Future Group to foray into wholesale distribution

Targets a revenue of Rs 1,000 crore.

Kishore Biyani’s Future Group is planning a foray into the wholesale distribution business. Future Logistics, the logistics arm of the group, is expected to start operations by January 2009, a top company executive said.

The company will distribute products in food, apparel, luggage, grocery and other categories to organised retail chains in the country. Future Logistics is eyeing a revenue of Rs 1,000 crore from the business in the next three years, said R Srinivasan, head, supply chain solutions, Future Logistics.

The company is in the final stages of talks with a foreign player and two to three domestic companies to distribute their brands, Srinivasan said. However, he declined to name the companies they are in talks with.

“There is a huge opportunity in this area and not many organised players are present in this sector. This made us look at this sector,’’ he added.

Currently, the sector is unorganised, with a large number of distributors at regional centres supplying goods to traditional retail stores even as modern retailers sourcing from companies directly.

“This is a high-volume and low-margin business,’’ he said. Wholesale distributors have a gross margin of less than 10 per cent and a net margin of less than 4 per cent.

The company, which is mainly into third-party logistics, is also rationalising the number of its warehouses from the current 50 to 20-30 in the next two years for better implementation of IT systems, automation and merchandising. However, the size of warehouses will go up from the current 20,000-2,00,000 sq ft to 50,000-1 million sq ft after the rationalisation, he said.

The company has nearly 3.5 million sq ft of leased warehouse space currently and plans to have a space of 7.5 million sq ft by 2011. “We are taking 100,000 sq ft of space every month to cater to our growing demand,” he said.

Meanwhile, the Future Group is also in talks with investors to dilute 15 per cent in Future Logistics to raise nearly $40 million for expansion plans, according to reports.

Future Logistics had revenues of Rs 150 crore in FY08 and plans to do a business of Rs 2,000 crore from warehousing, transportation, international logistics, reverse logistics and distribution, Srinivas said.