Walmart may rejig identity, structure

We’ll have to chat: Rajan Mittal on renaming, partnership, leveraging & allied subjects thrown up by govt decision.

Walmart, the American retail giant, may get another nameplate on its front-end retail stores in India. Bharti Walmart chairman Rajan Bharti Mittal told Business Standard the two joint venture partners “will have to have a chat on these issues”, when asked about the possibility of the front-end stores not being named Walmart.

“If you see Walmart stores in other countries, they use many other brands and not Walmart alone. Clearly, we will have to have a chat on these issues,” Mittal said, a day after the Union cabinet decided to allow up to 51 per cent foreign direct investment in multi-brand retail. “I’m sure, keeping the Indian market and the sentiments in mind, we will all be very flexible.”

Saying it was too early to make a comment on the store name, Mittal said, “All I can say is Walmart works in the UK, but it doesn’t use the name. It uses Asda there. It works in Mexico but again, does not use Walmart; it uses Walmex as the store name. Walmart is a very, very American thing, which they use there.” He said that the company has a multiple brand strategy, in that sense.

The $421-billion Bentonville-based supermarket player, with 8,500 stores in 15 countries, uses several names across regions. In India, where the 50:50 JV of Bharti-Walmart operates cash-and-carry or wholesale outlets, where FDI is not restricted, it has branded the stores as ‘Modern Wholesale Cash and Carry’. Bharti group’s retail stores, to which Walmart offers back-end support, are called ‘Easy Day’.

AN INDIAN FORMAT
Will the ‘Easy Day’ stores be leveraged for Walmart’s entry and then expanded in India for front-end multi-brand? “We already have 170 stores and are expanding as we go into front-end (with Walmart). That brand (Easy Day) is established. Brands are something you create, and don’t want to lose,” is all that Mittal said on the matter. According to him, “it will be an Indian model as I call it,” referring to Bharti-Walmart’s future multi-brand store formats.

Besides trying to iron out the number of stores they’d set up and across which cities, another important decision the two would have to take is on restructuring the partnership. When asked whether Walmart would have a 51 per cent share, as that’s the maximum a foreign player is now allowed, Mittal did not give a clear answer, saying “it’s very subjective”.

“We are in a 50-50 JV for back-end and cash-and-carry. It will now be a natural progression to go into front-end together. Once details come, we will start working on it (structuring of the new JV),” Mittal replied. He said FDI up to 100 per cent was earlier allowed in cash-and-carry, “but we have a 50-50 JV there”. Adding: “I don’t think percentages of equity allowed by the government have any relevance to it (how the two companies decide to restructure their partnership).”

Is there a possibility that Bharti will have greater equity in the new JV for front-end retail? “It’s too early for me to comment on that. Our partnership has done very well in the past three years and now we need to sit down and work together. We will come back to you when we finalise things,” Mittal said.

‘WE’LL GO ON’
He said their partnership with the American retailer for cash-and-carry would continue at the same pace as before. “Of course, we will go ahead with our cash-and-carry plan. We wanted to have 15 cash-and-carry by 2015, but we already have that number. We will probably end the year with 17 cash-and-carry stores.”

He said cash and carry would run concurrently, with 10 to 12 new stores a year. The first cash and carry store of the JV was set up in 2009. As for sourcing from India, Mittal maintained that just like cash-and-carry, the JV would source 90-95 per cent products from India.

While he refused to give a time-frame for the first multi-brand retail store under the JV in India or talk about investments, Mittal said foreign majors around the world must be “sharpening their pencils already” for an India strategy. But, it’s not a magic wand, that foreign investment will come flowing immediately, he said.