Wal-Mart makes a move on Mumbai logistics firm

WAL-MART is negotiating with Mumbai-based hospitality and logistics firm, Radhakrishna group for a tie-up or a strategic stake in their logistics company, 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 group 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 business.
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 had bought 25% in Radhakrishna Foodland. Wal-Mart is hoping to gain access to this network for its cash and carry business. Cash and carry refers to bulk sales of products to other retailers and institutional buyers. It had announced a joint venture with the Bharti group for cash and carry last year.

May intensify competition

WAL-MART’s talks with Radhakrishna is likely to intensify competition among Indian and global retail majors looking for a back-end supply chain for their shops. The salt-tosoftware Tata group had approached Radhakrishna some time ago for a buyout. Indian retail is estimated at around $ 300 bn of which modern retail comprises $ 20 bn and is growing at a robust 35% plus growth rate. There are not too many modern cash & carry formats although Indian traditional wholesale business forms a significant chunk. Metro Cash & Carry is the only global cash & carry format in the country while Kishore Biyani of Pantaloon Retail has also set up similar format called KB’s Wholesale in smaller markets.
Wal-Mart officials did not respond to an e-mail on the talks. The Radhakrishna group was started by Raju Shete, a first generation entrepreneur in 1979. Sources said that Mr Shete, a hands-on entrepreneur, may eventually sell out in the long run in the absence of a family upport to run the business. 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 the Radhakrishna group in India, people close to the negotiations said. Wal-Mart’s interest stems from the operational similarities between the Radhakrishna group’s service-oriented approach, pan-India presence and low-cost business model. The Rs 650-crore Radhakrishna group with a manpower of 16,000 people is also into front-end retail with its Foodland Fresh. A Radhakrishna Group initiative, Foodland Fresh today has the most number of outlets in the food and grocery format in Maharashtra. In fact, 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. 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 the global food-services giant, Compass Group. RKHS also has a tie-up with Ticket Restaurant, the food coupon promoter, a part of the French Accor group.