Shrenik Ghodawat, Director, Ghodawat Retail Ltd. and managing director, Ghodawat Consumer Ltd., Sanjay Ghodawat Group, speaks about fulfilling the aspirations of real Bharat that lives in tier 4 and beyond
Nestled in the small town of Jaysingpur in the Kolhapur district of Maharashtra, is the 1993-founded Sanjay Ghodawat Group, a powerful business conglomerate that employs more than 10,000 people and runs diversified businesses. Its fast-moving consumer goods business—Ghodawat Consumer Ltd., led by managing director and chief executive officer Shrenik Ghodawat—is the largest of its businesses with a top-line revenue of Rs 1600 crore contributing about 40%-45% to the group’s revenue.
The other business, that the group is focussing on currently, is retail under Ghodawat Retail Ltd., comprising a chain of neighbourhood grocery stores named Star Localmart, which started in 2019.
The company’s play for the business is to focus purely on rural markets offering a modern retail experience to customers of Bharat.
In an exclusive interview with IndiaRetailing, the United Business Institutes, Belgium-educated Ghodawat who took over the reins of the business in 2013, speaks about fulfilling the aspirations of real Bharat that lives in tier 4 and beyond and strategies the group is adopting to become the country’s largest rural retailer. Edited excerpts…
Tell us about Ghodawat Consumer Ltd.
When we started in 2003, we were only an edible oil company. Today, we have edible oil, flour, rice and snacks, which we sell under the Star brand name. We also have real fruit and vegetable snacks under To Be Honest (TBH) brand and beverages, which include Fizzinga (carbonated drinks), Frustar (fruit drinks), Coolberg (non-alcoholic beer), and Rider (Energy Drink).
TBH and Coolberg are premium offerings. While these are available in more than 80,000 outlets across 140 cities in India and on quick commerce, the staples are distributed in west and south India through a mix of modern retail and general trade.
All products together reach about 3.5 to 4 lakh outlets and are manufactured in-house at our units in Kolhapur and Indore in Madhya Pradesh. In the initial years, we were a Rs 150 crore consumer business, today we are at almost Rs 1600 crore top-line revenue.
Are the Star Localmarts, the platform to sell your FMCG products?
The marts are not just a forward integration of our consumer business. Close to about 35% of our total sales come from our private-label brands, while the balance 65% comes from third-party brands.
We have about 70 stores currently in Maharashtra and Karnataka, which are 100% owned and operated by the company. Here, we sell more than 3,000 different types of stock-keeping units (SKUs), which are a mix of Star and other national as well as regional brands.
This year, we are targeting about Rs 100 crore in revenue from the retail vertical, out of which around Rs 30 crore to Rs 35 crore will come from Star brands. The balance will come from other brands.
Our vision is to become India’s largest rural retail chain, selling groceries in tier 4, tier 5 and tier 6 towns and villages of India.
Will you only focus on tier 4 and beyond?
Yes. The metros and tier 1 markets are fairly serviced by modern trade, e-commerce and quick commerce. Now all players are moving to tier two.
We want to go to the bottom of the pyramid, where most of these other guys will not be looking at for the next five to seven years. There are no organised supermarkets in such places. We want to capture that space completely in terms of retail availability and customer loyalty.
Besides, we have a fair understanding of the rural markets in India, especially in Maharashtra and Karnataka. We know the challenges a shopper faces when s/he is living in a small village with a 50,000 or 60,000 population.
Are you a value grocery chain?
We are not focusing on value as a proposition. Our objective is to cater to aspirational customers within rural markets—the 10% – 20%, who want to use brands, and have the disposable income to buy them but do not have access to them.
Our proposition is not ‘buy cheap’. Our proposition is: You had to travel say 20 kilometres or 30 kilometres to buy certain products, now we are bringing them near you and that will come at some cost.
We are also piloting a home delivery model in rural areas.
So, you don’t offer discounts?
We offer everything that makes up for a modern retail experience like discounts and promotions. That said, the discount may not be as steep as offered by say a D-Mart. Because to go there, you have to travel 20 km and wait for 20 mins in line. All that is getting eliminated in the store next door to you, which is a Star Localmart.
Look at it as a transitional store for people who are moving from kiranas to a supermarket. We offer the best of all—national, regional local. As a practice, 70% of the products are either national or regional champion brands while 30% products are local favourites.
Typically, what is your store size?
About 1,000 sq. ft. to 1,200 sq. ft. The stores are like mini supermarkets. However, we have ensured that while the stores look modern, they are not dauntingly so.
A local ecosystem has been created to operate the stores. That is why we named them Localmart.
What are your expansion plans?
We have a clear vision for the next five years—we will open 3,000 stores by FY2029. However, we do not want to go outside five states—Maharashtra, Karnataka, Andhra Pradesh, Telangana and Goa. We want to go deeper into every village in these states.
The reason we’re focusing on these is that we understand the buyer behaviour in these regions.
Furthermore, our goal for the retail business is to clock Rs3,000 – Rs3,500 crore in five years.
It took almost 5 years for you to reach from one to 70 and now you want to go from 70 to 3000 in the same time….
The journey to 70 came with many learnings. When we started, we opened stores where space was readily available, we even tried franchising. And we went to 90 stores. Soon we learned that it’s not just about opening a store; people need to have a reason to come to you. So, we brought in data science and shut down 40 stores, bringing the count down to 50. Then we relocated some stores and again opened 20. Now, each of these has been profitable from the first month.
We generate around Rs 7 lakh sales from 1,000 sq. ft. in a month—so our sales per sq. ft. is roughly around Rs700.
In fact, for all 70 stores, we are stable at store level and by March, we will be corporate-level profitable—Profit Before Tax positive.
Is there a strategy to achieve your goal?
By the end of this fiscal, we’ll be close to about 110 to 120 stores. Next year, we want to take that to 250 stores and then keep doubling every year from there. Also, it’s a borderline state strategy—we go adjacent and we go deeper. For example, we started with Kolhapur and Sangli, then we opened stores in Belgaum, then we opened in Dharwad and so on. Now we are looking at Solapur, then at Osmanabad, Latur, Beed, Parbhani.
These are places where you still don’t have the D-Marts or the Reliances of the world and they are still quite sizable in terms of localities.
We have the first-mover advantage in such areas. In another two to three months, we should be implementing a monthly basket loyalty programme.
We are now standardising skills, processes, planograms and systems. We are building a playbook to ensure whatever we learn from here on is replicable. Our location blueprint for new stores is built on a lot of data science.
Do you buy or rent spaces?
We have an asset-light model. Our investment is only in movable furniture and stocks. The landlords must turn the store from bare shell to movable—we have clear guidelines on how the store needs to look and based on that, we tie up with them for anywhere between three to nine years.
Our new store opening teams have now started looking at people who are willing to look at this as a business with no risk of operations. We are even exploring a revenue share with the landlord.
Will you also offer e-commerce?
Home deliveries are the first step. In quick commerce and e-commerce, delivery and dark store operations are the biggest costs. Our physical stores will serve as dark stores while we will also do front-end retail and eventually offer the convenience of ordering from our app and website. But we may partner with a last-mile service provider and not get into the entire value chain of e-commerce.
Do you employ local talent?
Our retail business employs about 400 people and 100% of our people at the stores are locally employed with 50% being women.
To train them, we use learning management systems and train the trainer, which is why we open one district at a time to look at adjacencies.
Do you use technology in your operations?
Typically, we invest 5% of our revenues in technology at this point and it will grow as we expand.
We have a full enterprise resource planning (ERP)system. We have a warehouse management system as well as an automated replenishment system. We know exactly what our customers are looking for in every location we are present in and use data for demand forecasting based on past behaviour. Our assortment, stock, and SKU sizes are tailored accordingly.
We are now implementing a retail digital audit software, where a person just has to scan photos of each shelf and it will determine what is the SKU count, and items that need to be replaced or replenished.
We are now coming up with a software for digital planogramming. It will use the cameras in the store to tell us if products are indeed placed as per the planogram and priced as per the current scheme.
In addition to these video analytic tools, we are creating a data lake that will give us predictive analysis in terms of buyer behaviour.
Can you share some insights about rural consumer?
You’ll be surprised to learn that almost 50% of our transactions are digital—either UPI, debit cards or digital wallets.
To encourage digital adoption, we want to go one step ahead by offering free internet to those coming to our stores. We might perhaps tie up with a service provider and provide them with branding.
Another insight is that it’s not that people in rural areas have low disposable incomes. The challenge for them is accessibility or availability. If we can give them that they will be happy to spend with us and it could open up avenues of concessionary incomes for us in the form of tie-ups with educational platforms, NBFCs, and digital rural health providers in the time to come.
