Private Lables would dominate 50 % of Indian Retail

Organised retail is on the threshold of a boom in India. But as companies line up to grab a bigger and bigger slice of the retail pie, another battle is likely to change the face of the industry — the one between the manufacturer brands and the retail chains’ private label brands, which are far from being just cheap generics. Worldwide experience shows that as retailers become more powerful, they have increasingly focused on their own brands at the expense of manufacturer brands.

Nirmalya Kumar, Professor of Marketing and Director of the Aditya Birla India Centre, London Business School, and co-author of Private Label Strategy, speaks to Govindkrishna Seshan on the new strategies for private labels that retailers are using and the challenges brand manufacturers face to develop an effective response. Kumar says private label brands, which occupy less than 5 per cent of the market in India now, are likely to corner 50 per cent of the market as the retail space opens up and matures.

He also says the following -

"Retailing in India is still very primitive. At the moment, private labels almost do not exist in the country. They are less than 5 per cent of the retail business and still have a long way to go. But Indian retail is extremely hot and it offers a proposition that can’t be seen anywhere else in the world. Only in China and India can retail chains have as many stores as they have in the US. In no other country can one imagine companies having 5,000-6,000 stores of their own.

Here’s a little calculation: in a few years, most retail chains will have close to 5,000 stores in India. A profit of, say, Rs 5 lakh a store a month would mean a profit of Rs 250 crore. Ten such companies would mean profits of Rs 2,500 crore with their combined turnover being more than Rs 25,000 crore.

In the next 20 years, the richest Indian or one of the top three richest people in India will surely be a retailer. Private labels will have a huge role to play in this. As much as 50 per cent of Indian retail will be occupied by private labels. The question is not whether this will happen, but when? If the government opens up retail, we would see it happen within the next 10 or 15 years.

www.relianceretail.com to go live...

Reliance Retail is readying itself to take the online route as it unfurls major plans for its e-commerce business. According to sources, the Mukesh Ambani-owned retail venture, has already set up a separate team to kick-start an online retail channel to go alongside its physical stores. There are plans to set up depots at various locations which will serve as a delivery point once the orders are placed through the internet.

Industry observers say that increasingly, retail bigwigs will strengthen their online presence as they witness real estate pressures and growth in broadband penetration in the country. When contacted, an RIL spokesperson declined to comment. Sources confirming the plan, however, told ET, “In the next 2-3 years, a significant 5-6% of Reliance Retail’s overall revenues will be generated through the e-commerce network.” The company will gradually use the e-commerce platform to link its front-end retail with the back end logistics.

“The e-commerce business will thrive on a two-pronged strategy, B2B as well as B2C. It will also help the company strengthen its logistics network,” a source said. Industry experts say that with the organised retail pie getting bigger, e-commerce will become an important part of business strategies. “e-commerce will become a significant part of the overall format mix for retailers.

For Reliance Retail it makes a lot of sense to introduce an e-commerce arm as they have the advantage of physical stores already being present. Having physical delivery stores always add to the convenience and success of the online business model for retailers,” says Arvind Singhal, chairman of Technopak Advisors.

Reliance Retail is also looking at having co-branded credit cards and consumer financing schemes, which will enable the company to further strengthen its e-commerce venture. For the same, it has roped in the head of credit card at American Express. Internationally, all the retail giants including Tesco, Wal-Mart and Best Buy have a huge online presence.

Wal-Mart selling a feel-good image

The Beast of Bentonville has finally broken its silence. CEO designate for India Raj Jain on Thursday attempted to set the record straight on a host of controversies surrounding the Wal-Mart-Bharti alliance announced late last year.

In an e-mail to ET, Mr Jain asserted that his company aims at establishing a relationship with the Indian small business community by partnering them and helping them lower costs and increase profits.

He also traced Wal-Mart’s “strong history’’ with India, stating that the company sources goods worth over $600 million directly from suppliers in India. In a bid to appease critics, he also held out the carrot of increasing direct sourcing from the region.

After months of silence, his e-mail comes at a time when the Bharti-Wal-Mart joint venture is expected to be announced finally. But more importantly, it comes on the eve of anti-Wal-Mart activist Wade Rathke’s India visit, which ET reported on April 14. Mr Rathke, chief organiser of the Association of Community Organisations for Reform Now, is famous in the US for spoiling Wal-Mart’s party. He is known to have mobilised public opinion against the retail behemoth in South Korea and Germany, the two markets from where Wal-Mart subsequently withdrew, said a source.

Mr Jain said there have been a number of media reports about Wal-Mart that do not reflect the facts, and “for this very reason I thought I should proactively send you certain information about Wal-Mart”. First on Mr Jain’s list is clearing the anti-mom-and-pop-store image the retail giant has acquired, especially in view of the protests in India following the announcement of the Bharti-Wal-Mart JV.

He has clarified that the JV for wholesale cash-and-carry business will sell quality goods to retailers, including small store owners. Not only that, the venture’s wholesale supply chain would link farmers and small manufacturers, thus minimising wastage of fresh foods and vegetables and helping control inflation, Mr Jain says in his e-mail. He also clarified that the front-end retail venture would be a separate wholly-owned and managed Bharti venture.

Infamous for its labour policies? No way. The missive would have everyone know that Wal-Mart is the largest employer in the US and its jobs are “sought-after because of the investment we make in our associates and opportunities we provide them”. In fact, Wal-Mart’s average hourly wages in the US are more than double the federal minimum wage.

Reliance Retail off vertical limits

Call it the Wal-Mart effect. In the first gear shift since its launch last year, Reliance Retail is overhauling its management structure and changing operational heads.

From an industry vertical structure, the company has decided to move towards a store format-based structure with effect from May 1 to expedite the rollout of its ambitious retail venture and make it more accountable with separate profit and loss accounts.

Senior operational and functional chiefs such as Raghu Pillai (head of store operations), Gunender Kapur (head of Reliance Fresh), Sanjeev Asthana (head of agri) and Bijay Sahoo (head of HR) are likely to be moved up to the newly-created central leadership team, which will supervise the retail activities of Reliance Retail.

A new set of operation heads will manage the various retail formats. Bhavdeep Singh will take over as head of Reliance Fresh from Mr Kapur while S Radhakrishna will head hypermarkets, likely to be named Reliance Hyper Marts. Ajay Baijal will head Reliance Digital, the consumer electronics and IT store. The heads of other speciality chains will be decided at the time of their launch.

Another critical function of the retail industry—human resources—is also changing hands with Uday Bhende taking over as head from Mr Sahoo.

All format heads will report directly to Reliance Industries chairman and managing director Mukesh Ambani, said a source.

Mr Singh has been hired recently from the US, where he was working in a retail chain while Mr Bhende has been roped in from Siemens. Mr Radhakrishna joined Reliance Retail from retail chain Spencer’s last year and Mr Baijal was poached from Reliance Communications as a replacement for Rajeev Karwal.

Reliance’s new structure is a clear departure from its earlier one, which was managed as verticals, each under a CEO, with the front-end divorced from the back-end. “The structure was centralised and the merchandise and sourcing teams were independent from the actual retail business. That may end now,’’ said a source.

Veteran Reliance watchers compare this considerable change in the management structure to a similar exercise undertaken by the then Mukesh Ambani-controlled Reliance Infocomm, after the failure of the Dhirubhai Ambani Pioneer scheme.

Despite repeated attempts, the Reliance Retail spokesperson could not be contacted. While some professionals in Reliance Retail’s central leadership team are likely to play an active role, there will be some who will get sidelined in the process. While it’s not clear as to what prompted the development, analysts say growing urgency to usher in effective supply-chain co-ordination could have triggered the move.

“With each vertical working across more than one format, the company may have foreseen the problems it would lead to as the retail venture rolls out nationally,” said a source close to Reliance Retail.

Some call it a “hit-and-trial” approach to arrive at the right combination so as to gear up for the mega competition when the likes of Wal-Mart and Tesco enter the market.

Reliance Fresh just opened its 111th outlet, and the first Reliance hypermarket is likely to be set up in Ahmedabad next month while the first digital store is likely to open in Delhi on April 19.

'It is easy to achieve success; it is difficult to maintain it'

Future Group CEO Kishore Biyani had a two-hour breakfast meeting with ET earlier this week, in which he shared the logic behind the retail group’s new makeover. Excerpts from the interview:

You seem to have segregated mature and new businesses. Why?

We are immunising mature businesses from the risks we face in new businesses. So we can form a clear P&L account of every retail brand. Today, our formats have become so big, we are competing with ourselves. Earlier, products and operations worked together. I was accountable for everything. But today, growth is so much that somebody else has to concentrate on that growth. Earlier, we were hungry for topline. Now, we are hungry for bottomline growth.

Accountability for the profitability of the lines of businesses lies with one individual now. And profitability of a category lies with the individual handling the product in that category. We have to look at the costs of doing a business. The fact that we have been able to cut costs in the last few months has improved margins. We are getting result oriented.

For somebody who did not think much of processes, isn’t a lot of attention suddenly seems to be going into that area?

Every retail data (even Harvard studies show that) has only 70% accuracy. Therefore, a whole lot of decisions have to be based on gut feeling. Processes do not make a retail business. Human emotions make retail. For instance, if there is some bad news in the morning, or on a gloomy day, sales are at rock-bottom. Processes can’t capture all these things. As a group we believe that demand creates supply, supply does not create demand.

You have to do retail to do processes. I think processes do not allow you to react to a consumer. Processes work when you think everything is constant. But nothing is constant. Consumers are not constant. At 30 years of age a consumer behaves differently from what he will do at 34, assuming he is married or has a kid. Processes are a way to deliver consistently to the consumer.

How do you decide which businesses will be relevant in the long run?

You need businesses outside retail to support the retail business. The margins aren’t enough to support growth. So, for instance, in our real estate business, we get 20% margins, but we have partnered somebody who knows how to run it.

If there is no potential for a business to cross Rs 100 crore in the second year of operations, we are not interested. We developed pharmacy and beauty parlours, but we may not run it ourselves. As a group, fashion will be nearly 40-50% of our businesses and through that we will be able to raise margins by 5-8%.

Looking back, do you think there’s something you would ideally never have taken up, something that didn’t succeed?

I always believe that unless you do it yourself, you will never learn. There are no shortcuts. My biggest mistake was that I made cinemas. Cinema teaches you that although you think you know everything, you really know nothing. Today, all that humility and acceptance come out of doing cinema as a business. It taught me to be dispassionate about what you create. Without the cinema experience, we would never have learnt anything. It is easy to achieve success. It is difficult to maintain it.

Rakesh Biyani has taken over as the retail CEO. Did the group consider getting anybody from outside?

There was an option to bring in an outsider. But even within our organisation, people will move up some day. Bringing in an outsider sometimes does not make sense. We did not want to lose the comfort factor with our senior people. Rakesh has come in through consensus. We are open about everything. The vote went in his favour. Acceptance is important. Continuity is important

Reliance plans 180 outlets in Gujarat

Reliance Retail is all set to capture the food retail market in Gujarat by setting up over 180 Reliance Fresh stores in 16 cities and towns in the state over the next six months.

Reliance Retail, a wholly owned subsidiary of Mukesh Ambani-led Reliance Industries, will kick its operations in western India by launching nine Reliance Fresh stores in Ahmedabad on Tuesday. "Within a month, the company will open over 45 stores in Vadodara, Surat, Jamnagar, Bhavnagar and Rajkot", RIL president (corporate affairs) Parimal Nathwani said. "The number of stores is expected to cross 180 mark within the next six to seven months after cities like Mehsana, Palanpur, Anand, Nadidad and others are covered", he added.

The first Reliance Fresh store was launched in Banjara Hills in Hyderabad in November last year and till date, the company has started 100 such stores across the country. The stores that will be launched tomorrow will be the first in the entire Western Region and will provide fresh fruits and vegetables, grocery, dairy products and staples, said Gunender Kapur, president and CEO (foods business) Reliance Retail.

Bharti Retail to adopt a different model compared to Walmart's

In a model that will fundamentally differ from its partner Wal-Mart's, Bharti Retail has finalised a three-tier retail format that will provide customers access to a store 1.5 to 7 km from their homes.

Bharti Retail, a subsidiary of the Delhi-based Mittal group, has tied up with Wal-Mart for back-end and logistics support. Foreign direct investment in retail is currently prohibited in all but single-brand retail stores. Based on customer research, Bharti Retail is planning a small-format convenience store within 1.5 km of the customer home, a mid-level store 2-3 km distant and a hypermarket within a 5-7 km drive.

This is in sharp contrast with the Wal-Mart retail model in the US which is dominated by large-format stores on city outskirts. The world's largest retailer has a few small convenience stores in countries like Mexico to cater to neighbourhood demand. Bharti's model, on the other hand, will have more convenience stores and fewer hypermarkets.

"In India, our studies have shown we require a multi-format store structure, and for large store formats we have to consider the challenges posed by our poor infrastructure. The distance has to be convenient for customers to go to the store," explains Bharti Retail President and Chief Operating Officer Vinod Sawhney. The small stores will range from 2,000 sq ft to 5,000 sq ft in size and will mainly stock food, grocery and household items that have a high purchase frequency of seven to eight a month.

The company plans to build a majority of the stores within this format under a model that will franchise existing mom-and-pop stores. The hypermarkets will range from 75,000 sq ft to 1.5 lakh sq ft in size and a mid-level store will be 25,000-50,000 sq ft in size.

The new retail entrant, which hopes to have over 10 million square feet of retail space by 2015, is also considering shop-in-shop formats (under which it would rent space to a jewellery or pharmacy chain), and a private label for food, grocery and even consumer electronics.

It is also studying the possibility of introducing free home delivery services and an online format, should customer demand exists.

Reliance to sell electronic goods too

Billionaire Mukesh Ambani's retail venture will soon start selling electronics goods like refrigerators, TVs and computers, even as it prepares to open its 100th fresh food and vegetables outlet in the country.

Reliance Retail, which has spent about Rs 2,000 crore (Rs 20 billion) on real estate acquisitions in the national capital, is likely to open its 100th Reliance Fresh store in New Delhi this week.

Separately, the company also plans to open its first Digital Electronics Store, possibly in the national capital region, for selling TVs, refrigerators and other goods. The outlet would be spread over an area of 50,000 sq ft.

"The 100th store will be opened soon possibly in Delhi or Pune," a Reliance Retail official said, but did not elaborate.

The company has so far opened 99 Reliance Fresh stores, spread over a total carpet area of 2,50,000 sq ft, across cities since its launch in Hyderabad in November last year.

Reliance Retail, whose parent Reliance Industries Ltd has earmarked an investment of Rs 25,000 crore (Rs 250 billion) by 2012 in the retail business, targets a revenue of Rs 90,000 crore (Rs 900 billion) from its various formats like hypermarkets, supermarkets and speciality stores by 2010.

So far, the company has unveiled only fresh food stores, which industry sources say, have been averaging a sale of Rs 3.5 to Rs 4 lakh a day.

The NCR alone has 24 stores that account for over a quarter of its total fresh food business. Reliance Fresh stores sell farm fresh products like vegetables and fruits and dairy products, besides frozen foods, groceries and cutlery.

Outlook on the retail sector for 2007 - FE

2007 will be a year of expansion and growth for the organised retail sector, from both existing and new entrants. The economic outlook for India remains strong, supporting continued growth in incomes and positive demographic shifts. In order to take advantage of this growth, retailers across categories are ramping up their store networks aggressively. With shortening investment cycles, leading retailers are set to embark on aggressive expansion plans over the next two to three years in order to maintain market dominance.

Companies are consolidating their presence in existing locations and moving into smaller Tier II and larger Tier III cities, while regional players are attempting to expand their geographic footprint. Many firms are also attempting to establish a foothold in new sectors, pre-empting their competitors and stealing an advantage.

2007 will also see retailers strengthening operational strategies to differentiate themselves from competition and retain customer loyalty. A key difference between this and earlier investment cycles is the increased focus on developing the supply chain, measures that will benefit the sector as a whole.

While the potential tightening of consumer credit markets has been highlighted as a threat to this growth, other potentially limiting factors include the continued lack of availability of quality retail space, paucity of quality manpower and a need for greater legislative changes, such as uniformity of state-level taxes.

Food and groceries to see strong competition

The three nameplate entries into organised retail - Reliance Retail, the Aditya Birla Group and Bharti Retail (through a 50:50 joint venture (JV) for supply chain and a wholly-owned front-end) with Wal-Mart Stores Inc ('AA'/Stable/'F1+') - have all chosen the food and groceries category as their debut sector. This is due to the easy scalability of network and operations and the substantial opportunity in this space.

This segment has the lowest penetration of organised retail (estimated at 1%), and therefore the highest supply chain inefficiencies. It is also less susceptible to cyclical fluctuations as it follows the basic, more stable demands of consumers. These three retailers have all chosen the "small box" format for their preliminary entry into the sector, using this to establish their supply chain network.

Having established themselves in this sector, these new entrants have plans to enter the hypermarket format as well. Existing retailers, including Subhiksha (discount supermarket), Piramyd (Trumart), Godrej (Nature Fresh), RPG Retail (Spencer's Daily, based in the south), Nilgiris (supermarket, based in the south) and Pantaloon Retail (India) Ltd (Big Bazaar and Food Bazaar), have all announced large investments over the next few years. However, increased competition in this field is unlikely to have a major effect on broad-level operating metrics of existing retailers in the immediate-term, given the low penetration of organised retail.

That said, in larger cities where penetration levels are higher, losses at the store level could result from growing competition and higher operating costs.

However, given the substantial opportunities available in the Tier II and Tier III cities, the full effect of competition will only be felt in the medium- to long-term. Retailers will find it necessary to have at least a limited presence in larger cities despite higher costs, primarily for strategic and brand purposes.

Over the medium term, hypermarkets will have more competition. The Indian market is large enough to support around four to five major players, though survival will depend on retailers' ability to deliver tangible value to the customer and their supply chain efficiencies. Maintaining lean operating levels will become increasingly critical, and are required to manage margins. The longer term could also see a scenario of margins shrinking as growth rates slow.

Supply chain improvements

The supply chain will see substantial investment over the short-term. Reliance has announced plans to invest up to 25% (over Rs 6,000 crore) of its retail investments in improving its supply chain while the JV between Wal-Mart and Bharti Retail is focused solely on supply chain, with the front-end being owned and managed by Bharti to ensure compliance with prevailing regulations. These investments, coupled with those of existing retailers, will result in a marked improvement in the supply chain, facilitating higher efficiency, better inventory management, and lower waste. The food and groceries category, which is one of the most fragmented, will benefit the most from these initiatives, enabling retailers to offer better prices to customers and suppliers alike. With regards to other categories such as durables and apparel, Fitch expects a greater focus on private labels for the purpose of margin enhancement. Another noticeable trend is the focus on improving store-level operations, for example, in visual merchandising and point-of-purchase. These customer-facing developments are designed to improve the retail experience, with the ultimate goal of boosting loyalty and repeat visits.

Real estate pressures to continue

The substantial increase in real estate costs has impacted margin growth for retailers across the board. However, leading players have tried to mitigate the impact by:

• Advance real estate booking at lower prices;

• Revenue sharing pricing with fixed and variable components;

• Negotiating advantageous rates from real estate providers using their "anchor tenant" status.

Retailers must also compete for quality retail space, which remains in relatively short supply.

While many large new retail real estate developments have taken place recently, many of the new malls have been ill-planned, and created with a view to quick profits through sale, rather than long-term sustained revenues through leases. As a result, some of these malls are already witnessing a decline in footfalls. With the creation of 150 million sq ft of retail space, provisionally scheduled for 2010, and with the increased contributions from reputable builders, Fitch anticipates greater availability of quality retail space in the medium-term. However, to meet the current expectations of 12-15% penetration and to support an ongoing growth rate of around 30-35%, the required real estate for the organised sector alone is estimated to be around 400-450 million sq ft. To meet this figure, the sector would need to invest between $8-10 billion, in addition to ongoing expenditure. As a result, we expect the availability of retail space to remain a constraint for retailers, continuing to impact margins in the near term due to the expectation of firm prices in the short- to medium-term.

Acquisitions and expansion

For the first time (barring the small acquisition of Fabmall by Trinethra), the Indian retail sector has also experienced M&A activity over the past six months. New entrants are finding it easier to pay a premium and acquire regional players in order to rapidly scale up their operations and establish a footprint in the sector. Examples include the recently concluded acquisition of Trinethra by the Aditya Birla group and the acquisition of Nilgiris by a private equity fund. Market sources indicate that other regional players could also be looking to exit the market in light of increased competition and the attractive valuations which currently prevail.

It is believed that this activity will intensify in the longer term, once the impact of higher penetration and slower growth rates is felt. In the interim, existing mid-sized players are expanding to gain the maximum footprint possible in the shortest time frame using routes such as the capital markets.

An example can be seen in Vishal Retail which plans to raise Rs 110 crore from its proposed initial public offering (IPO), while Pantaloon Retail (India) Ltd 'F1 (ind)' has raised funds through the sale of equity in its Home Solutions Retail Ltd to private equity funds. Existing retailers are expected to also raise additional debt to finance their expansions, likely to result in higher gearing, partly offset by the higher earnings expected from these investments.

Retailers eye housing stock

In what could become a trend in the booming retail business, Reliance Retail, Future Group and Bharti-WalMart are among leading retail companies that are acquiring housing societies and colonies in Ahmedabad to knock down and build mega-retail stores.

Bharti-WalMart’s proposed retail venture has approached Goyal Park Row Houses, an upscale area west of river Sabarmati, at Rs 33,750 per sq yard, almost double the prevailing price of Rs 15,000 per sq yard.

There are 140 houses in the row, each with an average size of 251 sq yard. The joint venture, therefore, will be paying Rs 119 crore for 35,000 sq yard of land. The society also has a parking lot and a park.

Nearly 4 km away, Reliance Retail has acquired a 6,700-sq-yard plot, Paritosh Bungalow, bordering the commercial Chimanlal Girdhardas (CG) Road. The company is learnt to have paid Rs 37,000 a sq yard, or nearly Rs 25 crore, for the plot 8-10 months ago. The prevailing price along CG Road is Rs 60,000 per sq yard.

Latching on to the trend, real estate developer Navratna Organisers and Developers, a leading construction group in the city, has acquired Panchavati Apartments, an apartment block, along CG Road to build a mall and lease space to retail chains.

Navratna paid Rs 36.60 crore for the 6,000-sq-yard plot. “We will be constructing a 1,25,000-sq-ft mall in that space and leasing it to retailers,” said Pranav Shah, managing director, Navratna, adding that the company had applied to the Ahmedabad Municipal Corporation for a change in land use.

Navratna is also developing a 12,700-sq-yard mall named Kolonnade Centre for Big Bazaar, a part of Kishore Biyani’s Future Group. Shah declined to comment on the size of the deal and the duration of the lease.

Another developer in the city, Agrawal Builders, has acquired a housing complex spread over 28,000 sq yard, about 2 km from Goyal Park, to construct a multiplex and business centre.

Explaining the trend, Gujarat Institute of Housing and Estate Developers President Jaxay Shah said, “The reason for retail companies approaching housing colonies is the scarcity of premium plots in commercial areas and also since old housing colonies would provide a larger floor space index (FSI) for construction. The buildings in these areas have also completed their life cycle.”

For residential areas, the law requires space to be kept for utilities, which reduces the size of the built-up area. Commercial buildings, on the other hand, tend to have fewer utilities and therefore more space for construction.

Shah added that companies have to pay a premium of 15 to 20 per cent for commercial plots along the Sarkhej-Gandhinagar Highway on the edge of the city, where a significant level of commercial construction is taking place. Buying land in the heart of the city, therefore, was considered a more viable option.

Reliance Retail to expand south India ops

Reliance Retail Ltd is all set to expand its operations in South India with the opening of 11 `Reliance Fresh' pilot stores at one go across Bangalore tomorrow.

Company executives said more stores would be opened in the city in the near future.

The company's President & Chief Executive - Foods business, Gunender Kapur and Chief Executive - Customer Operations, Sunil K Chandran said it's looking at opening `Reliance Fresh' stores in the cities of Mysore, Hubli-Dharwad, Belgaum and Mangalore in Karnataka in the second phase later this year.

"We are rolling out to all parts of the country as back-end infrastructure comes up," Kapur told reporters here. "We are planning to be in all urban parts of the country".

The stores carry fresh fruits and vegetables, staples, grocery, dairy products and also offer `Reliance Select', the Reliance brand of products, officials said.

Within four months of launching Reliance Fresh stores, the total square footage of the 80 Reliance Fresh stores across India is approximately 190,000 sq ft, officials said.

Reliance eyes Sainsbury, Carrefour stakes: FT

Reliance Industries Ltd is considering buying stakes in British supermarket group J. Sainsbury Plc or French retailer Carrefour, the Financial Times newspaper said on Saturday.

"With both of these companies we'd definitely get a good supply chain and we would benefit from their experience," the newspaper quoted an "insider" at Reliance as saying. Sainsbury is already the subject of a bid approach from a consortium of private equity firms led by CVC Capital. A source close to the matter told Reuters on Friday that U.S.-based buyout groups Bain Capital and Apollo were also considering a joint offer.

Carrefour has been the subject of bid speculation recently as well. Separately, the Daily Mail newspaper cited unnamed sources as saying Sainsbury's pension trustees were seeking 600 million pounds ($1.17 billion) for the group's pension fund as a condition of their support for a bid from the CVC group. None of the companies mentioned could immediately be reached for comment.

Reliance Retail eyes foreign buy

In a move to strengthen its retail venture, Reliance Industries Ltd (RIL), the country's most valuable company, is planning to acquire a foreign retail firm.

A top Reliance team, which has so far confined its activities to small acquisitions in India, recently visited the US and the UK.

The team reportedly held discussions with a dozen companies, mostly tier-II or smaller firms like Coles & Myers and J Sainsbury. The company is not focusing on giants like Home Depot, Tesco and Wal-Mart.

Sources close to the development said RIL was keen on outright acquisition and not a strategic tie-up, which some companies had wanted. An RIL spokesperson declined to comment.

RIL has already earmarked Rs 27,000 crore for its retail business. A large chunk of this money, plus around Rs 22,500 crore from the sale of its treasury stock, could be used for the buy-out.

Treasury stocks are shares held in RIL by RIL associate companies. These shares will account for 13 per cent of RIL's equity after the merger with IPCL, a petrochemical company RIL acquired from the government. They will be sold to strategic investors.

RIL has also been looking for "suitable targets" within the country, in addition to its recently-concluded acquisition of Adani Retail for over Rs 100 crore. Sources explained that a foreign acquisition will not only provide access to overseas markets but also allow RIL to leverage robust back-end inventory and logistics management systems. RIL runs its retail venture through its wholly-owned subsidiary Reliance Retail, which currently has 71 stores under the Reliance Fresh brand name.

Sources said it would not list the company on the market yet, since the retail business can leverage support from RIL's Rs 14,000 crore of cash flows this year. The plan, they said, was to list the subsidiary after about two years.

There is also speculation that Reliance is in talks with Carrefour for acquiring its supply chain business. However, this could not be confirmed.

Mukesh Ambani is on the move taking a stake in Carrefour

Mukesh Ambani is on the move taking a bet on Paris and changing course from bringing foreign investors to India to establishing his imprint on foreign soil. Management control of the world's second largest and France's biggest supermarket chain is ready to change hands. Carrefour's owners Halleys have put 13 per cent stake on the block for sale and appointed bankers to find buyers.

Carrefour's owners value the 13 per cent stakes at 5 to 5.5 billion euros, which is only just as much as Mukesh Ambani has invested in the initial stage of his retail business.

But there's another angle to this bid pulling the carpet out from under the complicated retail FDI policy.

Growing business

After the Wal-Mart Sunil Mittal deal came under the Sonia scanner, Mukesh Ambani is taking no political chances. And so after a confident roll out of reliance supermarkets across the country, Mukesh Ambani is doing what his father was always known for, growing his business.

Despite the government, Mukesh Ambani is finding ways to avoid intervention by bringing in no FDI, instead taking control of a foreign major.

Maspar in talks with Reliance for retail

Home furnishings company, Maspar Industries Private Ltd, is in talks with Reliance to retail out its products through their high-end retail formats.

"We are in discussions with Reliance but nothing has yet been formalised," Company Managing Director Rajesh Mahajan told media.

The company that has been manufacturing home furnishings for the export market of US and UK and supplying to brands like Marks & Spencer, Ikea and Waverly started its Indian operations in 2002 as a step towards forward integration.

Maspar currently has five stores in the country and recently opened its sixth outlet in South Mumbai. "We will be opening up two more stores in Delhi next month and one in Pune," he said. In 2007-08 we will add four more stores in cities like Chandigarh, Noida, Hyderabad and Chennai, he added.

Maspar has also placed its range through shop-in-shop and currently there are two such formats in Mumbai and Bangalore. "Six such shop-in-shop formats are in pipeline," he said.

The company is targeting at a turnover of Rs 25 crore in 2007-08 and by the end of this fiscal, it is expected to close at around Rs 10 crore, he said. On investments, Mahajan said that on an average per store, the investment would be in the range of Rs 75 lakh to one crore.

Currently, Maspar stores are located at Gurgaon, Noida, Bangalore and Ludhiana. It has its own manufacturing plant located at Panipat.

Express Retail Services has charted a major expansion plan worth Rs 100 crore

Express Retail Services has charted a major expansion plan worth Rs 100 crore for its convenience store chain under the Big Apple brand in Delhi. Part of a diversified business group with interests in real estate and steel, the company is ramping up retail operations to take its existing 15 outlets to 100 stores by August’07.

Big Apple is engaged in retailing of products for daily needs of consumers including groceries, fruits & vegetables, FMCG etc. It is also planning to float its small format retail brand for fruits & vegetables under the Big Apple Fresh brand soon.

Talking about the expansion Express Retail Services’ managing director, Munish Hemrajani, said, “We have been studying the market closely for the last two years and now we are looking at scale. The funds for the ongoing expansion is being sourced within the group internally.”

He added, “After we have opened 100 outlets we would look at bringing in funds from outside which would be used for the next phase of expansion. We have been approached by various investors but we have not taken a call on the route of fund infusion. It could be anything private equity, joint venture, IPO etc.”

The second phase of expansion would involve launching its small format retail brand Big Apple Fresh which would be taking on Mother Dairy’s Safal retail brand, which has an extensive presence in Delhi.

Dabur India plans retail foray with 400 outlets

FMCG major Dabur India is all set to foray into organised retail. The Rs 1,900-crore company plans to set up a chain of 300-400 retail outlets, based on the health and beauty platform, across the country over the next few years.

The Dabur India retail outlets, modelled after foreign health and beauty retailers Boots and Walgreens, would sell pharmaceutical and OTC products as well as other products such as health food, confectionery, personal and baby care products and general merchandise. While Dabur is not tying up with a foreign partner, it is hiring a few foreign expats with wide experience in the retail business to guide the new venture.

Retail will be the Dabur group’s third major venture after FMCG and pharmaceuticals, and could over the medium-term become as big as the FMCG business. It is expected that the company would roll out the first few stores by the end of the calendar year. The stores would be located inside malls and would be set up in the metros and tier-I cities.

The company is learnt to have earmarked an investment of Rs 200 crore for its retail foray. The retail plans are expected to be taken up at Dabur’s board meeting this week. When contacted, Dabur India group director P D Narang declined to comment.

The new venture would mark Dabur’s full-fledged foray into retail. The company currently operates standalone outlets across the country offering complete Ayurvedic solutions, called the Dabur Ayurvedic Centres.

These centres, which retail only Ayurvedic and herbal medicines and have an in-house Ayurvedic practitioner, are meant to give a push to Ayurvedic medicines by boosting consumer confidence and enabling a more informed purchase decision. However, the scale, size and investments in the new retail business will be much greater.

Dabur would thus join the growing number of new entrants in the country’s $12-billion organised retail mart. The Ranbaxy-promoter group recently made its foray into healthcare retail with a new company, Fortis HealthWorld.

The company plans to set up 1,000 HealthWorld stores in 400 cities in the next five years at an outlay of Rs 800 crore. These stores are meant as one-stop shops for a consumer’s health needs with a 24/7 pharmacy which stocks FMCG products and health foods, ayurvedic and homeopathic medicines and also houses a diagnostic centre.

While the country’s largest listed retail company, Pantaloon, is focussing on its Health Village stores catering to the health and beauty needs of the consumer, Reliance Retail has also charted out plans to set up 4,000 pharmacies in the next four years.

US Lobby working for Walmart...

Wal-Mart vice chairman Michael Duke is not alone in his fight to enter India, he is being backed by influential US policy think tank, the council on foreign relations that has come out strongly in support of Wal-Mart's entry into India.

"In America these large retailers have greatly helped in increasing the standard of living by all kinds of supply chains and highly efficient methods, which reduce the cost to consumer that in turn increases the standard of living," said Peter Peterson, Founder Chairman, Blackstone Group and Chairman, Council on Foreign Relations.

"So both at the farm level and the retail levels there are lots of restrictions to doing the very things that would be necessary to increase productivity," Peterson added.

The US council led by the founder chairman of the Blackstone group met with the Prime Minister and Finance Minister this week asking them to ease up on FDI policy in retail and agriculture.

Of course, the sole objective is also to allow large multi-brand retailers like Wal-Mart to increase efficiency and reduce prices in the economy.

Political gambles

However, that argument was lost in the halls of South Block, which is still coming to terms with setbacks in the recent elections and not willing to take on any more political gambles.

"Intellectually they are receptive but politically they are not. No one wants to take the heat by saying that we are going to put pressure on a nation of small retailers. Nobody wants the heat but they all want the benefits," said Peter Solomon, Former Vice Chairman, Lehman Brothers, Member, Council on Foreign Relations.

The status quo on the issue of FDI in retail continues with the government still offering no clarity on how it plans to move forward.

Meanwhile, lobbying efforts are intensifying with prominent US business leaders saying that even a wholesale joint venture between Wal-Mart and Bharti would be a good start.

An ideal scenario in which foreign multi brand retailers will be able to access the Indian markets on their own.

Kishore Biyani increases stake in Pantaloon

Kishore Biyani, one of the promoters of Pantaloon Industries, has consolidated his stake in the company to over six per cent.

Biyani acquired 3.60 lakh equity shares of Pantaloon Industries through inter-se transfer of shares, taking his holding to 6.14 per cent in the company, it informed the Bombay Stock Exchange.

The transfer among the promoter group was carried out between February 26 and March 1.

In a separate deal, Kishore Biyani, along with persons acting in concert (PACs), have sold 75,900 shares representing 1.29 per cent stake in the company in inter-se transfer.

The PACs include Gopikishan Biyani and Anil Biyani, partners of Bansi Silk Mills along with Kishore Biyani. As on December 31, 2006 promoters and the promoters group held 59.33 per cent stake in Pantaloon Industries.

RPG Group - Spencer's expansion Plan

Buoyed by the increasing retail activity in the country, RPG group has embarked upon a Rs 2,500 crore expansion of its retail venture, Spencer's, which includes setting up of 1,000 stores across the country by 2009. The company plans to increase its foothold across the nation and would expand Spencer's retail in two phases. The first, to be completed by 2009, would see an investment of Rs 1,000 crore in taking the number of Spencer shops to 1,000 from the existing 125.

"We would invest Rs 1,000 crore in expanding Spencers', which would become our flagship retail brand, in the next two years. The company is also planning to invest an additional Rs 1,500 crore between 2009-11 to further expand retail operations," RPG Enterprises Vice Chairman Sanjiv Goenka told reporters.

He said the company would raise fund for the planned expansion through a mix of resources, which include private placements and internal accruals. RPG did not rule out the possibility of a public issue an was planning a fresh listing of its retail venture. "We are looking at a fresh listing of our retail venture. Though we have not set a specific time frame for the listing, it could be as early as 2009," Goenka said.

Spencer's Retail has format stores, which include express stores (stores which sell daily use items), cellcomm express (MBO for mobile phones), super store, book store, music store and hypermarket.