BW Communities

Less Is More For Aditya Birla Retail

Nevin John Nov 08, 2014

<?xml version="1.0" encoding="UTF-8"?><root available-locales="en_US," default-locale="en_US"><static-content language-id="en_US"><![CDATA[Pranab Barua, Business Head - Apparel and Retail of Aditya Birla Retail (ABR), is in action. Like his predecessor Thomas Varghese, Barua is tightening the loose ends of retail business by downing shutters on 27 supermarket stores under the brand More in Mumbai. These stores had turned loss-making due to the high rentals and rising competition. Barua finds hyper markets to be the ideal retail model for Mumbai.   "Except for the one profitable super market, which is at Kharghar in Navi Mumbai, we have closed down all the small retail shops in Mumbai. Similarly, we will look at the viability of supermarkets in high-rental places like Delhi," says Barua, who earlier was the managing director of Reckitt Benckiser India. Depending on the location and size of the catchments, the company will decide between supermarkets and hyper markets. ABR, a privately held company of Kumar Mangalam Birla, has 500 supermarkets and 12 hyper markets under More. Supermarkets were the one where the company had expanded rapidly in the first phase, and then closed many. During the time of Thomas Varghese, the company closed down more than 100 stores in two years and opened 50-60 at cost efficient locations. Unlike super markets, ABR started slowly in hypermarkets segment, but picked momentum in metros, posing threat to bigger players like Big Bazaar and Reliance Retail. But overall, Birla's food and grocery retail chain continues to make losses despite spending over Rs 600 crore on building the network across the country. ABR had reported a net loss of Rs 423 crore in the year ended March 2011 on net sales of Rs 1,637 crore. According to earlier estimates, the company will hit EBIDTA profitability by 2013 and PAT profitability by 2015, in 7-8 years of its operation. Barua is now focusing on controlling the costs to turn around the retail business. "We need to increase the throughput and margins to sustain the growth," he says. While controlling the costs by shutting down the loss-making shops in Mumbai, Barua aims to expand the business in low-capital cost cities with supermarkets. "In this financial year, we plan to open 70-80 supermarkets, in addition to adding 5-6 hypermarkets," he explains. In opening hyper markets, ABR faced delay because of the developer in most projects. With the financial downturn hit twice the market, most of the projects are completing at snail speed. In this environment of below 7 per cent GDP, the job of Barua is to change the retail business into cost efficient with the reduction or addition of stores, say analysts. According to a research report by The Boston Consulting Group (BCG), the organized retail in the country is growing at over 25 per cent and reaching a size of $44 billion by 2012. However, Indian players are still at nascent stage in forming a successful retail model, estimate analysts. While building retail business, the Aditya Birla group is seriously considering building its apparel portfolio under listed entity Aditya Birla Nuvo. For getting the operational synergies at the back end and plugging gaps in womenswear and kidswear, Nuvo decided to acquire a controlling stake in the rival Pantaloon retail chain, controlled by Big Bazar's Kishore Biyani. Unlike before, Birla is fast consolidating his consumer facing businesses at various levels. It's a tough task ahead.