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'We Need An Indian Food Company To Emerge'

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Kishore Biyani is back to what he does best and that is to find opportunities in the obvious. Being an acute observer of daily events and changing sociological structures in this country he has now taken a big bet on becoming a FMCG Company. In his meeting, with BW's Vishal Krishna, the conversation was free flowing with no specific agenda. He believes that the next decade of consumption will be led by Indian women and he is preparing his company for the generation born after 1995. Always ready to listen to what you know before he begins his conversation, Biyani believes that the retail revolution is going to get bigger than what we have witnessed in the last decade.  So, when he comes to the conference room fifteen minutes earlier for the interview, he spends the time listening to the experiences of the reporter. Then he unveils his plans to be an integrated food retailer and manufacturer. Here are the excerpts:

One of the problems with retailing today is related to staff retention and training them about quality of service, how do we get the right people for the right job?
That is a big problem in India today that we are all trying to solve. Until the sales staff people are not considered the best groom for the bride it is going to be difficult. We have an incentive programme for people and are doing a lot of work in this area. We are also trying to get people from the Philippines to work in the retail industry (if it is possible and if it is allowed). We are also increasing our hiring from the North Eastern regions because they serve the customer the best. "Right groom for the bride" is necessary and training forms a major part of making sales' staff find retail as an industry that builds careers. Recently at the world retail employees day ceremony held by B S Nagesh's trust, TRRAIN, we celebrated the spirit of retail associates and made these employees feel that they belong somewhere and that the industry cares about them. Nagesh and I keep speaking about various training methods and how to make people employable in retail.

Retail is also an industry plagued by inefficiencies in store operations, middlemen, logistics and product delivery, where are we heading in terms of creating robust processes this decade?
There are a few inefficiencies in every system. But in the case of middlemen, remember that they add value at a cost which is much lower because they understand the farm ecosystem. Remember if we are saying all middlemen are making money then India would have been a very rich country. In terms of farm produce it is the transportation charges that are adding to the cost of the fruits and vegetables in the cities. Yes, there are inefficiencies in the supply chain and it is an opportunity to change them. There can be bad elements in the system too. India is an interesting country and understanding it is a task. I look at the world very simply - how many music notes are there- seven; how many primary colors are there - five: seven other colors, emotions- nine; everything is recorded in the world; nothing new is happening. Look at mythology, history, how legends have shaped up - nothing new has happened and everything is recorded. We only have to learn from them.

Why do you think value added food will be the biggest business five years down the line?
I believe, in India, we need an Indian food company to emerge. Our group is in the forefront of retailing. We understand and always learn from cultures and ethnicities; their food habits, their tastes and preferences. Food is equal to culture- you cannot change culture. 15 years ago we identified ethnic fashion and we created consumption in that category, but it is losing the race now and will need a rethink that business.  We have a new vision for the group. We have created three companies. One is the hyper and super market company. The second is the fashion businesses and the third is the food and FMCG company which will be the major focus for us in the coming years. The food park that we are building is a mind blowing development.  What we have done is to create four supply chains: supply chains for dry grocery, for fresh products, for dairy and for processed foods. In the fresh business we will use Future Farm Fresh Company will collect fruits and vegetables from our park. All our retail chains will have access to fruits and vegetables collected by Farm Fresh. There are 35 sourcing offices called Future Agrovet that can become aggregators of the produce that will be supplied to the food park. Then comes the food processing part where my plans are to add value by processing the food.

In dairy we need to create a supply chain. I am staying away from it for a while because Nandini in Karnataka and Amul across India have really done well and I cannot take them on in milk. But I might venture into the category of value added dairy products. It is a big plan. Today we have 200 KB's Fair Price in cities for staples and daily needs. More acquisitions similar to the Big Apple (10 stores) takeover are in the pipeline. We will truly be a farm to fork company. For rural regions we want to build Aadhaar wholesale in to a big business. We will identify 10000 franchisees to expand the KB's Fair Price Shop and our food park is going to be the back bone of our stores. We made people entrepreneurs through the Aadhar concept and we now want through the KB's Fair Price Shop. Most food parks are doing it for a product in the B2B business; we are completely different in our thinking and we will do B2C and B2B.  This business can do Rs 3,000 crore in one year and Rs 10,000 crore in the long run.

Do you think the food park will create productivity in farming methods?
Productivity in India is Rs 50,000 per acre to Rs 1,50,000 per year; who wants to live with such low returns. The farmers need to be linked to manufacturing. That is the mentality behind the food park, people (consumers) have to pay for value added food and they are ready to do that because of changing social habits. The customer has to pay a premium for finer readymade food. In India I have seen people show off their wealth and we have moved from cows to cars (jokes!). Remember that India will change from a wealth seeking country and time will be spent on better things in time to come. This is where the consumption story comes in, it is a huge opportunity.

What do you think of the e-commerce explosion and your other fashion formats?
 We are not doing much in e-commerce and smart phone applications. I need to make money and that is how I am thinking, profitability is more important for me nowadays and a lot of time is spent in planning the food park. Building the food and fashion strategy is key for me. Our 24 fashion brands under Indus League are doing well. Central and Brand Factory will both give us a turnover of Rs 4,000 crore.

Who will buy value added foods and where is the opportunity?
Chinese food is big business; Capital Foods is what we have invested in and that category is the future. Broccoli and Iceberg Lettuce too have become popular vegetables. The biggest thing is women shopping over the next decade and the way they are changing consumption. Firstly, understand that we want to be in the entire food "value" segment and not necessarily focus on perishable food alone. Somebody has to do this from farm to retail (integrated play), create a model that no one has done so far and it is about time someone did this in our country. China is a leader, but the world is looking towards India for processed food. No one wants to operate in China because of various issues such as labour and pesticides usage. What is the landscape of food in India? We know because we have all the data as a retailer. We are talking about creating value from farm to packaged, branded and processed food. The farmer will have a cooperative to go to, we will bring an input company, and we will collect and grade the material. The FMCG companies can manufacture and pack in our park. Our group will focus on export products and we can supply to wholesalers and other retailers too. We will have a cross channel distribution and we will control it. We are training a set of people for this. We are doing value addition in global standards for food products. India is the largest producer of fruits and vegetables and everything gets consumed here. Grading, pulping, milling, warehousing, cold storage, packing houses, the entire infrastructure is available to FMCG players in this food park. We can lease the factory to FMCG players. They will bring their machines and do the value addition. Today, in food processing, 13 per cent of the cost is supply chain; we aim to bring this down for the customer and our partner. We are identifying land in MP too- where wheat, soya and grains are grown in plenty. 

More than Rs 500 crore is the investment here and the labour will be local. At least 2,500, or more, people will be here to work. Any company can come and take food from us. We haven't done any tie ups with the farmers and FMCG companies. But we talk to everybody about the prospects. The moment you start tie ups, you need to buy from farmers and we will do this when we are ready. We can reach all southern and western states with this plant.

What is the bet that food processing will succeed?
Now is the time for someone to do it. There is no doubt that this is big. When one plans his business with a market linkage it works and the older food parks may have not planned that. But ours is a journey. You can learn and correct yourself in this case and not in the case of the movie business that I produced all those years ago. The consumer decides on a Friday and your fate is sealed. Not all products will fail, but we can be successful in the long run. We know breakfast cereals and ketchup will do well. But we can go beyond these products. We will put some of our factories and Capital Foods is coming to the Tumkur Park. Can we become top three FMCG company? But I don't know what will happen, let us see what happens. The idea has been there a long time, from garment manufacturing to fashion and food retailing to food processing. We got it right in fashion and food retailing; we can get this right too. Can we grow Olives in India, imagine that! It all depends on what we do, mushrooms, broccoli gives better value and nutrition than cauliflower. (Our visions have to meet, Praveen's and mine). We get all our data on food from weddings.  The consumer needs to be conditioned and he does not know what he wants. Our weddings show a variety of food nowadays with continental food becoming popular. Young people don't eat Indian food, they eat exotic food. Market research will only validate what we think; it cannot tell us what we have to do.

Where do you learn these things about how young Indians are changing their food habits?
I go to a public gathering regularly to learn new things because food and fashion is what you can observe in these gatherings. In Amritsar, 60,000 people come to the Golden Temple everyday: 60 per cent are youth and most of the girls wear jeans; this was not possible ten years ago. For this I have identified Jealous21 as a brand that can be big for us. Women are a big segment going forward. We see fatigue levels in the ethnic segment, but we need to bring fusion brands. The retail business is hard and the truth in the consumer business is that not all are going to be successful (going back to the movies example).

Was it emotional when you sold the fashion format Pantaloon?
I am close to Central and Brand Factory now. No emotions! I am not worried about what has past.