“Acquisition offers scope for business expansion”

The innovative localised retail concept by Wadhwan Food Retail and its distinct shop formats…
Wadhawan Food Retail Pvt Ltd (WFRL) launched its maiden store in March 2006 and has now marked its presence in around 96 locations. We have a strong presence in the convenience store format - mainly through acquisitions and partly through our own outlets that we have created. And currently, we operate more than 200 outlets.
We have a unique and innovative retail concept, purely based on the needs of Indian states; with extreme service orientation; localisation and thus sell quality products at fair prices. By focussing on the needs of Indian states, we are adopting practices and employing resources that are best-known internationally. The store has been designed by a UK-based designer.
.Our business is powered by over 4,000 personnel and years of national & international retail experience. It is modelled on lines with leading food and grocery retailers around the world. We are planning to launch over 150 stores in the west and east of India by the end of the 2008-09 fiscal and over 1,500 stores across the country in the next four to five years. This means more shopping options for the customers at every conceivable location that is close to home. At Spinach, our stores have three distinct formats that include; large-format stores (5000 - 7000 sq ft) called ‘Spinach Super’, medium-sized stores (2500 - 3500 sq ft) known as ‘Spinach Local’ and small-sized stores (1000-1200 sq ft) namely ‘Spinach Express’. And we see tremendous growth potential in this market.


On WFRL’s branding strategy…
In India, we have a number of brands starting from Spinach in the west & east of India and Sabka bazaar in the west. We acquired Sangam from HUL about a year ago and in southern India, the company started ‘Smart Retail’ - a chain of F&G stores located in Bangalore. For us, price and convenience to the customers are the prime factors that we wish to offer throughout our stores. Currently, we are in the process of developing a brand strategy through which, we would concentrate either on a single brand or would continue to invest money in building these independent brands. In addition, the company has a management contract with the Maratha, a chain of co-operative stores, to operate its stores in Maharashtra.
With the current acquisitions and collaborations, WFRL today has a presence in three major cities and several other small towns of the country with 200 stores. The stores are positioned as the ‘local community store for daily home needs’ catering to customer needs. These stores are placed within an area of 1.5 to 2 km radius from the locality that offers convenience of shopping for family’s daily need in food & grocery and personal care categories for the households. The stores offer convenience of buying food & grocery, fruits & vegetables, bakery items, home & personal care items, house ware, packed meat and poultry, fish and branded as well as unbranded grocery items and diary products under one roof. Over the next four years, WFRL plans to operate 1,500 stores under these brands across India with an investment of Rs 1,500 crore.

The market size and future of food retail industry in India…
Though these numbers and statistics keep on changing, all we can tell is that the organised food & grocery industry is about 5-6 per cent of the total
$ 350 billion industry and there is a tremendous scope for us to expand. Today, the consumers are very much aware about what they purchase and thus, more and more retail outlets in the food & grocery space are established in the market. The convenience of people to go to these ‘convenient’ stores for their daily shopping is a major opportunity for the food retail industry to tap.
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Your views on the retail giants acquiring small firms…
Acquisition offers both large organisation and small retailers a scope to expand their business activities. For a large organisation, acquisition provides an established brand, local knowledge & preferences, and established footfalls to generate sales. For a small retailer, acquisition provides opportunity to improve and increase existing categories, manpower efficiencies, sourcing technology and capital to expand further. There is a rush of entrepreneurs entering the food & grocery space in the convenient shop format without realising the fact that this entire business has its own challenges, right from supply chain management and logistics. Unlike other business, this is not a cash breaking business; one has to invest and establish credibility in the market. Due to these challenges, many people decided to move away from this business.

The emerging trends in the food retailing industry…
In India, food and grocery retail is in the nascent stage. Consumers’ aspirations are changing and with it the demand for better convenience and quality. They need everything under one umbrella, which is one of the biggest trends that we have observed. People look at prices when it comes to food and grocery, but then that is a universal trend. Thus, some of these trends are obviously encouraging for the business. At the same time, nuclear family and demographic shift would impact the modern food retail that will continue to evolve.

The various challenges facing the industry…
Lack of manpower is a major challenge to the industry. Manpower is in plenty but lacks the required quality and efficiency. We are taking measures to improve the same. One such step is investing in proper training of the personnel, which is essential for Indian retail industry. Supply chain, logistics and realty are a few other areas which need serious attention.

Effect of inflation on the business…
Inflation will come down to a realistic level, and our government is taking necessary steps in overcoming the hurdle.

The flow of FDIs in Indian food retail industry…
FDI in food and grocery space will not be allowed in the next five years, though foreign investors continue technology transfer & franchise understanding,
and invest in logistics & supply chain. It is thus important to build the infrastructure first. Moreover, the big food and grocery retailers in world view the Indian food retail market as ‘not-so-pleasant’ since they face tremendous challenges. So, FDIs for the food retail industry in India could face difficulties for the next
few years.

Increasingly organised food retailers are looking at ‘private labels’ to improve their bottom-line...
It is the proven way to increase the margin in this business. WFRL currently has nearly 10 categories like staples, spices, etc. Under its brand name, we will be introducing approximately five categories in the next 12 months. Private labelling offers a good choice for consumers.

Future growth strategies of WFRL…
This business has an extremely long-term story. There is an efficiency issue that is general. Over the next five years we anticipate to have a significant presence across various formats right from convenient shop formats, supermarkets and hypermarkets. We like to be a significant player in the market. Understanding customer preference and delivering better quality products has always been our focus. We will continue to build our operations with clear focus on efficiency and profitability.

Your outlook for the WFRL…
Outlook for WFRL is extremely robust. We are committed to this business and we will continue to invest in front-end as well as the back-end. Obviously, we want to have a significant presence in the country. WFRL will continue to be one of the largest food and grocery retail players in this country.

There is a rush of entrepreneurs entering the food & grocery space in the convenient shop format without realising the fact that this entire business has its own challenges, right from supply chain management and logistics