Kirit Maganlal, founder Magsons group is ready to scale up after forging a tie-up with Mumbai based, Godrej Nature’s Basket, finds out Shoma Patnaik
Businessman Kirit Maganlal, the founder of the Magsons chain of superstores is known to have his eyes and ears to the ground. His contemporaries admire him for being up-to-date in industry developments and for nimbly shaking off competition to climb to the top of Goa’s retail industry.
So when news of Mumbai based, Godrej Nature’s Basket, a Godrej group company, picking up equity stake in Magsons group broke out few days back not many were surprised. “If Godrej was looking for a partner in retail then what better candidate than Maganlal who is astutely taking the Magson stores forward,” they said.
Today Maganlal looks ready for another climb. Sitting in his office above the supermarket in Taleigao, he says that, the equity alliance with Godrej is not only a milestone for a regional player like him but also another sign of the changes taking place in the local retail market.
“Goan retailers have to be ready to ramp up to survive the advent of stores like D-Mart who will soon set up shop in the state. Tie-ups like mine are better than the coming in of mega players as it does not disturb the local market by injecting excessive competition in the system,” he says, explaining, how he is looking to synergize with Godrej’s strengths and scale up his own business.
The alliance came about while attending a food conference in Mumbai. There he discovered that Godrej top officials were quietly making enquiries about him as they were searching for a local partner in Goa. The talks began somewhere around November 2017 and after several rounds of meetings resulted in an MOU being signed on August 23. The finer details of the partnership are still being worked but it broadly boils down to a minority equity stake (less than 26 per cent in Magsons) by Godrej Nature’s Basket, a company with turnover of Rs 330 crore as on 2017-18. .
“Godrej is a large group with huge war chest. They are also hard negotiators. But as a group they are known for their ethics and also know for treating partners with respect,” says Maganlal who met up with Tanya Godrej, executive director of the Godrej group and Avani Davda, managing director, Godrej Nature’s Basket for the deal.
“Our stores have brand equity of about 30 years and we will be retaining the equity. Godrej will not be putting obvious signs of its part ownership in the stores. However it will certainly play a key role in improving sytstems,” he says.
Managers from Godrej Nature’s Basket have been regularly visiting Magsons stores to observe how things work. Maganlal says that, he will be using the Godrej expertise in improving merchandising, stocking and procurement operations. “We grew through trail-and-error. But times are changing and we need to be competitive. Our partner will put order into our system,” he says.
As first change, the stores will start sourcing directly from the source by using the suppliers of its partner. It will also cut down the size of stock keeping units by paring down the quantity by more than a half. “Our shoppers will soon see the difference in the freshness of fruit and vegetables,” claims Maganlal.
He reveals that, there will not be any change is the employee policy. “We have about 150 employees at present who are of all kinds. Some come from villages to work in the city and have little education. Employees are our strength and will immensely benefit from the legacy and expertise of Godrej,” says Maganlal, adding that his wife Andrea has a major role in maintaining an exemplary HR department.
A family-owned retail grocery chain, the Magsons store based out of Panjim are around since 1990s. The chain currently comprises 11 stores with a turnover of Rs 50 crores at a gross margin of around 15 per cent during 2017-18. According to Maganlal, the stores earn seven per cent of their revenues from online sales through home delivery networks, drop orders and phone-ins. The plan is double online turnover by the end of the current financial year.
Godrej Nature’s Basket: Expanding through strategic alliances
In a telephonic conversation with
Team B&C, here’s what Avani Davda, managing director, Godrej Nature’s Basket, has to say about the strategic alliance with Magsons chain of superstores
- How will the equity deal with Magsons group help your company?
The tie-up is a great way for us to grow our business as well and penetrate deeper into the Goa market. Over the last two years we have changed our way of working dramatically. From operating large 5,000 sq. ft store we today looking at smaller 2,000 sq.ft store. Through a smaller store format we have actually been able to establish our stores profitably. The penetration channel through tie-ups with regional players makes more sense today. We are currently at about 32 stores in cities like Mumbai, Pune and Bengaluru., In 2017-18 we closed at Rs 330 crore turnover. By the end of this financial year even if I don’t consider our partnership in Goa we will be Rs 450 crore in revenue. With the privilege of partnering with Magsons are expecting to close at Rs 500 crore in top-line in 2018-19.
- How will you push the GNB brand name in Goa through the partnership?
I think the principle behind our kind of partnership is expansion for us. As you know Godrej is a corporate registered company for over 100 years. We have chosen to partner with regional players and respect the business they have done. We are looking at improving the supply-chain arrangement. Over the course of the next two years we will jointly decide as and when we co-brand. For us we want to create value in our business and if we believe that the local consumer and the equity of Magsons is strong in Goa we will be happy to go with that. We will look at co-branding as when our customers and partners are ready for it.
- What is your market presence in Goa currently?
Our customers are through our physical stores and online. Most our online customers come from our existing markets which is Maharashtra, Karnataka, Pune and we have few in Kolkata. We are bolster our presence in the western market. So this equity stake will provide Magsons an opportunity to strengthen its operations using GNB’s experience of successfully establishing neighbourhood stores and it will help in establishing ourselves in Goa.