Entrepreneur who has proved a model which was not dreamt till 2000 in India. Has been quite successful in attempting and creating a culture of Shopping from Malls.
Set Up one of the strong Distributions set up.
In my view management has been quite candid in lots of his interview about his mistakes done after the first big success and after realizing that he has been accepting it publicly and has taken gr8 steps to improve it.
The Management has strong record of execution and implementation of such large retail projects and understanding the consumers expectations in India.
20% i.e. more than 25 cr ppl visit Big Bazaar, Food Bazaar,and other Future retail joints. The highest Footfalls are in Big Bazaar. This comprises the Major Middle Class and emerging Middle Class Bracket of People.
Mr. Biyani believes that the advantage of Demographics would add close to Future Groups potential customers.
The Company has in my understanding has clearly demarcated his business in to 3 divisions, a) Retails i.e. Future Retail, b) Food and FMCG FCEL and c) Fashion apparel His earlier diversification into various products, like appliances, finance, luggage, etc (basically he targeted every money which a consumer spends). But realized that its more of a mess than success. So he has focused his strategy to 2 large areas where a consumer spends and where Future group has a strong foothold and is confident of scaling it. The 2 areas are a) Fashion Apparel and b) Food and FMCG.
Food and Apparel are one of the biggest spending brackets of middle class, compared to elite.
At present more than 40% (as reported in media) of Bigbazaar and Food Bazaar sales comprises of Future groups private label item. That means without advertising a single product on television, he is able to sell large part of his pvt label food products in Bigbazaar to customers i.e. ~25 cr ppl app.
FCEL focuses on all the private label food & FMCG items manufactured or sold in Future Retail outlets.
FCEL Focuses on 3 main areas a) Food Park, b) KB Price Store and c) Aadhaar Market.
Food Park is 110 acre Food manufacturing plant, which could procure raw materials and provide direct customers to all farmers, mandis etc in the radius of 300 kms of its location. ( Loc: Tumkur, Karnataka)
o can handle variety of food related work. In my reading through various available public information is that the company would be working in a similar way it developed brands in Pantaloon at early stage, The company could develop variety of new Food Brands under private label.
o The Focus is not only on Private label, it could also focus on tieing up with established player for new or existing products.
o As per Mr. Biyani, a Food park of this size could generate close to 5000 6000 cr of sales in a year and that could also grow. He is expecting to achieve revenue of 10000cr in FCEL by 2020.
o This will be the First Integrated Food Park in India. One of the main reasons for success of Food park is the cost management and second is the Distribution and Logistics setup. If you can scale and reach mass the food park could be a big manufacturing hub of food products.
o As per the available information from the website and from my personal experience from visiting various Big bazzar joints, FCEL at present is not into manufacturing non veg products, However they have egg based cakes of monginis sold in Future retail( not a part of FCEL).
Second is the KB Price Store, which is like in my knowledge kirana store with a Franchise model. If he is able to scale that , it could be big on long term, as a typical kirana would have limitation in no. of but a KB price, would have an advantage due to 1 point sourcing and inventory management helping it to get more SKU to sell.
Aadhaar is JV with Godrej, it is like rural mall concept.
I am not very confident what can this company be valued, as its still at initial stage and the Food Park is still to start in this year. How the park turnout would is to be seen.
However comparing other global companies in China and other developing countries, I feel if This food park is able to achieve the success, than the company could atleast maintain the 1 times Mcap/sales ratio.
At cmp of 10 with mcap of 1600 and cash of 250 cr the stock has EV of Rs. 1350. Revenue at present is 900 cr with marginal Loss at the PAT level.(Loss cld wipe out or could increase, difficult to judge at current level of business)
At present I am not able to figure out any big MOAT, except to some extent the Distribution, loyal customers, Brand, Logisitical set up.
However, I believe that if the company is able to create strong food brands like it did for BIBA, AND in pantaloons, it could start creating a moat i.e. stickiness of customers towards its food products. Like at present large set of consumers coming to Future stores, purchase Tasty Treat products, which have variety of eatables under this label.
But I also believe that similar private label could be easily done by competitors like reliance, and see why they too scale. However the difference would be the management spirit and execution capability, which always was the difference in Big Bazaar and any other food malls.
Success of the Food Park is the key to the emergence of this company.
I do not recommend anything. This is purely for my own understanding and tracking. My views are completely personal and it could be challenged with different thoughts and that is welcomed