In a first-of-its-kind move of two rivals joining forces, Kishore Biyani-owned Future Consumer Enterprise (FCEL) has inked an agreement with Trent Hypermarket, the retail joint venture between Tata Group and UK-based Tesco, to push its FMCG products through the latter’s Star Bazaar outlets.
Brands like Tasty Treat, Golden Harvest and Clean Mate, which until now were available predominantly in Future Group’s retail chain stores such as Big Bazaar, Food Bazaar, KB’s and Nilgiris, among others, will now be available at Star Bazaar outlets.
Star Bazaar may be a rival to Future Group’s Big Bazaar hypermarket chain, but Biyani also sees it as a stepping stone towards scaling up the fast-moving consumer goods (FMCG) business.
“This (Star Bazaar partnership) is a stepping stone for us…We believe we have a chance to become among the top three FMCG firms in India,” Biyani said.
FCEL currently sells 350 stock-keeping units (SKUs) across 31 brands. The plan is to scale it to 1,000 SKUs over time, Biyani said.
As a part of the deal with Trent, FCEL will supply 140-150 products in the first leg to Star Bazaar’s 22 outlets across Maharashtra and Karnataka. FCEL is also in talks with other retail chains to launch its products. The company is also testing waters in Banaras and Uttar Pradesh to sell its products through the traditional mom and pop stores, just like other FMCG companies.
As a part of a pilot project, FCEL has tied up with a distributor to sell food items under its Tasty Treat brand across traditional retail stores in Banaras. Over time, the company may tap traditional retailers in other cities as well.
“We have started the pilot two weeks ago and Tasty Treat has been introduced in 5,000-6,000 stores in Banaras. One by one we will introduce more brands in stores in Banaras as well as explore other cities,” Biyani said.
FCEL reported revenues of `1,317 crore in 2014-15. Biyani expects the number to go up to `4,000 crore by 2016-17.
According to analysts, given the huge size of the traditional retail market, FCEL’s move is in the right direction.
Boston Consulting Group estimates the Indian retail market to top $1 trillion by 2020 from about $600 billion in 2015. The traditional trade is expected to grow at 10% annually to around $900 billion in the same period.
FCEL’s move to sell its products across Star Bazaar and other retail outlets opens avenue for Biyani, who has in the past shared a wider ambition to garner `20,000 crore from sales in the FMCG business by 2021. The plans also include a big thrust on food processing.
In 2014, the Future Group opened its first food park in Tumkur, Karnataka. The company is looking to come up with a similar food park in West Bengal.