Kishore Biyani, the retail baron, seems ready to smoke the peace pipe with suppliers with whom he has been at loggerheads for the past few months. The move comes at a time when some of his recently launched private-label product categories are outselling those of multinational rivals such as Nestle.
The founder of Future Group of retail chains including Food Bazaar and Pantaloon recently launched a series of in-house value-for-money consumer products to compete with Hindustan Unilever, Reckitt Benckiser and other fast moving consumer goods (FMCG). Now, he said, he isn’t interested in becoming the leader in the product categories he has launched.
"We want to be number two brand in each category. We can't replace a national brand," said Biyani, who has also authored a book titled It Happened in India.
The retailer has warred with suppliers including multinational companies to improve margins. Earlier this month, Biyani urged rival retailers to join hands with him to challenge the might of Unilever, Britannia and other FMCG companies in seeking higher margin.
Biyani’s Future group reportedly has sparred with global confectionary major Cadbury Schweppes by asking all its stores across formats, particularly outlets of Big Bazaar and Food Bazaar retail chains, to remove the multinational company’s products from the shelves as Cadbury was offering better deals to global retailers than to modern retailers of Indian origin.
Biyani has launched several products in foods, cosmetics, consumer durables, apparel and electronics. Sales of some of these products have outstripped those of suppliers.
For instance the Future group produced tetra-pack milk brand “Sach” has garnered 1/3 of tetrapack milk sales, making it the market leader since its test-trial launch three weeks ago in select stores, according to Future Group Consumer Director Damodar Mall.
That's because the Future group has positioned “Sach” as cow's milk, unlike other companies which sell it as merely homogenised milk.
“Sach” is selling more even though it is priced at Rs 42, considerably higher than rival brands Amul and Nestle. Amul's milk tetra-packs cost between Rs 32 and Rs 36 and Nestle charges Rs 38. "First is our association with Sachin and second we're using nutritious cow's milk, which naturally comes with a price," Mall said.
The group expects to clock sales of Rs 10,000 crore by 2012 in private labels. Still, Biyani is crystal clear about the purpose of his labels and being a retailer knows he can’t outpace suppliers.
"Our intent is to give customers an option and the consumer should decide what he or she wants to buy and we don't want to do it at the cost of others," he added. “To be honest as a modern retailer we should get our due. We want to be collaborative and sometimes we should shout to be heard.’’
The group’s tetra-pack milk will be in a three-month assessment period after which it will be launched in all Big Bazaar, Food Bazaar and KB Fair Price stores.
The move differs from The Future Group's global counterparts like Walmart and J.C. Penny that price their products lower.
"We want to extend our brand beyond Future format stores and we therefore have to compete with other FMCG companies and we have a good proposition to back our pricing," Mall explained.
At present, products in the company's FMCG stable account for 15 to 40 per cent of the business at Future stores. Over the next few months, the retail giant will be rolling out more FMCG products particularly in the personal care and foods segment.
“Sipping and munching is the next big thing,” said Biyani. The company which has currently has about 18 in-house brands expects to add about 12 more by 2011.
