Mumbai company may help Wal-Mart get moving

Mumbai company may help Wal-Mart get moving

Author | Source: The Economic Times | Thursday, May 24,2007 9:28 AM

Mumbai company may help Wal-Mart get moving

MUMBAI: US retail giant Wal-Mart is negotiating with Mumbai-based hospitality and logistics major Radhakrishna Group for a tie up or strategic stake in its logistics offshoot Radhakrishna Foodland.

Top Wal-Mart officials visited a few of the company's back-end facilities across the country recently and discussed a partnership with senior officials.

“Wal-Mart is interested in closely working with us but it is too early to comment on where the discussions will take us. I have nurtured and run this business and intend to be a part of it as long as I can,” the firm's founder Raju Shete told ET.

The Bentonville, Arkansas-based company is aiming to build a vast supply chain network comprising warehouses, storage and transport facilities and a vendor base that will feed its upcoming cash-and-carry joint venture with the Bharti group.

Radhakrishna Foodland, which began as a captive distribution model for the group, has now farmed out into a massive services model providing logistics, distribution and back-end solutions to top retailers and corporates such as Pantaloon, Metro Cash & Carry, McDonald's, Subway, Pizza Hut, HLL, Cadbury, Amul, ITC, Venky's and Chambal Fertilisers, among others. In 2003, Warburg Pincus bought a 25% stake in Radhakrishna Foodland.

Wal-Mart is hoping to gain access to this network for its cash-and-carry business, which refers to bulk sales of products to other retailers and institutional buyers. Wal-Mart, which operates on a low-cost business model across markets to offer the most competitive prices at the front-end, is believed to have been impressed with the efficiencies offered by Radhakrishna in India, people close to the talks said.

Its interest stems from the operational similarities between the Radhakrishna group's service-oriented approach, pan-India presence, low-cost business model.

The US company's talks with Radhakrishna are likely to intensify competition among Indian and global retail majors looking for the perfect back-end supply chain for their shops. The salt-to-software Tata Group had approached Radhakrishna sometime ago for a buyout.

Indian retail is estimated at around $300 billion. Of this, modern retail comprises $20 billion and is growing at a robust 35%-plus growth rate. There are not too many modern cash-and-carry formats, though Indian traditional wholesale business forms a big chunk.

Currently, Metro Cash & Carry is the only global such format in the country while Pantaloon Retail's Kishore Biyani has also set up similar formats-KB's Wholesale-recently in smaller markets. Wal-Mart officials did not respond to an email on this issue.

The Radhakrishna group was set up by Raju Shete, a first-generation entrepreneur in 1979. Sources said Mr Shete, a hands-on entrepreneur, may eventually sell out in the long run in the absence of a family back-support to run the business.

The Rs 650-crore Radhakrishna group, which boasts of a manpower of 16,000, is also into front-end retail with its Foodland Fresh. This venture today has the most number of outlets in the food and grocery format in Maharashtra.

Incidentally, US retail major Shoprite is also understood to have expressed interest in teaming up with Foodland Fresh for its retail foray, sources said.

Like Wal-Mart, Foodland Fresh has adopted a 'in the community' approach by playing an active role in issues related to the environment, consumer health, hygiene, sanitation and local employment. For instance, Foodland Fresh employs people from local neighbourhoods in which they trade their store operations.

Another group company Radhakrishna Hospitality Services (RKHS) provides high-end catering services and is equipped to service even remote locations such as oil rigs.

RKHS has a tie up with Eurest International, part of global food-services giant Compass Group. RKHS also has partnered Ticket Restaurant, the food coupon promoter, which is part of the French Accor group.

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