Strategy Digest Vol 1 (Oct)

Bharti Retail to enter western India, follow its cluster strategy

After the north, Bharti Retail will soon enter western India with its first hypermarket in Mumbai followed by 20 more stores in cities such as Mumbai, Pune and Nanded. The retailer is also planning to set up a mother distribution centre on the Mumbai-Pune highway.

Unlike other retailers such as Reliance Retail, which set up stores across the country in one go, Bharti is focusing on creating a cluster in one region before entering another. This consolidation before further geographic expansion results in efficiencies in supply chain and logistics, which require significant investment.

SpiceJet to double fleet by end-2013; add more routes

Gurgaon-based low-cost carrier SpiceJet said today it would double its current 22-plane fleet by the end of 2013 which will be utilised on the 12 new domestic routes being planned. The company is also starting an international service. It already has rights to fly to Dhaka and Male and they feel the expansion will be easy given the similar demographic profile in these destinations. These routes are being based on a hub-and-spoke model so that the additional costs are minimised. Colombo, for example, will be a spoke from the Chennai airport, which acts as the hub.

More players looking at premium personal care market

The high-end or premium segment of the personal care market in India has been growing at about 35 per cent per annum. This segment, pegged at over Rs 1,000 crore, has a small base but is growing fast. Major companies such as HUL, P&G are already devoting their attention to the premium end of the market. J&J has jumped in, too with its skin care product, Neutrogena, last year. Some of this focus also comes from the fact that the customers have been moving up the value chain in terms of their needs.

Elder Healthcare, the FMCG Company which has brands such as Tiger Balm, AMPM Mouthwash and FairOne fairness cream in its portfolio, is a new entrant. It plans to focus its attention on the premium end of the personal care market, with in-licensed products. It has tied up with companies such as Uriage Laboratories of France and POLA Chemicals of Japan already.

Coffee Day may buy logistics company

There is a buzz that Coffee Day Holdings is trying to acquire a logistics company. Analysts believe there could be a merit in doing so as the group has close to 1,000 CCD outlets spread across the country, most of which are supported by a centralized kitchen in Koramangala, Bangalore, hence requiring a periodic replenishment of coffee beans, raw materials and other consumables. There is also the need to carry furniture for existing and new outlets from its furniture factory in Chikmagalur. The firm also exports coffee abroad. Hence, acquiring logistics assets with a retail connect , not one that involves huge cargo movement, might be on the cards.

ONGC ventures into shale exploration

Oil and Natural Gas Corporation (ONGC) has ventured into shale gas exploration by spudding the first shale gas well near Durgapur in Burdwan district of West Bengal. The country’s biggest energy explorer also notified two new discoveries in the KG onshore basin and Cambay Basin to upstream regulator Directorate General of Hydrocarbons.

Shale gas is a natural gas contained within shale formations. Shale gas exploration and production has witnessed a surge in activity recently and is making substantial contribution to gas production. Shale gas is often regarded as a game changer in the hydrocarbon industry. In the US, shale gas production contributes to nearly 17 per cent of their total gas production. ONGC’s move seen in this light, is a move to not miss the bus as competitor’s like Reliance and Bharat Petroleum Corporation have already begun exploration.