At a time when other FMCG retailers like Big Bazaar and More are consolidating, RP-Sanjiv Goenka-led Spencer’s Retail, a subsidiary of the R7,570-crore CESC, is looking to scale up.
After a lull in expansion in 2012 — when it entered a consolidation phase — and a decision to put a full stop to supermarket expansion from the current 97 stores, Spencer’s is planning to massively scale up its hypermarket presence from 28 stores to 100 by 2017. Plans are also afoot to increase the hypermarket store size from 23,000 sq ft to 29,000 sq ft.
“The hypermarket format is working for us and we are looking at a major scale-up. There are 70 stores lined up over the next 48 months. We’ll cross the 100 mark by early 2017,” Spencer’s Retail president and CEO Mohit Kampani told FE.
The retailer says it has lined up an investment of R600 crore from its parent group for the large-format expansion. At the end of the FY13, CESC’s cash and equivalent stood at R1,425 crore.
“We are looking at expanding the average real estate space from 23,000 sq ft to 29,000 sq ft for the upcoming stores as our fresh business requires more space. The fundamentals of the large-format business are very strong for us and we will open in smaller clusters of UP, AP, Delhi-NCR and eastern India,” he said.
The company estimates the cost of setting up each large-format store to be in the range of R6 crore to R10 crore.
Spencer’s inspiration seems to be Reliance Retail, which is also betting big on the hypermarket format and aims to open at least 100 such stores by 2017 from the current 17. This sudden interest in home-grown retail companies comes at a time when the likes of Bharti-Walmart and Metro are putting brakes on their expansion in large-format cash-and-carry model.
Meanwhile, Spencer’s is also looking to slow down its supermarket expansion. The company shut down at least 30 of its small stores in 2012.
“We will focus on the hypermarket format and won’t look at entering any new format soon. There will be no further expansion in the supermarket space. The 97 stores are profitable and we will continue to run them without making any additions,” said Kampani, who took over as the CEO in December last year. The average space for the small supermarket store is 2,400 sq ft.
For its hypermarket expansion, the company