Kishore Biyani’s Future Group wishes to raise the share of fresh produce from five per cent now to 10-12 per cent in its food stores in the next two quarters to capture higher consumer spending on such items.
A Future executive said this plan had been in the works for many months, part of an overall aim to take the share of food in group revenue from the present 30 to 45 per cent.
Currently, the group makes Rs 350-450 crore from fresh food in its stores such as Big Bazaar and Food Bazaar. It can generate sales of Rs 1,000-1,200 per sq ft in a month in the next couple of quarters.
“We have made a lot of investments in the back-end, which is ready to show results now. We have 220 stores between Big Bazaar and Food Bazaar, which justify our investments in this segment, “ said the executive, who did not want to be named.
The group has invested Rs 4.5 crore to set up nine consolidated centres in the country to improve the sourcing of fresh produce and reduce wastage, he said. He added that compared to fashion, the working capital requirement in food was lower.
Hypercity, the hypermarket chain owned by the Rahejas, is looking at increasing the share of fresh food.
“We are constantly investing in product development and direct sourcing, including imports, to improve our overall sales mix. Fresh produce as a category can make a customer visit the stores at least four to six times a month,” said Ashutosh Chakradeo, head, buying, merchandising & supply chain. Fresh produce contributes around eight to 10 per cent of Hypercity’s overall business.
Analysts say increasing the share of fresh produce is a good move, given the potential. “This category has the lowest penetration in modern retail, though consumers make most of their purchases in this category. They (Future) have sizable presence in fashion with Central, Brand Factory and others, so they must be eyeing the next level of growth from food. I think, strategically, it is a right move,” said Sangeeta Tripathi, a retail analyst with Mumbai-based brokerage Sharekhan Ltd.
Arvind Singhal, chairman of Technopak Advisors, a management consultancy, said: “You can earn higher margins if you solve supply chain complexities. In general, it can increase turnover, as consumer spending is more in food and grocery.”
