Future Group to acquire Foodworld Supermarkets

Kishore Biyani’s Future Group is believed to be in advanced talks to acquire Foodworld Supermarkets – a grocery store chain prevalent in South India.

If the deal bears fruit, this will be Future Group's sixth acquisition. In the second half of 2017, the firm acquired Hypercity from K Raheja to have a more prominent presence in the western market. The firm already owns Globus Retail, H&R Johnson and Exide Industries, among others.

The firm, by this strategy of aggressively adding stores, will be able to multiply its revenue to Rs 75,000-1 lakh crore by 2021. Future Retail is currently present in 253 cities through 930 stores. The firm plans to double the Easy Day store count to 1,000 within the next 18 months instead of focusing on expanding its major retail Big Bazaar stores.

Foodworld was earlier a division of Spencer & Co., but later became a separate firm in 1999. As of now, it is owned by the two-year old merged entity, Arko Enterprises and Health & Glow Retailing. Last fiscal term, the grocery retailer posted a Rs 2.3 crore profit, which they gained from 36 grocery stores and 121 Health & Glow cosmetic and beauty stores.

Future Group to acquire HyperCity

Kishore Biyani led Future Retail Ltd is set to acquire Shoppers Stop Ltd HyperCity for Rs 700 crore. The deal is expected to combine cash and shares of Future Retail to be given to shareholders of HyperCity, a subsidiary of the listed Shoppers Stop.

HyperCity, a network of high-end grocery and general merchandise retail chain, has yet to turn profitable. It operates 19 stores over a 1.34 million square feet area, according to an investor presentation by Shoppers Stop for the quarter ended June 2017. The company made losses worth Rs 84.73 crore in FY16-17 on revenues of Rs 1,154.57 crore, as per annual report data.

HyperCity also has high debt, worth nearly Rs 400 crore, even as its equity remains low at Rs 11.45 crore, according to data from its latest annual report for FY16-17. However, the company might transfer a part of this debt to Future Group with this sale.

Meanwhile, Future Retail, that owns four major retail brands, will find HyperCity sit somewhere between its existing Big Bazaar departmental store network and Foodhall, a premium upscale gourmet store. It is unclear how HyperCity will be integrated in Future Retail’s clearly defined networks. Big Bazaar has 235 stores in India which have been undergoing an upgrade from a go-to destination for discounts to a lifestyle departmental store.

Future Retail to merge with Bharti Retail

Kishore Biyani Future Retail Ltd and Bharti Retail Ltd have decided to combine their retail operations to create Rs 15000 crore companies in a move that accelerates the consolidation of India’s organized retail trade. Bharti Retail will get a 10% stake in the combined entity. Future Retail is valued at Rs 5000 crore currently.

The combined company will be demerged into two companies one which will be the front end will retain the name Future Retail and will have 570 stores and a presence in multiple retail formats across 243 cities. The second will be back end, investments and Infrastructure Company and will be listed separately as Future Enterprises Ltd.

Bharti Retail has 203 Easy Day stores currently which generates close to Rs 2000 crore in revenues whereas Future Retail has 300 stores and revenues to close to Rs 13000 crore. Bharti Easy Day retail brand will be retained. Future retail has about Rs 1200 crore debt and Future infrastructure has close to Rs 3500 crore of debt in the books.

The company is looking to have 4000 supermarket or small format stores in India by 2021. Currently it has close to 450 small stores. Shareholders of both Bharti Retail and Future Retail would hold shares in the two new companies. Future retail operates around 350 stores in different parts of the country spread over 11 million feet of retail space. Bharti retail currently operates a network of over stores in multiple formats across 114 cities.

Future Group acquires Nilgiris

Nilgiris is a supermarket chain in South India. It is also one of the oldest supermarket chains in India with origins dating back to 1905 and hence its products are sold under the brand name of ‘Nilgiris 1905’. Unlike all other supermarkets and grocery shops in India, Nilgiris sells its own products among other brands. Kishore Biyani Future Group acquires the iconic brand. Future Consumer Enterprise Ltd., the food and FMCG arm of the Future Group, paid around Rs.300 crore for the acquisition.

Nilgiris operates a franchisee operated convenience store chain with 140 stores in key metros across the four states. Private equity firm Actis had bought 67 percent stake in Nilgiris in 2006. Apart from a wide assortment of products sold through its convenience store chain, Nilgiris also owns a portfolio brands in dairy, bakery, chocolates, and staples along with their manufacturing facilities in Bengaluru.

Bangalore based Nilgiris is an iconic brand that enjoys wide household recall in the southern states of Karnataka, Tamil Nadu, Andhra Pradesh, and Kerala. This acquisition is synergistic as it enables strengthening and expanding of convenience stores through franchise model is an asset light model. It brings in new manufacturing capabilities and brands within the company as well.

Existing portfolio of brands of FCEL including Sunkist, Tasty Treat, Golden Harvest, Premium Harvest, Sach Ektaa, CleanMate, and CareMate, will be channelized through Nilgiris store network. It operates 8 distribution centres along with a fleet of vehicles, including refrigerated vehicles that cater to the supply of its own dairy, bakery, and chocolates brands to its network of stores. FCEL is a part of Future group that operates modern retail network in 102 cities and 40 rural locations through retail brands like Big Bazaar, Central, Foodhall, Brand Factory, among others as well as various consumer goods, logistics networks and infrastructure for the consumption sector in India. 

Future Group and Amazon Partnership

From being dismissive about the potential of e-commerce in India to joining hands with the sector, leading ‘brick and mortar’ retailing entities seem to have had a chance of thinking on the former. A week after Future group Kishore Biyani alleged that online retailers were indulging in predatory pricing, the company announced a partnership with Amazon India.

The two companies will jointly sell goods over the internet amid growing friction between online and offline retailers over heavy discounting. Future group will sell more than 45 own labels of apparel, followed by in-house brands in the home, electronics and food categories, while the US headquartered company will handle order fulfillment and customer service for the merchandise on its portal. Both firms will also develop a new line of products across categories to be exclusively sold at Amazon and Future Group’s retail stores.

In its home market, Amazon had similar alliances with retailers such as Target Corp and Toys R US in the past decade though both sourced over time once the online seller gained scale and attracted other large brands. Following the India deal, Future Group’s four dozen own brands such as Lee Cooper, John Miller and Indigo nation will be taken off from online marketplaces where they are currently being sold.

It is also reported that Amazon is planning to open its first brick and mortar store in New York. The company main rivals in India are Flipkart, Snapdeal and other online stores. In the offline market, just three companies – Aditya Birla Madura Garments, Arvind Brands and Future Group either own or sell more than two dozen brands each, thus becoming the preferred options for any online player looking to partner retailers.

Industry insiders also said the Indian retailers move reflects a bid to expand into new distribution channels such as e-commerce in the search of growth. Last month, Snapdeal agreed to create Croma Flagship store on its e-commerce portal to sell electronics items including mobiles, tablets, and laptops.