The Hindu Business Line : Nilgiris to expand franchisee network

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Chennai Feb. 12 Retail chain Nilgiris Dairy Farm has drawn up an aggressive growth plan for its own brand products in bakery, dairy and foods as well as for its franchised retail chain across South India.

The new management team of Nilgiris, headed by Managing Director Mr N.C. Venugopal and Chairman Mr Raja Chellayan, has drawn up a plan entailing Rs 120 crore of investments to increase its store network strength to 500 from the present 40 stores by 2010.

Store design

Refuting reports of a sell-out by the present majority stakeholders of Nilgiris, private equity firm Actis and GIC Special Investments Ltd of Singapore, Mr Venugopal told Business Line that Nilgiris has commissioned a professional design agency and a creative agency to draw up a new and contemporary store design which could change the overall look of its stores as well as its signage while keeping its 100-year-old brand values intact.

The design agency has embarked on a three-week study before drawing up a redesign plan.

Mr Chellayan pointed out that Nilgiris could well be considered a pioneer in modern retail. Now, the investment plan is in place to expand manufacturing capabilities, technology and its supply chain.

Nilgiris' expansion plan for the next three years will be confined to Southern India where its strengths and brand recognition are high.

Expansion

While the Nilgiris management, with its 2,000-strong employee base, will focus on developing the entire back end, expansion at the retail end will be solely through franchisees for which the chain is in the process of identifying entrepreneurs.

Mr Venugopal said that Nilgiris is in the process of setting up and enhancing its distribution and satellite centres in the four States.

The chain, while undertaking direct distribution of its milk and dairy products, is also looking to increase the presence of its Nilgiris brand of bakery and dairy products in other stores, apart from being retailed through the Nilgiris chain.

Build equity

This, he emphasised, helps build equity for the Nilgiris umbrella brand.

The chain, he said, would also scale up its dairy and bakery products manufacture, perhaps even through outsourcing, as the retail chain expands.

Approximately Rs 70 crore has been earmarked for expansion of its dairy and bakery business.

As Mr Donald Peck, Actis partner and a director on the Nilgiri's board, said in a statement, "Nilgiris will make a series of changes in its business approach by increasing the pace of roll out of franchise stores, improve customer service and create a strong supply chain to make its product range widely available."

Today, only 20 per cent of products stocked in Nilgiris are own brands, the bulk 80 per cent are FMCG brands, all approved by Nilgiris, which each franchisee buys separately from distributors.

With a centralised purchasing system, Nilgiris can achieve economies of scale and better prices for its franchisees, according to Mr Venugopal.

The plan is also to increase the Nilgiris' private label presence to at least 40 per cent of shelf space in all the stores to earn better margins. Currently, Nilgiris Dairy Farm has a sales turnover of Rs 125 crore on sales of its own brand to its franchisees as well as direct distribution of bakery products and milk.

More Stories on : Channels and Franchises | Dairy & Dairy Products | Retailing

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