Interview with Mr Thomas Varghese, CEO, Aditya Birla Retail Limited

IndiaRetailNews.com, July 5 2010 Facebook Twitter Linkedin Email

The Aditya Birla Group entered the supermarket business with a bang through its acquisition of Trinethra in 2007. After a rollercoaster 3 years, ABRL looks poised to take advantage of the revival in consumer demand, with expansion plans in both the supermarket and hypermarket formats. Mr Thomas Varghese who took over as CEO in 2008 has implemented several changes to set the foundation for this growth. India Retail News caught up with him to discuss these plans and what drives him as a retailer. Facebook Twitter Linkedin Email

IRN: Please tell us a little about yourself. How did you become a retailer?

Thomas: I started my career as a Senior Management trainee with the DCM group and worked in SRF, Indian Organic Chemicals Limited and Indo Rama Synthetics.  I then joined Grasim in 1999 as CMO (Chief Marketing Officer) of Grasim's Pulp and Fibre Business.  In mid 2007 I moved as Business Head of the Pulp Operations in AV Birla Group looking after 5 Units viz. Grasim Industries Limited, Kumarapatnam (Pulp & Fibre Units), AV Cell, Canada, AV Nackawic, Canada & Birla Lao Pulp & Plantations Co., Ltd., Lao PDR.  I have now been with the group for more than 10 years and was given the opportunity to head the retail business 2 years ago.

 

IRN: What are Aditya Birla Retail's top 3 strategic priorities at the moment?

Thomas: The first priority is to strengthen our connect with our customers by delivering daily on our value proposition across both formats.   Our internal priority is to continue to strongly implement the various initiatives we have in place to continue our profitability trajectory.  Our third priority is to open great stores which meet our customer and business objectives that we have set for ourselves.

 

IRN: What differentiates Aditya Birla Retail from the other retailers in the country? What is the positioning?

Thomas: Our value proposition in the supermarket space is hameesha extra.  We are essentially a community store and we deliver all the basic requirements of the customer's daily, weekly and monthly shopping basket at affordable prices.  Our positioning of Hameesha extra means that we strive to deliver customers extra quality, extra savings, extra service and care , extra range than competition.  Our hypermarkets, more mega store has the clear premise that we will offer to our customers everyday lowest prices guaranteed from a store which has a huge range, variety, great products which meets all the shopping requirements of our customers.

 

IRN: Can you elaborate on your private label strategy? In which categories do you see more potential for private label? How is the consumer responding? How is competition responding?

Thomas: Our private label portfolio is designed to bring to customers quality products from the house of Aditya Birla at affordable prices.  Basis our experience over the past three years, we have introduced private label across multiple product categories including staples, processed food, personal care, apparel, footwear & general merchandise.  We have been able to establish significant traction with our customers with our products doing better than the benchmark brand in several categories. Private label is as yet a small proportion of the overall FMCG space so this will be a continuing focus area of ours to build market share with customers.

 

IRN: What are retailers doing wrong in the country today? What are they doing right?

Thomas: In my view, In retail, having a clear business model and being true to the model in all business decisions is very critical.   In the past retailers, including ourselves, have faced issues because of losing fidelity to the model and entering into properties which have very high rents and hence of the wrong rent to revenue ratio.  In the last 2 years, all of us have corrected these mis steps and have exited unviable properties or renegotiated rentals.  Recently, I have seen a few instances where deals have been struck by a few players at significantly higher rentals and I think that is a mistake.  But largely, industry seems to have learnt from the mistakes of the past.

 

IRN: How do you see the organized Retail industry evolving in the short-term and medium-term future?

Thomas: Organized retail the world over has grown with the growth in GDP of the country.  With India's growth story firmly in place, I believe that organized retail will gain strength in the short and medium term.  In particular, I think our customers have appreciated our value proposition and as long as we continue to deliver on our customer promise, we expect to continue to grow strongly.

 

IRN: What are your future plans with Aditya Birla Retail?

Thomas: We will continue our focus in delivering our customer proposition, our profitability trajectory and focused and planned expansion over the coming years.

 

IRN: What are the challenges involved in scaling up?

Thomas: Our key challenges are systems and processes and people like any other retailer.  We have stable processes for scaling up which we have honed over time. We have trained people in place in both formats who have experience in opening great stores and we will continue to train them and build this capability.

 

IRN: What is your opinion on opening up FDI for the sector? As chairman, CII National Committee on Retail, what items are on your agenda when lobbying with the government?

Thomas: The key priority items are 1. Portfolio investment should be permitted in retail as that will improve access to funds that the industry needs to establish critical infrastructure.  2 FDI in Multi Brand  Retail to be permitted.In fact since it is a politically sensitive issue we could put a caveat on some significant % of investments going to build back end Infrastructure, Supply Chain, Cold chains, etc 3) Retail should be accorded industry status since it is one of the largest employers in the country and  4) .  The licensing and clearance process needs to be streamlined and local government needs to help industry and developers set up more retail zones in the city.

 

IRN: What fascinates you about Retailing? What keeps you going every day?

Thomas: This is a 24 by 7 by 365 day business and you can never afford  to take your eyes off the road.  I enjoy the endless variety and the sheer dynamics of operating a retail company as your customers and your employees give you new learnings every day.