Birlas' More likely to stitch retail plans around clothes biz
The Aditya Birla group is understood to be revisiting the business strategy for its retail businesses which could result in greater long-term emphasis on apparel retailing.
By Kala Vijayraghavan & MV Ramsurya, TNN |
MUMBAI: The Aditya Birla group is understood to be revisiting the business strategy for its retail businesses which could result in greater long-term emphasis on apparel retailing, sources close to the development said. In a series of review meetings at the Mumbai-based conglomerate���s office, the top management and the retail team are understood to have taken a relook at the design, positioning and merchandise offered by More ��� the supermarket format under Aditya Birla Retail, which has recently seen slow growth.
The review meeting, which according to group sources is conducted every six months, was called to focus on challenges that Aditya Birla Retail has been facing, especially on issues such as managing the more competitive food & grocery format, and related challenges such as supply chain, merchandising and competitive pricing in the face of high operating costs.
Aditya Birla Retail currently has 550 outlets under More and a hypermarket. At the same time, the group���s think-tank seems keen to increase spends and focus on apparel retail currently being undertaken by Madura Garments, a unit of Aditya Birla Nuvo, which has seen a significant jump in sales. Madura Garments targets all class segments with its multi-price points.
The review meeting, which according to group sources is conducted every six months, was called to focus on challenges that Aditya Birla Retail has been facing, especially on issues such as managing the more competitive food & grocery format, and related challenges such as supply chain, merchandising and competitive pricing in the face of high operating costs.
Aditya Birla Retail currently has 550 outlets under More and a hypermarket. At the same time, the group���s think-tank seems keen to increase spends and focus on apparel retail currently being undertaken by Madura Garments, a unit of Aditya Birla Nuvo, which has seen a significant jump in sales. Madura Garments targets all class segments with its multi-price points.
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High realty costs have put a dampener on the expansion plans of organised food & grocery retail sector in India, where Aditya Birla Retail is a key player ��� others include heavyweights like Future Group and Reliance. Though prices have started softening, the impact is likely to take some more time.
An industry executive admitted that since retail is a new business in India, there are bound to be hiccups. ���Time to time, everybody keeps reviewing their formats ��� it���s a new business and there are various issues, which we are new to,��� he said.
However, the Aditya Birla Group is looking closely at the right retail segments and formats for better business sense, sources said. It is also felt that there could be some significant announcements in this regard in the near future.
Another area that is proving to be a critical for Aditya Birla Retail is identifying the right catchment areas, which also means higher lease rentals. While locating outlets in far-flung suburbs was done to lessen the real estate impact, the move has affected conversion rates of footfalls into revenue; that is, customers making actual purchases. This tells on the revenue per sq ft.
The slow growth has already shown its impact with Andrew Denby, expat CEO of Aditya Birla Retail���s supermarket business quitting, following differences with the top management over business targets. The retail business, currently in the second year of its operation, has already put in place a new organisational structure with Aditya Birla Retail CEO Sumant Sinha directly supervising the supermarket business. When contacted, Mr Sinha declined to comment.
The indication within the group is that it would be comparatively easier to make higher investments in the core business of textiles and apparels, where profit margins are far higher than the low-margin, high-volume grocery format. The group has a strong presence in apparel retail through Madura Garments, which owns and markets brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England. The company has said the brands have been growing at a CAGR of 27% over the past three to four years.
Madura Garments recently opened a large family store in Mumbai called Peter England People, the first in a proposed 90 such stores. At investment of over Rs 400 crore, the stores are planned across cities. Group chairman Kumar Mangalam Birla is also confident that the apparel retail business would bring a revenue of $1.5 billion or Rs 6,300 crore in five years. The target looks ambitious for a company like Madura Garments, which last year posted a revenue of Rs 1,025 crore.
���Apparel retail has been growing at a faster pace in the past few years due to a shift in the way garments are marketed and sold,��� said Aditya Birla Nuvo business director (textile and apparel) Vikram Rao. ���In organised retail, you can also sell apparel, like they do in the US. It is now possible to sell apparel in multi-format stores.���
It is also learnt that the group has been planning on developing the two formats independently to evaluate growth patterns later. Like the plan to develop the Peter England People family apparel store was formulated a year ago and the subsequent appointments and choice of cities was initiated six months ago.
The slow growth has already shown its impact with Andrew Denby, expat CEO of Aditya Birla Retail���s supermarket business quitting, following differences with the top management over business targets. The retail business, currently in the second year of its operation, has already put in place a new organisational structure with Aditya Birla Retail CEO Sumant Sinha directly supervising the supermarket business. When contacted, Mr Sinha declined to comment.
The indication within the group is that it would be comparatively easier to make higher investments in the core business of textiles and apparels, where profit margins are far higher than the low-margin, high-volume grocery format. The group has a strong presence in apparel retail through Madura Garments, which owns and markets brands such as Louis Philippe, Van Heusen, Allen Solly and Peter England. The company has said the brands have been growing at a CAGR of 27% over the past three to four years.
Madura Garments recently opened a large family store in Mumbai called Peter England People, the first in a proposed 90 such stores. At investment of over Rs 400 crore, the stores are planned across cities. Group chairman Kumar Mangalam Birla is also confident that the apparel retail business would bring a revenue of $1.5 billion or Rs 6,300 crore in five years. The target looks ambitious for a company like Madura Garments, which last year posted a revenue of Rs 1,025 crore.
���Apparel retail has been growing at a faster pace in the past few years due to a shift in the way garments are marketed and sold,��� said Aditya Birla Nuvo business director (textile and apparel) Vikram Rao. ���In organised retail, you can also sell apparel, like they do in the US. It is now possible to sell apparel in multi-format stores.���
It is also learnt that the group has been planning on developing the two formats independently to evaluate growth patterns later. Like the plan to develop the Peter England People family apparel store was formulated a year ago and the subsequent appointments and choice of cities was initiated six months ago.
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