The forthcoming of future group?

It was around 2005 that many non-metro cities of India started witnessing the sky-high shopping malls erecting. These places began a new era of the Indian consumption journey. While most people in these cities would crib about the high price the brands would ask, one sector people were most happy with was the retail. Big Bazaar, Central, Brand Factory, Pantaloons, and Indigo Nation are some names that are known to everyone. All these names were once under the conglomerate of the ‘Future Group’. Future Consumer Enterprises Limited, owned by this Future Group, once claimed to shape India’s consumption journey, is now struggling to shape its future.

This is the piece about the future of the Future Consumer.

The Past

The era of 1993-2015 has seen leaps and bounds increase in the income of an ordinary Indian. This enthuse the consumerist fervor and pushed India further to become one of the world’s biggest consumer markets. With the rise in income, the expectations of the Indian consumer grew too. Here arrived the Future Group (started in 1996) with its retail. The Future Consumers Limited also called Future Retail came up with stores in all domains of the retail sector. Also, all these stores established themselves in the years to come.

The stores were related to FMCG, clothing & apparel, electronics, sports, and lifestyle. Big Bazaar was the first to start in 2001, and then came the tsunami of Food Bazaar, Home Town, Lifestyle, Hypercity, Central, Pantaloons, Brand Factory, eZone, Planet Sports, WH Smith book store, and many more. In addition to being a supplier, they also came up with manufacturing their brands. For instance, ‘Premium Harvest’ was Future Group’s production of daily food staples like wheat flour and rice. Indigo Nation and Scullers were their fashion brands.

The Present

There seemed no stopping for the Future Retail. In 2010 Republic Day Sale, they clocked a business of over ₹200 crores just within 4 days. It was their strongest chain for the Future Group, earning $14 billion in the year 2014. Brand Factory, Central, Big Bazaar became household names. The marketing and placing of stores is a matter of case study. Let us see it this way. Future Retail has its stores. This store sells most stuff that comes from the manufacturing of Future Group. Nothing was going wrong.

In 2015, Future Consumers Limited bought Bharti Retail. Bharti Retail owned 570 stores of EasyDay in partnership with global retail giant Wal-Mart. In 2017, the Future Consumers Limited bought another popular retail chain of the Deccan- ‘The Heritage’.  By 2019, Future Consumers Limited held over 1700 stores across India in Big Bazaar, EasyDay, Hypercity, Heritage, Food Bazaar, and FBB.

The Flaws

One mistake that every retailer in India did was to undermine the power of e-commerce. With the advent of Flipkart, Amazon, and Snapdeal, the market dynamics changed. The consumer was attracted to this new oracle of Indian retail. This space was even more squeezed with daily essentials suppliers like Big Basket, and Grofers. On the other hand, other retail competitors picked the trend early. Bharti Retail (EasyDay) and Heritage Supermarkets took an early exit from the business. Astonishingly, they sold themselves to the Future Consumers. 

Reliance Retail, another giant in the business, already started moving to e-commerce. It might even launch its website against Flipkart and Amazon under the flagship of Jio. However, it plans to stay in the daily essentials business for the time to come.  Aditya Birla Group-backed ‘More Supermarkets’ reformed its strategy. Apart from going online, it stopped coming up with new ‘More Mega Stores’. Rather, it focused on community-based smaller stores that can tackle the e-commerce business on essential goods front. D-Mart has been the only exception that has stuck to its core business. The reason for the success can be attributed to the successful marketing of its low prices; and its meticulous approach when starting a new store. D-Mart started only 196 stores in the long run of 17 years. However, nothing new can be said about its future strategies and adaptability.  

Against its competitors, the Future Consumers’ hands were already full with new acquisitions. They kept investing their money in brick-and-mortar stores while others either changed with time or simply chose to exit.  The consequences were harsh. Future Group promoter Kishore Biyani and his family kept buying the chains like Heritage and EasyDay by raising debt from the market. To raise the loans they kept pledged their shareholding in Future Retail. They struggled to repay. Currently, their share price is 83% down in this financial year, trading at a five year low.

The Future

The total debt on the entire Future Group is $1.7 billion. Recently, Future Corporate Resources Private Ltd (FCRPL), a Future Group company, defaulted on its debt payments. IDBI Trusteeship Services took over the pledged shares.  The Biyani family owns 49.5% of Future Consumers. If the shares pledged against the debt are taken over, Kishore Biyani and his family will be left holding just 8% in the company, effectively losing control over the Big Bazaar parent firm.

The fact is that once a gold mine FMCG is now struggling to reduce the losses. It’s PAT (profit after tax) fell by 65% by FY 2020 on Year-on-year basis. The fall was 107% in 2017, and 34% in 2015. So one can see that fall is consistent in the past five years.  Its stock was trading at an absurd high of 20 times the book value during the peak market value. The earning per share fell by 73% year-on-year by FY 2020. Besides Future Consumers, Future Lifestyle Fashions and Future Supply Chain Solutions broke by 55-75% of their value by the end of FY 2020.

The Debt-to-Equity ratio rose from 0.4 by FY 2019, to 1.3 by FY 2020. This shows that things are quickly getting out of hand.

The Future Retail started putting up the fight. In November 2019, Amazon invested ₹43000 crores in the Future Retail, which is now called Amazon-Future Retail. Skechers, the popular footwear brand amongst the privileged, took over the entire joint venture that it had with the Future Group. The Future Group is in plans to sell off its insurance Future-Generali, a joint venture with Generali Insurance of Italy. The Future Group plans to reduce its dependence on Future Consumers in the next three to five years. They want to move to other avenues like e-commerce and rural distribution networks. Azim Premji backed ‘Premji Invest’ is in talks for taking over India’s largest retail chain of 1700 stores across 231 cities. 

The Final Word

It was not wholly the fault of the FMCG giant. India started seeing a slowdown since 2017 owing to demonetization and GST mayhem. National Statistical Office (NSO) data showed that the consumption of FMCG goods too fell to its worst in the past 42 years. When not all this was enough to break down the company, there arrived the Coronavirus lockdown that ended all the hopes for all the struggling companies. 

Nevertheless, the Future Group has a huge debt to pay. It is getting tougher to infuse more capital. It will be miraculous to see if the Biyani family sails through this crisis unhurt. The future of Future Consumers Limited is bleak.