Less than two years after testing the waters in the gourmet food space, Kishore Biyani-led Future Group is set to expand its newest business vertical, Foodhall. In the pipeline are plans to open two stores in Delhi NCR in February followed by one in Pune next month.
Foodhall stores are profitable and we are looking at scaling up presence," said Kishore Biyani, founder and Group CEO, Future Group.
"We are looking at opening stores in newer cities. The target to open at least 16 stores by 2013-14 is underway," Biyani told Hindustan Times.
The retailer opened its first Foodhall in early 2011, a 15,000 square foot store in Mumbai with a live in-house bakery. This was followed by a much larger 30,000 square-foot store in Bangalore.
While Future Group plans to scale up operations and catch up with the earlier plans to open more than two-dozen stores by 2013-14, it plans to eschew the grand floor-space in favour of a smaller format.
"The new stores in Delhi will be 8,000-10,000 sq ft, as it fits the market needs there," said Biyani. The first Foodhall in the national capital region (NCR) will be opened at Vasant Kunj followed by one in Gurgaon.
The company aims to roll out large flagship stores with satellite stores around them in key cities. It is in the process of studying how many satellite stores one flagship Foodhall store can command.
While the gourmet format is an expensive business to build, with high capex requirements, the margins are correspondingly high despite low intensity footfalls.
Thus, while the a large format modern retail store normally breaks even in five-six years, Foodhall gourmet stores are already in the black less than two years into their existence, riding on high margins and good product portfolio. Sources say the average margins at Foodhall is about 25%, which by Indian retailing standards is the highest.
The gourmet format food store has a long way to go to catch up with value formats. Other players addressing a shift in consumer preferences and an attempt to tap it early on include the Tatas' WestSide, Nature Basket of the Godrej group, and Spencer's.