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Birla Retail eyes 18-fold sales growth

February 11, 2009 11:16 IST

Aditya Birla Retail, a venture of the A V Birla Group, aims to boost its sales 18-fold in the next five years by opening new stores and adding more private labels.

The retailer, which runs a supermarket chain under the More brand, is targeting annual sales of $4.5 billion (Rs 22,000 crore or Rs 220 billion) by March 2014 from Rs 1,200 crore (Rs 12 billion) in the current financial year. The retailer clocked sales of Rs 500 in the previous year.

The A V Birla group, which started its retail operation with the acquisition of South India-based Trinethra Super Retail in January 2007, plans to enter the milk and dairy products business with its own private labels. At present, the retailer sells over 300 private labels in cereals, processed foods, personal care and detergents, among others.

In 2007, the company had talked about a Rs 9,000 crore (Rs 90 billion) investment plan.

"We have primarily invested in packaging, R&D and supply chain systems,'' said Thomas Varghese, chief executive of Aditya Birla Retail.

He declined to give details of future investment plans to achieve the target. "We would look at fund-raising from the public at the right time when business achieves a certain value level," he said.

The company wants to ramp up its supermarket chain to 2,100 stores by 2013 from 670 now. Besides, it also wants to add 12 hypermarkets of around 50,000 square feet by March 2010. Currently it has two hypermarkets.

Retailers including Kishore Biyani, Spencers and Vishal Retail are adding more private labels to boost margins. Private labels in food and groceries can help retailers margin of more than 25 per cent.

"It is a margin-building exercise and retailers are still experimenting with private labels in the FMCG segment. This model is yet to be established and a lot more learning has to be made,'' said Pinakiranjan Mishra of business consultancy Ernst & Young.

Though Aditya Birla Retail has tied up with vendors to manufacture the products, the retailer controls some of the elements to ensure the quality and price. "In many cases, we give the packaging materials to vendors. Where we think we need to control the quality of input, we control it,'' Varghese said.

Last year, the company bought forward contracts in labsa, a chemical used in detergents, when its prices went up to control escalating costs. "We went in forward investments to control costs like any other FMCG company,'' a company official said.

Its private labels include detergents, dishwash bars under the brand '110 %', shampoos, soaps under 'Enriche', ketchups, jams, honey, carbonated drinks, chips, cookies under the brand 'Fasters', beverages under 'more' among others.  "You should have the understanding of both retail and FMCG to run this business," said Farida K, assistant vice president and private label branch head, ABRL.

Indian retailers such as Reliance Retail, Pantaloon, Spencer's have either launched FMCG products such as soaps, detergents, cosmetics and non-FMCG products or in the process of launching these products.

Kishore Biyani's Future group recently announced plans to become a Rs 10,000-crore (Rs 100-billion) consumer products major in the next four years by launching new brands in the fast moving consumer goods, consumer durables, electronics and apparel space in anticipation of down-trading slows and also to take advantage of a slump in commodity prices.

The Future Group has brands such as John Miller, Bare, DJ&C, Indigo Nation in apparels and Tasty Treat, Fresh n Pure in the FMCG category and Dreamline in general merchandise, Sensei and Koryo in consumer durables and electronics category among others. The group expects to earn at least 30 per cent of its revenues from its private labels in the next four years, Biyani said.

 

Raghavendra Kamath & Abhineet Kumar in Mumbai
Source: source
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