Future Group’s founder and CEO Kishore Biyani says brands such as Nilgiris, Easyday and Heritage are today part of its network of small stores that it is building to increase its presence in food and grocery. The plan is to take its small-store network from 1,200 now to 10,000 in the coming years, he says.
Sources at the Godrej group admit that Nature’s Basket was “non-core” and that it made perfect sense to exit amid heightened activity from online and offline players. Two weeks ago, Flipkart brought its online grocery store 'Supermart' to Mumbai, while Amazon has been pushing its e-store Amazon Pantry and is also eyeing an omni-channel play in grocery with its acquisition of More supermarkets (along with PE player Samara) from the Aditya Birla group.
“Priorities for each group may be different, prompting them to view the future of a business in a different light versus their competitors,” says Arvind Singhal, chairman, Technopak. “Food and grocery retail also requires scale, since margins are thin. So it can be a challenge if you lack scale,” he says.
Dhanraj Bhagat, partner, Grant Thornton India, says net profit margins in food and grocery retail can be as low as 2-3 per cent, pushing players to increase their volume of business with the help of discounts, promotions and offers. “While margins in gourmet food retail are a little higher, footfalls are not enough to sustain the business. Plus, e-tailers and some of the bigger grocery chains are also stocking niche products today. Even high-end traditional trade outlets are targeting upscale consumers with imported products. So it can be a tough for those specialising in gourmet food retail,” he says.
Nature’s Basket was known largely for its niche and imported products and attracted well-heeled consumers in Mumbai, Pune and Bengaluru, where its stores — 36 of them — were located.
The chain is expected to give Spencer’s Retail (from the RP-Sanjiv Goenka group) a foothold in the west and is likely to see a change in its assortment in the coming months.