countries, including West Asia and North Africa. The transaction for the acquisition is likely to be completed by the third quarter of the 2010-11 financial year.

Milestones

Bharti WalMart opens third store in Jallandhar

Bharti WalMart Pvt Ltd has opened its third wholesale store in the country. The latest Best Price Modern Whole sale store was rolled out in Jalandhar, the third city in Punjab where Bharti WalMart has its cash-and-carry stores. Bharti WalMart made its debut in May 2009 by opening its first store in Amritsar. The firm plans 10 to 15 wholesale stores in the next three years.

Reports

Study highlights importance of music in retail sales

An interesting study on the influence of music on shoppers has been conducted by scientists at a Stuttgart Medical college lead by Prof Eberhard Wuest. The report’s conclusion is that music can be an important influence in the shopping experience. In fact, shoppers remember better what they hear than what they see. The study found that 70% of people remembered the music as opposed to only 3% for visual advertising elements.

The other positive effects of music on shoppers include the following:

Turn stressful shopping experience to a relaxed one

Future Group launches new commodity brand Ekta

Kishore Biyani’s Future Group has launched the new commodity brand Ektaa, under which, the company will roll out rice, spices, cereals, flour, pickles, regional snacks, and other products in a phased manner.

Ashni Biyani, director, Future Ideas, Future Group said, “The idea of creating ‘Ektaa' as a brand is to bring all communities together and celebrate the diverse culinary tastes of India. While there are food products and brands that cater to the tastes of each Indian community, we found that most of these are limited to the local or native market. So, even if you are Maharashtrian or a Bengali living in Delhi, you will still find your preferred food items at the local Food Bazaar.”

Godrej decides against licensing dormant brands to retailers

Godrej Consumer Products Ltd has decided against licensing out the dormant soap brands Evita and Ganga to retailers. The initial plan was to activate the dormant brands with a new business model. This included selling-out some of the brands. However, the Company now plans to focus on its existing portfolio and the international markets with its spate of acquisitions.

A. Mahendran, MD, GCPL said that some of the household insecticide brands in its subsidiary company Godrej Household Products Ltd, such as Banish in Tamil Nadu and Jet in Andhra Pradesh, will continue to have a regional presence unlike the pan-India brands such as Hit and Good Knight. In Q1 ended in June, GCPL has reported a 67% increase in net profit at `Rs116cr. Net sales were h Read More

Barista to get screens post tie-up with LiveMedia

Barista Coffee Company Ltd announced a strategic alliance with a digital destination firm LiveMedia. As part of the tie-up, 200 Barista Lavazza outlets across India will have LiveMedia screens on their premises.

Rajan Mehta, Chief Executive Officer of LiveMedia said, “We will be developing specific content to the tastes of the youth, upwardly mobile people and young professionals who spend time at coffee shops.”

Sanjay Coutinho, Director and Chief Executive Officer, Barista Coffee Company Ltd said, “We believe that the LiveMedia screens will add significantly to the overall experience of our guests.”

Market

Realty

Kishor Biyani picking up India’s top managerial talent

The Future Group head, Kishore Biyani, has been making special efforts to attract talent and get the pick-of-the-lot. The latest addition is V Vaidyanathan, who has left ICICI after 10 years to build the financial services business of the Future Group. In the industry circles this is being viewed as a managerial coup as Vidyanathan is a highly rated catch. In 2010, as yet, seven managers of high standing have joined the group.

Future Group CEO, Kishore Biyani makes no bones about his efforts: “Expect more big signings…we have identified another five to seven top people in the country, and we are working on getting them…You take care of Lakshmi (wealth), Saraswati (intellectual growth) and Durga (emotional well-being) for them, the rest, like productivity and commitment, is sure to follow.”

Clearly, his package is so attractive and the work so challenging that it is difficult for the most to refuse. The magic words that do the trick is ‘intra-preneursip’ or making employees co-owners. Vaidyanathan is likely to pick up a stake in the financial services business he will be spearheading. Another who was pulled in by Biyani’s ‘intra-preneur’ pitch was R Radhakrishnan, the ex-CEO of Reliance Retail’s hypermarket business, who was involved in setting up the Reliance Fresh format and had earlier worked with Foodworld Supermarkets and Hindustan Unilever. He heads Future Fresh Foods, where he has a stake, the exact amount of which is being worked out. Mark Ladham, president of the home business, Future Group, was roped-in in a similar manner. Vibha Paul Rishi, former PepsiCo high-flyer joined the Future Group this March, as group strategy & consumer director, and leads marketing, communication and customer strategy across group companies.

People

Noel top contender for Ratan’s chair

The hunt for the new Chairman of the Tata Group is hotting up. The one name in the forefront is that of Noel Tata. Last month, Noel was appointed as non-executive chairman at Tata Investment Corp, a finance company with a portfolio of investments, including Tata Mutual Fund. More recently he joined in the same position, Tata International, a leather and engineering trading company with presence in 10 African nations, which handles the group's overseas trade. This is being seen as a move to expose Noel to diverse business. Noel Tata grew the retail business Trent more than 10-fold in less than a decade, from a single store company in 1998, to over 90 stores across retail formats that include Westside, Star Bazaar, Landmark, Fashion Yatra, Sisley and Zara. The retailer’s consolidated revenue grew to Rs1,137cr in 2009-10, from Rs8cr in 1998-99. What could work in favour of Noel Tata may be that he has the support of Shapoorji Pallonji Mistry family which he is married into. The Mistrys are the biggest shareholders in Tata Sons, the group’s holding company. But there has been no official word on it either.

Reheja Corp appoints new CEO for Hypercity

Mark Ashman has been appointed by K Raheja Corp as CEO of Hypercity Retail (India) Ltd. Ashman was previously CEO of Marks & Spencer Reliance India and was instrumental in the rollout of Marks & Spencer’s retail strategy in India. He will replace Andrew Levermore.

B.S Nagesh, Vice Chairman of Hypercity Retail (I) Ltd. said, “I am delighted to welcome Mark Ashman to our leadership team. His vast retail experience and understanding of Indian consumer will enable Hypercity to remain a leading hypermarket company in India. Mark is joining us at an exciting time as we are expanding into different parts of the country to keep pace with the needs of today’s consumer”.