Nilgiri’s to widen its private label offerings

Nilgiri’s, the Southern food and grocery retail chain, intends to widen its private label portfolio. The Rs 700-crore chain earns over 30 per cent of its food category revenues from its private labels, which stretch across pulses and cereals to bakery and dairy products. Most retail chains earn under 20 per cent of their revenues from their own brands in foods.

The retail chain, says Murali Krishnan, CEO, has increased its offerings under the Nilgiri’s 1905 (the year of its founding) brand in the past few years. While it already had a large offering in branded commodities, the chain also has a wide portfolio of cakes, rolls and breads as well as dairy products from its bakery and dairy in Bangalore. Bakery and dairy contribute to 15 per cent of its revenues from the food category. The Nilgiri’s brand has a strong association with fresh foods and is extendable across the category, points out Krishnan.

While it recently launched a range of low-fat fruit yoghurts, it has also unveiled its own brand of gingelly oil, breakfast foods such as oats and multi-grain, sugar-free porridge, and will soon launch its own brand of bottled water as well. With the pooja season on, Nilgiri’s has launched its lamp oil, a blend of five oils meant for prayer lamps.

Krishnan says Nilgiri’s will continue to offer its own brand in the food segments where it can add value. It is not in mass market products. Its focus is on continuing to create niche products.

He says the trend clearly shows that younger consumers are shopping ‘healthier’ for their foods and Nilgiri’s expects to ramp up its offering in this space. “We are soon launching a range of health cookies as well,” he adds.

Nilgiri’s’ CEO says the brand is being rejuvenated with nattier packaging to appeal to younger customers when they make purchase decisions.

An exercise is under way to revamp the packaging for its entire range of private labels.

Krishnan says Nilgiri’s has among the highest average bill sizes in the grocery retail industry and revenues of over Rs 2,000 per sq ft, more than double that of similar retail chains. And, that also makes it one of the few profitable retailers.

The chain, which is expanding through a franchisee model, has 128 stores and is expanding fast in the south. It expects to have 150 stores operating by year-end.

Actis will exit in good time

Private equity fund Actis invested Rs 300 crore around five years ago to take a 67 per cent stake in Nilgiri’s Dairy Farm which manages the back-end for the retail chain, while 33 per cent remains with the family which promoted Nilgiri’s.

A retail industry observer says PE funds such as Actis typically stay invested in a firm for five to seven years and it has now crossed the five-year threshold. There are many names being bandied about to take Actis’ stake, including a few foreign retailers. “Conversations happen all the time; anybody who has an interest in Indian retail is talking to Actis,” he says, without divulging the names of possible suitors.

However, he says, Actis has given itself a long time frame and will stay invested till it gets to its investment target. “There is a lot of interest around Nilgiri’s, as it’s a profitable retail chain now and a unique brand,” he says.

>vinay.kamath@thehindu.co.in

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