Germany-based wholesale giant Metro Cash & Carry (MCC) envisages that in the long-term there is a potential for opening 40-50 outlets in India.
“Over a period of time, we can look at 40-50 DCs (distribution centres) in the country,” MCC India managing director, Rajeev Bakshi, said adding that a company like MCC needs a minimum of 20 outlets to achieve break-even.
At present, MCC, which caters exclusively to professional business customers like hotels, restaurants and small retailers, has five centres in the four states of Andhra Pradesh, Karnataka, West Bengal and Maharashtra. It is opening its sixth centre in Hyderabad next month, which will be its second outlet in the city.
Bakshi, who took over the reins of MCC India operations one-and-a-half months ago, said the break-even had been achieved so far at the store-level but not at the company level.
According to the company’s estimates, there are 43 cities in the country that have over 1 million population and 63 cities that have a population of over 500,000, and have the potential for setting up the company outlets.
Bakshi said MCC would be reviving its plans for Punjab where it would be opening at least four outlets by next year. The company has already acquired land for six outlets in Punjab but its plan to launch the outlets has been put on hold as Europe had been hit by the global recession. On the whole, the company would be investing about ' 900 crore in Punjab.
After Punjab, the company intends to foray into Tamil Nadu. It will, however, not set up its outlet in Chennai as the prevailing municipal laws prohibits location of wholesale business outlets in the city limits.
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MCC is allowed to do business only in states that have amended the Agriculture Produce Marketing Committee (APMC) Act. Even in these states, “we need to obtain 27 different licences,” MCC head corporate relations, Vishal Sehgal, said.
Currently, only seven states, including Madhya Pradesh (MP), have amended the APMC Act. But the company has no immediate plans of opening its outlets in MP.
The company invests about Rs 120 crore in each outlet. Thus, its investments in the country so far in six outlets and six plots for the proposed outlets had crossed over Rs 1,000 crore. Of this, AP accounts for Rs 240 crore.
Bakshi said MCC had tied up with some of the major hotel chains, including Taj and Oberoi, in the country. Hotels contribute up to 25 per cent to the MCC’s revenues.
Of late, he said, MCC had entered into a tie-up with BPOs for supplying stocks to their canteens besides trying the ‘Mandi’ concept.
The Mandi concept involved sale of stocks in the open area outside the company stores daily morning. Thus, in Kolkata, the company was selling fresh vegetable, sugar, oil, pulses, rice, wheat and some other products.
“Psychologically, this open area sale makes our customers feel that Metro is not expensive. In fact, our prices are 0.5 per cent lower than the wholesale market. With regard to FMCG, our prices will be 1-1.5 per cent less than that offered by the companies distributors,” Bakshi said explaining that the company had to compensate its customers by offering lower price for the lack of credit and delivery services.