Retail giants circling over Heritage Foods

The retail onslaught from the biggies is starting to take a toll of the second tier retailers as the giants fan out to acquire regional players.

Just months after the Birlas bought out Hyderabad-based Trinethra, it is understood that there are moves by almost all retail majors to acquire the Hyderabad-based chain Heritage Foods, although the company is not yet put up on the block. Heritage Foods is a Rs 300 crore firm which was founded by former Andhra Pradesh chief minister Chandrababu Naidu. Investment bankers said it is being targeted by big retailers.

However, Sambasiva Rao, president, Heritage Foods told Business Standard that he is not aware of any such acquisition move. He also said the company is going ahead with the expansion plans. "With the Reliance, Tata, Birla and most recently Bharti groups falling over themselves to establish retail chains, Heritage's logistical reach makes it an obvious target in a sector that is bound to see rapid consolidation," an overseas investor, who holds a minority interest in Heritage, has said in a note to their investors. Heritage started as a milk processing unit a decade ago and has in the recent past diversified into the retail business with focus on fresh vegetables, cereals, spices and dry fruits. The company is embarking on a Rs 150 crore expansion plan across the three Southern states of Andhra Pradesh, Tamil Nadu and Karnataka.

It is expected to touch a topline of Rs 300 crore in this retail foray over the next year with a network of 100 stores. According to information available, Heritage is going in for term loans to fund this expansion. The move for regional consolidation started when Bangalore-based Fabmall got merged into Trinethra, before Trinethra folded into Birlas. Another Bangalore-based retailer Nilgiris recently changed hands when Actis, the private equity firm, bought out the promoters in a $65 million deal. Heritage is rolling out this retail expansion under 'Fresh @...' brand and already has 45 stores predominantly located in Hyderabad. It is concentrating on the food retail chain model based on estimations that these contribute nearly 65 per cent of the total retail sales of Rs 13 lakh crore. The company generates nearly 80 per cent of its business through milk processing for which it is has a capacity to handle 7 lakh litres of milk per day. It reaches out to an estimates 5 lakh urban households supplying milk, curds, ghee, cream, flavoured milk and butter.