Dabur to take franchise route to expand retail venture

Consumer goods firm, Dabur India Ltd will start adopting the franchise route for its retail stores 'Newu' and explore smaller format stores in order to expedite expansion.

The company's subsidiary, H&B Stores Ltd that currently operates 22 'Newu' stores primarily in North India, is also looking to open up to 150 new stores in 2011-12 and enter in the western region.

It is also trying express or smaller formats that have quick turnaround time, besides focusing on 'beauty' as a category, as it looks to break even in the next two years.

"We are looking to go for the franchise model to expand reach as it is a very simple model to replicate and can offer a good return on investment. By next fiscal we should see action on that," H&B stores Chief Operating Officer Parikshit Sharma told PTI.

He said to begin with, the franchise option will be tried in North India, while company-owned outlets will be set up by next year to mark its entry into the western region starting with Mumbai.
     
H&B Stores that started operations in 2008 suffered during the 2008-09 economic downturn forcing it to go slow on the expansion and even closing down some stores.
     
The retail arm registered loss of Rs 17.83 crore in 2008-09, that came down to Rs 9.35 crore in 2009-10. It is, however, looking to kick-off again in a streamlined manner with intentions to break even in the next two years.
    
"We made a lot of mistakes in the past because of which we had to re-align ourselves in various ways, including product mix, pricing and the overall positioning of the brand," Sharma said.
    
In the last one year, the company has been able to streamline operations and finalise direction it needs to take going ahead, he added.
    
According to industry observers, H&B Stores is still a very small contributor to Dabur's topline but business realignment and favourable economic environment can help it turn around.
     
"The retail venture is still very small and has not done very well so far. However, the losses have stabilised and with the top-line and number of stores growing fast, there is a strong traction," Angel Broking, analyst Anand Shah said.

Elaborating H&B Stores future plans, Sharma said the company plans to have a total of 50 stores by March next year entailing an investment of Rs 17 crore.
    
"In 2011-12 we will become more aggressive as the plan is to open up to 150 new stores, including 50 franchisee-run operations and remaining will be owned by the company," he said without divulging investment details.
     
Besides, the company is also trying express/smaller formats that have quick turnaround time.
     
"The current stores vary between 500 to 800 square feet in size. However, we have also set up two express stores spreading across 300 square feet and they are doing well. The intention is to increase the number of such stores," he added.
     
The company will also strengthen its focus on 'beauty' as a category, he added.
     
Currently a loss making entity of Dabur India, the firm expects to break even in the next two years driven by investment and re-alignment in operations.
     
"Some of our stores have already broken-even but as a venture, we should break even in 2012-13," Sharma added.