Pranab Barua, business director, apparel and retail business of the Aditya Birla Group, recently took over as the chief executive officer of Aditya Birla Retail Ltd (ABRL). He is also a part of the fashion council overseeing a recent deal between Aditya Birla Nuvo and the Kishore Biyani-led Future Group. In his first interview after becoming the CEO of the group’s retail chain, he discusses the company’s strategy with Raghavendra Kamath & Sharleen D’Souza. Edited excerpts:
There have been media reports that you have closed most supermarkets in the country. Are you exiting that format?
No. We have shut supermarkets in Mumbai, about 25 of these, due to high rents — over Rs 100 per sq ft versus Rs 25-30 per sq ft in other parts of the country. After Mumbai, other store closures are based on commercial aspects. In fact, we are planning to open 80-100 supermarkets in the current financial year.
When do you expect Aditya Birla Retail to reach break-even?
Not many retailers are making money because margins are low and costs are high. Unless we get better throughput and get the configuration right, it is difficult to make money. Though I cannot comment on ABRL’s profitability, of 500 supermarkets, 50 are yet to become profitable. Of 12 hypermarkets, two are yet to break even.
There is a perception that you are slow in expanding hypermarkets.
We are not slow, we are thoughtful. We will not open stores unless the location is right and rents are right. We are not here for speed, we are here for the long term.
What are you doing to achieve early profitability for the company?
A lot of work has to be done. We are working on the whole of assortment planning, replenishment planning, how to get better throughput right, customer engagement and keeping costs under check. We will sell more of high-margin products such as apparel, general merchandise in our stores.
ABRL was very bullish on private labels, but that has fizzled out. Why?
When you launch private labels, some work and others don’t. The chain has gone slow on personal care products. Now the focus is on apparel, general merchandise and so on. Wherever we have private labels, 15 to 20 per cent of our sale in any category comes from there.
Aditya Birla Nuvo recently acquired a majority stake in Pantaloon stores. What are your plans in this segment?
The deal has been announced recently and it will take 10 to 12 months for it to conclude. It is too early to say anything now.
What kind of synergies can you explore between ‘More’, Madura’s stores and Pantaloon?
I think we can explore synergies in real estate. Both ‘More’ and Pantaloon can be anchor tenants in a mall and get better rates. We have formed a fashion council comprising Kishore Biyani, Rakesh Biyani and Kailash Bhatia from Pantaloon and Kumar Mangalam Birla, Ashish Dixit and me from the Birla side. The council will meet and discuss the synergies one can explore.
ABRL has seen three chief executives in the past five years. Don’t you think constant change in leadership has affected the business?
Sumant Sinha resigned on his own. The recent change involving me and Thomas Varghese (head of the textile business) is part of the rotation policy of the group. It keeps happening across the group. These changes have not affected the business. Retail is a difficult industry and margins are low.
When do you think the company can go for an IPO (initial public offering)?
It is too early to say that. It depends on the performance. Whenever we see performance, we can look at it.