Kishore Biyani may keep FMCG arm off the deal table in talks with Amazon

Future Consumer could be the silent engine that Kishore Biyani, chief executive officer of Future Group, hopes will power his business in the coming years. 

Despite talks with US major Amazon for a possible stake sale in Future Retail, and an entry of the former (through an investment arm) into the group, Future Consumer, the fast-moving consumer goods (FMCG) arm of the conglomerate, could be kept out of the ongoing negotiations, sources in the know said.

This comes as Biyani charts out an aggressive future for the company, predicated on a series of launches, brand tie-ups and manufacturing. From sales of Rs17 billion in 2015-16 (FY16), Future Consumer achieved a top line of Rs30 billion in FY18, clocking a compounded annual growth rate of 32 per cent over three years. 

The company also turned Ebitda (earnings before interest, tax, depreciation and amortisation) positive in FY17 (at Rs207 million), with analysts expecting it to turn profitable after tax by FY20. Ebitda in FY18 stood at Rs664 million. Biyani was not immediately available for comment. 

Future Consumer owns more than three dozen brands in 70 categories, including food brands such as Sunkist, Karmiq, Golden Harvest, Fresh & Pure, Premium Harvest and Tasty Treat as well as a slew of home and personal care products. Biyani had earlier said he expected the unit to contribute 70 per cent to Future Group’s consumer goods sales by 2022, and that prospects for companies in the sector were robust given the fact that per-capita consumption of FMCG products in India was low.

While Future Consumer has counted mainly on its group stores, including Big Bazaar, Easyday, Heritage and Nilgiris, to push sales, its products are also available in other outlets such as Star Bazaar, Foodworld, Godrej Nature’s Basket, Spencer’s, and Haiko, among others. It is also available in 6,100 Rajasthan fair price shops, and has been scaling up its presence in general trade in recent quarters, sector analysts said.

Its second quarter numbers (for FY19), said experts, showed that the company derived around 18-20 per cent of its top line from outlets beyond its own, comprising a mix of general trade, institutions and rival supermarket chains. This number could go up in the future as the company looks to widen its distribution reach. A recent investor update for the first half of FY19 showed that Future Consumer’s products reached 114,800 general trade outlets, a nearly 20 per cent jump over the FY18 full-year number of 96,000 stores. 

Its online presence, however, has come down from four e-tailers, including Amazon, Flipkart, Bigbasket and FirstCry to only two now, including Amazon and Paytm, its November 2018 investor update showed.

Analysts Jimeet Shah and Kimberly Paes of Mumbai-based brokerage Indsec Securities and Finance said in a recent report they expected the coming quarters to be strong for Future Consumer. “The company is well poised to continue its growth trajectory given its innovative product portfolio, new launches and strong distribution network,” they added.