Retail Highlights – November 2014
Contents
Nilgiris Goes for a New Future Under Biyanis
Papa John’s Acquires Pizza Corner
Amazon.com is Set to Acquire Fashion e-tailer Jabong
Nilgiris Goes for a New Future Under Biyanis
Future Consumer Enterprises Limited the food and FMCG arm of Kishore Biyani's Future Group
acquired the Nilgiris convenience store chain. Nilgiris, an iconic brand with origins dating back to 1905
and a household name in South India, operates a franchisee operated convenience store chain with
140 stores in key urban centers in the four southern states of Kerala, Karnataka, Andhra Pradesh and
Tamil Nadu. This acquisition by FCEL will lead to geographical expansion of the convenience store
network in Southern India, as presently FCEL’s existing footprint is primarily concentrated in North and
Western India.
Future Group with an investment of over Rs 110 crores, is setting up a food park spread across 110
acres in Tumkur, near Bengaluru, India. Products developed at the food park will be retailed through
Future Group’s retail formats such as Big Bazaar, Food Bazaar, Foodhall, KB’s Fairprice, Big Apple
and Aadhaar as well as through other modern retailers. Over the past two years, the Future group has
also made acquisitions to increase its footprint and product line. In September 2012, Future Consumer
Enterprise then known as Future Ventures India Ltd had acquired 100% equity share capital in Express
Retail Services Pvt. Ltd, which runs Big Apple, for Rs.61.35 crore, strengthening its footprint in North
India. Earlier in January 2014, the company had acquired 35% stake in Sarjena Foods, the seller of
bakery products under the name Baker Street.
Papa John’s Acquires Pizza Corner
Om Pizza & Eats Pvt Ltd, the Indian master franchisee of global pizza chain Papa John’s, has acquired
bigger local rival and the arguably the third-largest pizza chain in India, Pizza Corner, for an
undisclosed amount. The Indian Pizza market is currently dominated by Domino's followed by Pizza
Hut. It is believed the terms of the transaction includes a stock deal which would give Global Franchise
Architects (GFA), the current owner of Pizza Corner, a stake in Om Pizza. Papa John’s will convert the
existing Pizza Corner stores to Papa John’s branded restaurants through Q1 2015. Papa John’s, the
world’s third-largest pizza delivery company, currently has 15 operating restaurants across India
through its master franchisee Om Pizza. The acquisition cum merger brings a phenomenal opportunity
to meet growing demands by combining Papa John’s world class pedigree with Pizza Corner’s local
expertise and would make it a strong player especially in south and Western India said John Schnatter,
founder and CEO of Papa John’s. Om Pizza, a firm backed by PE firm TVS Capital, is majority owned
by Avan Projects, owned by the Mittal family (which sold Ispat to JSW a few years ago). Avan is led by
Atulya Mittal and is focused on capitalising on the consumption-driven growth story in India.
Founded by serial entrepreneur Fred Mouawad, GFA is a Geneva-based group that builds, operates
and franchises a select portfolio of specialty food service brands. Pizza Corner was its first brand in
India launched way back in 1996 - and its other portfolio in the country consists of Donut Baker, Cream
and Fudge and Coffee World. Currently GFA has 120 stores across its four brands in India, around half
of the over 250 stores in six countries globally.
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November-30-2014
Amazon.com is Set to Acquire Fashion e-tailer Jabong
According to reports E-commerce giant Amazon.com, has completed its first level of talks to acquire
Rocket Internet-backed lifestyle e-tailer Jabong.com in a deal worth a little over $1 billion, upon
completion this could be the biggest acquisition in the history of the Indian e-commerce space.
However right now it is not comprehensible how the deal would be structured as Jabong is an
inventory-based e-tailer. The Indian government which allowed up to 51 % foreign direct investment in
multi-brand retail trading however has ensured that multi-brand e-commerce companies with FDI will
not be permitted to operate. With some meticulous structuring, Amazon can seal this deal because only
recently Flipkart bought Myntra. Flipkart-Myntra deal, pegged at around $340 million, remains to date
the biggest M&A in the e-com sector in India. Flipkart, founded by ex-Amazon employees has given
Amazon a run for its money. Jabong acquisition is more of a counter move for Amazon to up its fashion line.
It is very likely that post acquisition Amazon may keep Jabong as a separate asset, very much on the
lines of Amazon's acquisition of Zappos in 2009. However, the Jabong deal would attract intense
regulatory scrutiny given the market muscle of Amazon. Besides Rocket Internet, Swedish investment
firm Kinnevik and UK's development financial institution CDC are major shareholders. Kinnevik owns
25 per cent stake in Jabong. The structuring of the transaction would also be interesting as the fashion
portal is being merged into a global network of Rocket Internet-backed sites such as Dafiti, Lamoda,
Namshi and Zalora under a firm called Big Foot Retail. Big Foot Retail itself is said to be worth around
$2.5 billion as of September 30, 2014, as per disclosure made by Kinnevik recently based on its 34 per
cent effective ownership of the global platform.
Jabong, which is one of the two top lifestyle e-tailers in India along with Flipkart owned Myntra, reported
gross merchandise value (GMV) of over Rs 509 crore from 3.197 million orders in the January-June
2014 period. This marked a three-fold rise over the previous year.If it maintains the same growth
through the rest of the year it may end with GMV of over Rs 1,000 crore for the year ending March 31,
2015. Accepted fair valuation in speciality e-com in unlisted space internationally is pegged at 3.5x
sales, which would value Jabong at around Rs 3,500 crore. Jabong could be looking to drive a hard
bargain given the strategic play of Amazon in India and significance of the deal to win in the high stakes
game in the country. Earlier in October, Amazon's founder and CEO Jeff Bezos during his India visit
committed to invest $2 billion in its Indian operations, a day after Flipkart announced a $1-billion
funding. Bezos said he was happy with his company's run on India since it sold goods worth $1 billion
a year. "If there is an opportunity to invest more, we will," he said. Jabong was founded by Arun
Chandra Mohan, Praveen Sinha and Lakshmi Potluri in 2012. Later, Mukul Bafana and Manu Jain (now
head of Chinese phone maker Xia). Jabong and Amazon's India team have refused to comment about
the deal.
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November-30-2014