Retail major Trent is looking to position Star Bazaar, its supermarket and hypermarket chain, as its third growth driver after Zudio and Westside, informed sources have told FE. The plan is to accelerate store additions, drive affordability and push private labels aggressively under new head Neville Tata, who has taken up an executive position at Trent Hypermarket, the 50:50 joint venture between Trent and UK-based Tesco that runs Star Bazaar outlets in the country.
Star Bazaar will add around 20-25 stores in FY25, taking the overall footprint to around 90 stores by the end of the year, retail industry sources said. At the end of FY24, Star Bazaar had 66 supermarkets, which increased to 72 in the first quarter of FY25 covering 10 cities. By FY26, the plan is to touch around 110-120 stores covering around 15-20 cities.
A mail sent to Trent on its strategy for Star Bazaar remained unanswered till the time of going to press.
Neville, 32, who is the son of Trent chairman Noel Tata, is keen to tap into the growing organised grocery retail market in India, which is pegged at $30 billion in size, according to estimates by retail consultancy Technopak. “At 5% of the overall grocery retail market, which is estimated at $600 billion, the organised grocery retail market in India has a huge runway for growth,” Arvind Singhal, chairman, Technopak, said.
Much like rival DMart, Trent is likely to take a clustered approach with Star Bazaar stores, setting up outlets in close proximity with each other and targeting a few states such as Maharashtra, Karnataka, and Telangana to create local scale, improve cost efficiencies and maintain a tight footprint of stores, persons in the know said. The emphasis will be on sharp pricing and a focus on fresh and own brands or private labels, executives in the know said.
During the recent June quarter results, Trent said that its revenue share from private labels had increased to 72% from around 63% a year ago. This number could touch 80-85% by the end of FY25, experts said.
Trent Hypermarket saw a 21% year-on-year increase in revenue to Rs 2,210.53 crore in FY24. The JV narrowed its net loss to `0.67 crore in FY24 versus a loss of Rs 102.86 crore reported in FY23, Trent’s FY24 annual report said. Trent has funded the losses in the Star Bazaar business mainly through the liquidation of certain financial assets and the issue of equity, sector analysts said.
Trent also operates Star Bazaar stores along with Zudio outlets through another company called Fiora Hypermarket. Fiora Hypermarket reported a 2.71% year-on-year increase in revenue to Rs 192.33 crore in FY24. Net profit came in at Rs 12.47 crore in FY24, a growth of 4% versus the previous year.
In a recent report on Trent, brokerage Motilal Oswal said that Star Bazaar offered 20-30% savings to consumers with a focus on private labels. The grocery market in India provided strong tailwinds for growth, supporting Trent’s overall focus on Star Bazaar, the brokerage said.
“In FY24, despite an improvement in gross margins of 150 basis points versus last year, Star Bazaar posted earnings before interest, tax, depreciation, and amortisation (Ebitda) of Rs 25.5 crore. This is lower (by 85%) than the Rs 170 crore Ebitda reported in FY23,” it said.
Ebitda margins in FY24 came in at 1%, which could be due to the re-classification of lease liability and the cost of modification of stores, the brokerage added.
While Star Bazaar, experts said, would need funds for its expansion for a year, it would begin to fund its growth as the business expanded and its footprint of stores increased.