Heritage will stake it beyond the South

The Hyderabad-based company, which has a strong presence in the South, plans to set up retail stores in metros in the West and North by October-November this year.

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MUMBAI: Retail major Heritage Foods India Ltd (HFIL) is on an aggressive expansion spree. The Hyderabad-based company, which has a strong presence in the South, plans to set up retail stores in metros in the West and North by October-November this year.

It currently has 70 supermarkets, called Fresh@, in Bangalore, Hyderabad, and Chennai.

S Jagdish, vice-president (retail division), said it is currently studying the consumer trends in the western and northern markets, and a report would be ready by June.

“We are more attuned to the market dynamics of the South. Now,  we want to mark our presence in other cities as well. But, we are  not going to enter different cities on an ad hoc basis. We are profiling the business environment, competition level, etc in certain metros and will zero in on the places by June, and open our outlets by November.”

Jagdish refused to divulge the names of the cities or the number of stores, but said Heritage Foods will not enter tier II cities for now as it wants to first make a mark in the metros.

Jagdish said the retail sector in India is expected to grow at 9% year-on-year and thus presents tremendous opportunity for expansion.

According to estimates by retail services and solutions provider Technopak Advisors, the retail industry is worth $400 billion at present, and would reach $800 billion by 2018, of which 25% would be organised retail.

Jagdish said each supermarket would soak in an investment of Rs 50-60 lakh. “Funding alternatives are being discussed and would be a combination of internal accruals, debt and equity,” he added.

In January, a private equity fund managed by Kotak Venture Funds had signed a deal with Heritage Foods to invest $10 million and money thus raised is to be used for the expansion.

The outlets would incorporate two formats. The first includes the 2,500-3,000 sq ft Flagship stores providing items ranging from beverages, personal care and home care to groceries, fruits, vegetables, and dairy products.

The second format would involve the 1,000 sq ft Daily stores providing only food items like fruits, vegetables, groceries, and dairy products.

Heritage Foods, which entered the retail market in November 2006, will add about 30 more retail stores in Bangalore, Hyderabad, and Chennai in the next 3-4 months, to take the total count in the South to 100.

It will also set up bakeries within the supermarkets to increase footfalls by the end of this calendar year, said Jagdish.
At present, about 24 Fresh@ outlets in Hyderabad have bakeries within the store space.

“Consumers visit a store more often for food items than for personal care and home care products. Hence, we believe that by adding a bakery within the stores, our footfalls, which are around 600-800 per day, will increase substantially and provide us with an edge,” claims Jagdish. He adds that approximately Rs5.5-6 lakh will be needed to set up bakeries in each store.

The company, which recorded a turnover of Rs 347 crore in 2006-07, expects to report Rs 700 crore revenues for 2007-08.

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