Kishore Biyani is betting big on private labels in food. So after noodles, breakfast cereals and soup, it’s the turn of rice, snacks, spices and edible oil.
Kishore Biyani is putting his money where his mouth is, at least where his consumers’ mouth is. That the retail king was betting big on private labels is well known; the difference this time is that he is now strengthening his own food and grocery brands, which already contribute around Rs 750 crore, or a quarter of the group’s overall foods business of over Rs 3,000 crore.
So after noodles, breakfast cereals and soup, the Rs 10,000 crore Future Group, which Biyani heads, is focusing on staples, snacks and masalas under a new food brand called Ektaa which will be available in Big Bazaar and Food Bazaar shortly.
Last week, the group launched five variants of rice under Ektaa, which Biyani hopes, will become his biggest private label brand in two years.
The two other main food brands are Tasty Treat and Fresh & Pure. The group already has 150 food products under 35 categories. With Ektaa as another umbrella brand, Future wants to grow the share of food private labels manifold. The group is also looking at launching an edible oil brand called Punya.
“Ektaa is set to become a Rs 300 crore brand in the next two years and the idea is to have 20 per cent market share in all categories that the brand will be in,” says Ashni Biyani, Director, Future Ideas.
At the heart of the strategy is community-specific products – be it kasundi, a mustard sauce popular in Bengal, or snacks such as khakra, poha and mamra popular in Gujarat, chole masala and rajma masala loved by Punjabis or muruku enjoyed by Tamils.
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The junior Biyani says the idea of creating Ektaa as a brand is to bring all communities together and celebrate the diverse culinary tastes of India.
Experts say that is a sound positioning as most food brands prefer a uniform product across the nation. In that sense, Ektaa’s community-specific plan is different.
Devendra Chawla, head-private brands business, Future group, says while the world is thinking global and acting local, we are thinking local and acting community and we see a great potential in this, as independent brands sell by themselves. “We are targeting people who stay away from their native places and long for their local food,” Chawla adds.
Analysts endorse Future’s bets on branded community foods. Debashish Mukherjee, principal at AT Kearney, an international retail consultancy, says there is a genuine need gap in the staples and cereals market and customers are unhappy about their options on quality and price. But the key is to offer such products in right sizes and at right prices, he adds.
Biyani is well aware of this. So the rice available in one kg and five kg packets will be priced 10-15 per cent lower than other branded products. To ensure quality and right pricing, the group has roped in its sourcing arm, Future Agrovet, to procure staples and cereals from millers and farmers.
The group is also not averse to pushing its private labels through kirana stores and plans to build scale by setting up two food parks in Maharashtra and Karnataka. These parks will have everything within a hundred acres — collection centre, processing centre, factories manufacturing various products, distribution centre, laboratory, cold storage and packaging unit. Capital Foods, where Future Ventures has bought 33 per cent stake, already sells a lot of products to other retailers.
But not everyone is convinced whether Indian retailers have the stomach for a stand-off with the FMCG companies which have manufacturing units in every state, geographical spread and reach.
But Future, which works with over 120 vendors for its private label business, is convinced that it can pull it off. So protecting margins through innovative ideas is the mantra. For example, the group launched ketchup in pouches as it saves Rs 12 on the cost of a bottle and Rs 4 on freight. While pouches sell at Rs 63, bottled ketchups are at Rs 79, giving Biyani a tidy margin.
Private labels in food and groceries carry margins of 25-35 per cent, while that of national and regional brands give margins of 10 to 12 per cent. For most of the retailers, who are still many years away from break-even, private labels can be a key factor in boosting profitability, retail consultants say.
But Biyani has tough competition. Tata’s Star Bazaar has launched 50-odd private labels from its franchisee partner, UK’s Tesco, in its stores, mostly in the health and beauty category, apart from its own private labels in breakfast cereals, noodles, and other processed foods. Spencer’s Retail, which gets around a quarter of its total revenues from private labels, plans to launch more variants in its product lines. Aditya Birla Retail, which draws around 20 per cent of its revenues from private labels, plans to take it to 30 per cent in the next three years.
But Future isn’t perturbed as it feels more players will only expand the market. According to Future’s own estimates, Mumbai itself has a total food market of Rs 28,000 crore, with an addition of Rs 8,000 crore per annum. This is the market among those who earn more than Rs 2 lakh per annum.