Biyani to scale up no-frills store chain

After divesting majority stakes in Pantaloons and Future Capital, the Kishore Biyani-led Future Group plans to scale up its no frills, neighbourhood store format KB’s Fair Price stores, as well as its rural distribution venture, Aadhaar.

A group executive said this was part of the group’s plan to deepen its penetration in food and grocery distribution.

In the next 18 months, Future Group plans to open 1,000 KB’s Fair Price stores in top cities. It also plans to appoint franchisees. The executive said pilot projects for this were already on the way.

India has about 15 million kiranas, or grocery stores, and KB’s Fair Price competes with these in urban areas. “These stores can be set up with one third the capital invested in modern trade and can be run at half the cost of running other stores. The biggest point is these have the highest per-square feet revenue, compared to other formats,” the executive said. The stores, spread across 1,000 to 1,500 sq ft, sell 400 products, or stock keeping units.

ON THE ANVIL
Format	Stores

Size (sq ft)

KB’s 
Fair Price1,0001000-
1,500 Aadhar 
Wholesale215,000-
20,000  Aadhar30
franchise
stores in
Gujarat

600- 
800

Though the group had planned to open 1,400 stores in 2008, today it runs just 190 KB’s Fair Price outlets. “Earlier, it was not our priority. Those stores were kept in incubation. We later discovered the model is more robust, and it can be scaled up,” said Damodar Mall, group director (integrated food strategy) at Future Group, who supervises the format.

After feedback from customers, the chain has added new categories and has even started selling vegetables in certain stores, Mall said.

Though Mumbai and the national capital region (NCR) account for the majority of KB’s Fair Price stores, the group would focus on opening many such stores in metros such as Bangalore, Mall said. “Wherever we can set up a large cluster of stores, we will go to those cities,” he said.

However, a few rivals argue kiranas have an edge over these stores. “Kiranas, which compete with KB’s Fair Price stores, have lower distribution costs and their cost of operations is low. Cost of operation is a challenge for small-box stores,” said the chief executive of a national retail chain, on condition of anonymity.

Prashant Agarwal, joint managing director of retail consultant Wazir Advisors, however, says consumers are shifting towards modern stores such as KB’s Fair Price for their weekly or monthly shopping, and these stores offer big opportunities.

After opening its first rural wholesale and distribution centre ‘Aadhaar Wholesale’ in Kalol, Gujarat, the group plans to open two more centres in the state, said the Future Group executive. When the Kalol centre was opened, the group had said it planned 65 wholesale stores, and was looking at revenue of Rs 4,000 crore in the near future. Each such centre caters to the group’s rural retail chain, Aadhaar, and the general trade around these.

“The store is doing well, and it is easy to learn business in Gujarat,” he said.

The Future Group plans to increase the Aadhaar stores near the Kalol centre from 20 to 50 through franchisees. The group has 55 Aadhaar stores across the country. “Tomorrow’s distribution is not done the mom-and-pop way. Concepts such as KB’s Fair Price and Aadhaar are new ways of distribution that reach out to both urban consumers and rural retailers,” Mall said.

Agarwal of Wazir says after Kishore Biyani divested stakes in fashion apparel chain Pantaloons to Aditya Birla Nuvo and Future Capital to private equity major Warbug Pincus early this month, he planned to expand existing formats faster. The divestment was aimed at reducing the group’s debt pile of about Rs 7,800 crore.