Monday, August 20, 2012

A simple issue of timing

Godrej Industries has suddenly become more enthusiastic about its retail plans, especially in new concepts of retailing (like gourmet food). Is there any radical plan we’re missing or is this it? by Angshuman Paul

It was in January 2006 when Adi Godrej, Chairman of the Godrej Group announced an investment of Rs.700 crore for the expansion of ‘Aadhar’ (chain of supermarkets in rural India) – part of Godrej Agrovet Ltd, and an additional investment of Rs.200 crore for the expansion Nature’s Basket – a gourmet food retail chain. The five-year plan was to take the number of Aadhar stores from 18 (in 2006) to 1,000 across the country and scale the footprints of Nature’s Basket from only three in Mumbai alone to 100 in metros by 2011. Today, after 40 months, while 70% stake in Aadhar has been taken over by Kishore Biyani-owned Future Group (in 2008), the progress at Nature’s Basket cannot be called anything better than sluggish with the current count of outlets standing at just 10 (7 in Mumbai & 3 in Delhi).

The detail – that the Indian retail industry is now a mammoth Rs.9.3 trillion with organised retail at only 4% - has apparently not been lost on the Godrej group. Company officials tell B&E how now, after identifying gaps in the retailing of home and office furnishings and equipments, Godrej plans to take the count of Lifespace stores from the current 51 to 90 by the year-end. The group has allocated Rs.16 crores towards advertising and promotion expenses. Would the fact that not many retailers are paying heed to the retailing of home furnishing and office equipment (except for Biyani’s Hometown, which is lagging behind on a similar model and is leveraging its finances from the other retail businesses of Future Group) make a difference to their highly niche offerings? Would Godrej, in the coming periods, expand the products portfolio to reduce the risk quotient? Godrej spokespersons reject the proposition. “We are not into the trading business and we won’t retail any other brands. And if we can offer everything to the people who are setting up their homes, why do we need other brands,” argues Shyam Motwani, VP & Business Head, Retailing Division of Godrej & Boyce Mfg. The company plans to reach a turnover of Rs.300 crores by the year-end from Lifespace sales alone.

At the other side of the Godrej strategy map is Nature’s Basket – their gourmet retailing arm. Nature’s Basket has tied up with many foreign brands and provides a wide array of food & beverages products. That is apart from selling the various food products of Godrej itself. But the issues of being extremely slow on the expansion plan hit here too. Mohit Khattar, MD, Godrej Nature’s Basket, defends the approach to B&E, “The type of format that we are offering is very exotic and we did not want to roll out stores unless we had completed our ground work.” It’s true that Nature’s Basket didn’t have to shut stores like its rival Le Marsche had to in Mumbai – after aggressive retail plans forced it to backtrack. But then, it’s also true that for every Le Marsche, there’re three other competitors who succeeded much better than Godrej.


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