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Kovai Pazhamudir Nilayam (KPN), a byword for quality veggies and fruits in Coimbatore, has an inspiring growth story of entrepreneurship and perseverance. From a pushcart to a mega superstore, the family- driven enterprise has developed by leaps and bounds to the point of an MNC acquiring 71 per cent stake in the KPN’s total equity.
The U.S.-based Westbridge Capital, a private equity organization, has picked up a major chunk of equity in the Coimbatore-based retail chain that has franchises at several places. But the question raised now is if this is the fixed pattern of successful retail businesses being acquired by foreign corporates when they have sweated out all the way from the unorganized to the organized sector, making it big.
Regarding the implications of the WestBridge acquisition of equity in the KPN not only for the individual supermarket but also for the whole Indian economy, inmathi.com spoke to Kumaravelan M Kaadai, a people & process consultant and founder of KMKaadai Business Excellence Training Academy and to Nithya Subramaniam, Director, Meark Enterprise Pvt. Ltd.
Kaadai, speaking about the fabulous growth of Kovai Pazhamudir Nilayam, in the past two decades, said it was launched as a family business by three brothers just like an ‘annaachi kadai’. Later on it started growing first in Coimbatore and later to other places as well. Its first franchise was started on North Boag Road in T. Nagar, Chennai and has since progressed from the status of being unorganized to the organized sector. The business is now carried on by the second generation in the family. So, it is with the intention of taking the business on to the next level, the proprietors have tied up with the MNC.
Kovai Pazhamudir Nilayam , a byword for quality veggies and fruits in Coimbatore, has an inspiring growth story of entrepreneurship. From a pushcart to a mega superstore, the family- driven enterprise has developed by leaps and bounds to the point of an MNC acquiring 71 per cent stake in the KPN’s total equity
Talking about the trend of MNCs’ investments in India, Nithya said the Westbridge had earlier acquired stake in Justdial, Indiamart, Indigo and so on. Their latest investment has happened in the KPN. Out of their total 28,000 crore investments, they have invested Rs.800 crore in the current venture. That is quite significant, she noted.
Nithya also recalled how in 2008 Actis, a UK-based private equity investor, acquired over 51 per cent stake in the Nilgiris, one of India’s oldest convenience supermarket chains. And later in 2014, Future Consumer Enterprises Ltd acquired 98 percent equity from Actis and Nigiris became a fully owned subsidiary of the Future Group.
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Talking about retail trade growth, Kaadai said that back in the 2003 only three per cent of the retail business was in the organized sector. In fact, the retail shops’ leapfrogging from the unorganized sector to the organized sector is much needed in the current times for it spells growth of our economy. In 2013, migration of retail business to the organized sector was 13 percent. Realizing the big business potential of retailing, biggies are plunging into the sector. For instance, in 2006 Aditya Birla made a foray into retail business with the acquisition of Trinethra, a supermarket retail chain.
With the nuclear family system having come to stay in the society and the DINK (Double Income and No Kids) factor dominating most of the families, the ‘organized’ makeover of retail has become imperative. For instance, Kannan Supermarket, after the Reliance takeover, has attained a new status, yet retaining its Kannan brand name.
Back in the 2006 there were fears that the corporatization of retailing would edge out small retailers. Even when mobile phones started being used, it was feared that the phone booths would go out of business. But when it comes to growth, times dictate its terms, he noted.
Asked if the small suppliers to the retailer will not be affected when retail business gets into the organized sector, Kaadai said there used to be only middlemen in suppliers to retailers. Now the retailers can make wholesale procurements from the companies themselves. The organized sector units can procure products from the farmers directly and for the purpose they have collection centers at several sectors. In places like Ottanchathram farmers and consumers are all happy with organized sector retailing. While farmers get good prices for their produce, consumers get quality goods worth the money they spend.
With the nuclear family system having come to stay in society and the DINK (Double Income and No Kids) factor dominating most of the families, the ‘organized’ makeover of retail has become imperative
Nithya said that when a well-established retail supermarket is acquired, its original brand name and management is not changed. The company which has acquired the retail supermarket or has heavily invested in the retail business will continue the practices followed by the acquired group for long enough to become popular among the people. Many are unaware of the Nilgiris changing hands and have continued their patronage of the supermarket.
When Reliance took over Kannan supermarket, Reliance already had some presence in the fruits and vegetable market. But in the Kovai Pazhamudir Nilayam case how will Westbridge, an investment firm, run a fruits and vegetable retail chain?
Nithya said th cases cannot be compared. While Reliance wanted to diversify its footprint, Westbridge just wants to make its presence in the market and help the organization it ties up with grow exponentially. Moreover it is just a question of an investor buying at the right time and selling at the right time, as happened in the case of the Nilgiris which was first bought by Actis and sold to the Future Group.
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It is normal when a foreign company has a controlling stake in an Indian retail chain, it may think of introducing its own unique style of functioning and SOPs. Will the Westbridge acquisition of 71 per cent stake in the Kovai Pazhamudir Nilayam affect its employees and their day-to-day working style?
Nithya said the MNC may make changes in the management and procurement, leaving the employee structure intact for now. But in the future, the foreign company may bring in more sophisticated salespersons in order to galvanize the new-look entity. That is probably because they would like to leave their cultural footprints on the business they are running.
Kaadai said that Kovai Pazhamudir Nilayam has earned a great deal of goodwill among the Kongu region people to whom the generic term ‘Pazhamudhir’ is a metonym for the particular Kovai Pazhamudhir Nilayam. The employees working in its units have a good rapport with customers. The yellow Pazhamudir signboards are imprinted in the minds of customers in that region. The salespersons’ personalized service and familiarity were unique. While the other organized retailers promote their products targeting the people celebrating Tiruvathirai festival, KPN simply puts on display the ‘Chithrakani’, a range of fruit varieties identifieed with that season. While ‘kali’ is associated with Tiruvathirai everywhere else, its Chitrakani in Coimbatore.
The Kovai Pazhamudir Nilayam’s connect with the people should not be tampered with even while the new MNC controls the retail chain. So, the employees’ work culture, their selling style and the KPN’s management will not change. Perhaps the procurement practices may change when a talent transformation team is set up.
Kaadai pointed out that the Kannan supermarket’s name was changed as Jaisuryas after the Reliance buy-out. But the people still remember the supermarket only as Kannan departmental store and nobody mentions Jaisuryas. That will be the case of KPN too, Kaadai said.
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