After acquiring loss-making Nature’s Basket in a Rs 300-crore deal this July from the Godrej Group, Spencer’s Retail is targeting to make the business venture profitable in the next two years.
In the past 14 years of operations, Nature’s Basket has never been able to make a profit and before the acquisition, in the last fiscal year, it reported losses of around Rs 60 crore with revenues of about Rs 300 crore.
On the other hand, Spencer’s, the listed retail arm of the RP-Sanjiv Goenka Group (RPSG), was able to register a full-year of profit at the company level in the 2018-19 fiscal year of Rs 7.94 crore, as against a loss of Rs 9.10 crore on a standalone basis.
“It will take two years for us to make Nature’s Basket a profitable venture. There are a lot of synergies between Spencer’s and Nature’s Basket that can be leveraged,” Shashwat Goenka, sector head of RPSG’s retail and FMCG business said.
According to Goenka, the synergies lie in supply chain, sourcing, logistics and information technology, which will result in cost saving for both brands.
Spencer’s has eight distribution centres and Nature’s Basket has one.
While Nature’s Basket is focussed on the food business with organic and imported items and exotic ad gourmet foodstuff as the key focus areas, Spencer’s is mostly focussed on monthly grocery, apart from the food category.
“The positioning of these two brands is completely different as are the consumers for these brands,” Goenka said.
The average bill value in Nature’s Basket, at Rs 3,000, is nearly twice that of Spencer’s.
After the acquisition, Spencer’s topline is expected to increase by 10 per cent.
Aiming for profitability post acquisition, Spencer’s has already closed one of Nature’s Basket’s loss-making stores in Mumbai and another three are expected to shut down in that city.
At the time of acquisition, Nature’s Basket had 36 stores across Mumbai, Pune and Bengaluru.
RPSG inaugurated its first Nature’s Basket store at Kolkata's Park Street as part of its plans to expand the brand into other geographies.
“We intend to open another 12 Nature’s Basket stores this year, of which eight will be in the east. The locations will be where Spencer’s is already present and there is consumer pull for good quality products,” Goenka said.
After this expansion into the east, RPSG will explore other geographies for expanding the brand but will limit the scope to where Spencer’s is already present.