We have the cash flow to make growth happen: Kishore Biyani
Ajita Shashidhar December 14, 2017
King of retail, Kishore Biyani, recently announced his retail 3.0 plan, where he talked about making his retail empire worth $1 trillion in revenues. The next round of growth, according to Biyani, will come from integration of his physical stores with a high level of personalisation through predictive and analytical technologies. To begin with, the plan is to set up 10,000 EasyDay tech enabled stores by 2022. While these stores would initially be a one-stop destination for the grocery needs of consumers who would be encouraged to become members of the store, it would eventually serve as a market place and give them access to the retail company's entire inventory.
While this ambitious retail strategy has grabbed headlines, Biyani, behind the scenes is aggressively scaling up his Rs 2000-odd crore FMCG (Future Consumer) business. Like his retail business, he has set an ambitious target of scaling up Future Consumer into a Rs 20,000 crore entity by 2021. Will he be able to do it? Will he be able to enter into the bastion of giants such as HUL, Nestle and Godrej? Biyani says that he is a 'new-age FMCG company with a difference.
In a conversation with Ajita Shashidhar, Kishore Biyani, Chairman, Future Group, gets into details of his vision for his FMCG business.
BT: You say that Future Consumer is a 'new-age FMCG company with a difference'. How are you different?
Biyani: We are building a wholesale distribution network - Aadhar Wholesale. We are opening cash and carry stores. We have more than 12 cash and carry stores already. There is a team in place, ordering is done on mobile phone, accounting is on mobile phones.
Earlier, we were tying up with Bookers but that JV didn't happen because Bookers merged with Tesco. We have created a network in Rajasthan, Punjab and Gujarat, and we are making kiranas members and we are making them shop. We are already supplying to PDA stores in Rajasthan. We have 60 Aadhar Open stores in a population of less 100,000. We are taking over fair price in a few districts in Andhra.
BT: How do the acquisition of the various retail companies that you have done in the recent past tie up to the overall consumer business story?
Biyani: These acquisitions help in distribution in a way.
BT: Which would be the pillars of growth in your FMCG business?
Biyani: Atta, tea, soap will be our hero categories. We sell 5 crore units of soap (body-wash) in our stores alone, which is huge.
Dairy is going to be a big business. We are launching cold coffee and we will sell 100,000 bottles a day. We are already into ghee and yogurt. In bakery, we have a good range, in ketchups and dips we have a good range. In centre of plate we are the best. In processed food we are launching new items. Again we are strong in home care. Our brand, Clean Mate, does very well. We are also getting into personal care and fabric care.
BT: How do you get the kirana stores to buy at your cash and carry?
Biyani: Woh ho jayega (That will happen). All products may not sell but quite a few will sell. We will do only wholesale cash and carry and not through distributors. The distributor route is very expensive. We are looking at a low cost route.
BT: What kind of a reach are you looking at?
Biyani: That's not a kick of life. I am not in a hurry to reach out to the nook and corner of the country.
BT: You seem to be back into the growth mode?
Biyani: We are back into the growth mode. In yesteryear, we were here and there, scattered. This time we are only doing what we want to do with lot of insights, lot of data, full stated strategy and a balance sheet in place.
We will be in growth mode, but calculated growth. We have every ingredient to make growth happen. It's not with debt or equity. We have the cash flow to make growth happen.
BT: Your consumer business seems to be more inclined towards the urban markets. Am I right?
Biyani: We are building the consumer business with majorly the urban audience in mind. The cost of distribution in rural is too high. We don't want to get into areas where the cost of distribution is too high.
Biyani: Nobody has as many stock keeping units (SKUs) as we have. ITC is the only one who is trying it.
BT: What are the lessons that you have learnt from the past?
Biyani: Last time we didn't have such a growth story, we didn't have so many platforms. Today, we have a robust tech platform. We understand food and technology as a business, we have customers, data and a very strong balance sheet.
BT: How big is the fashion business?
Biyani: In terms of number of garments, we are aiming at 30 crore garments by next year. This will take us to top 10 in the world. This year we are at 20 crore.
We are becoming strong in footwear. If we compare our portfolio in footwear, we may be larger than the rest. We also have our electronic business. We have our brand Koryo there. By next year it should be a Rs 500 crore brand.
BT: What kind of challenges do you expect from the bigger brands?
Biyani: We have our own business, our own customers and brands. We will be doing strategic alliances with other brands, as we believe we can give them distribution.
BT: People tend to compare you and the D'mart founder, Radhakrishna Damani. What's your take?
Biyani: We shouldn't be compared with DMart at all. They are a low cost operator, limited SKUs, they do it very well. We are very complex. That's our speciality, as you can't be the same. This is a long term game and India needs many players.
BT: You have charted out a rather ambitious growth story. Don't you see the debt story repeating itself?
Biyani: It's for all of you to comment. The debt story started because we got into NBFC. The NBFC business is to borrow and give, to some extent, we were victim of that.