Why the Retail Giant ‘Future Group’ Failed?

Dr M.Rahman, Senior academician in Business Administration

Unable to bear huge debt and liabilities and compete in the dynamic retailing business environment, India’s retailing giant Future group led by Kishore Biyani (known as “The King of the Indian Retail”) owning flagship store ‘Big Bazaar’ has accepted a proposal of acquisition from Mukesh Ambani led business conglomerate Reliance Industries Ltd. Big Bazaar stores were considered to be ‘the Indian version of America’s Walmart stores’. However the Future group failed to manage its momentum due to certain reasons and this article made an attempt to understand the reasons behind its failure.

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Failure of Future group and the proposed acquisition

In the past, the world saw many business giants like My Space (in social media), Nokia (in mobile phone), Kodak (in Camera), Jet Airlines (in Indian aviation sector) and many others unable to stand in the cut-throat competition and ended up either being acquired by other business giant or shut down. In this list, the latest addition is India’s retailing giant Future group led by Kishore Biyani commonly known as “The King of the Indian Retail”. Unable to bear huge debt and liabilities and compete in the dynamic retailing business environment, Future group’s retailing business that owns flagship store ‘Big Bazaar’ has accepted a proposal of acquisition from from Mukesh Ambani led business conglomerate Reliance Industries Ltd through its subsidiary Reliance Retail Ventures for an amount Rs 24,713 crores.

However, the Future Group asset acquisition is subject to regulatory and other customary approvals, which may take around few months to complete. At present, this deal is going through legal proceedings filed by Amazon (a stakeholder in Future Retail) in Singapore International Arbitration Centre (SIAC) against the deal.

As a part of the proposed deal, Reliance Retail Ventures (RRVL) will take over more than Rs 19,000 crore of debt and liabilities owed by Future Group’s retail, wholesale, logistics and warehousing units until March 31, 2020. Future group owned renowned companies like Future Retail Ltd., Future Lifestyles Fashions Ltd., and Future Supply Chain Solutions Ltd. will be now owned and managed by RIL through its subsidiary. While Future Retail owns the flagship Big Bazaar alongwith many other popular stores (including HomeTown, Food Bazaar, FBB, Easyday, Nilgiris, FoodHall, Heritage Fresh and WHSmith), Future Lifestyle Fashions Ltd operates fashion discount chain Brand Factory, Central and Planet Sports.

While this acquisition (if completed successfully) will further strengthen RIL’s financial profile and competitive position and add about 1,700 large stores to RIL’s 11,806 stores in its retail segment and increase its organised retail revenue market share by around 5 per cent. (according to Fitch Ratings, a global research firm), it will kick out Kishore Biyani out of retailing business for many years. After this transaction, Future group will retain the manufacturing and distribution of FMCG goods and integrated fashion sourcing and manufacturing business and its insurance JVs with Generali and JVs with NTC Mills.

It’s irony that with this deal Kishore Biyani known as the finest brain in Indian retail sector and considered as “the King of Indian retail’ would have to remain out of any retailing venture for the next 15 years. Kishore Biyani is known for pioneering organized retailing in the country with the launch a chain of modern retailing formats like supermarkets and hypermarkets across the nation.

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About Future Group

Future Group is a corporate group headquartered in Mumbai (India) in 1987 and founded by Kishore Biyani in 1987 as a garment manufacturing company that sold formal trousers under the brand name of ‘Pantaloon’. Over a period of time it diversified rapidly and the group is now known for having a significant prominence in Indian retail and fashion sectors with popular retail chains like Big Bazaar, Food Bazaar, Home Town, Brand Factory, Planet Sports, etc through its operating companies Future Retail Limited and Future Lifestyle Fashions Limited. In addition to retailing, the group has a notable presence in integrated foods and FMCG manufacturing sector, logistics, insurance, logistics & supply chain as well as apparel design and manufacturing sectors.

Kishore Biyani is known for launching India’s first hypermarket ‘Big Bazaar’ in the country around 20 years ago when organized retailing was at the introduction stage. It was scaled up rapidly to over 250 stores across 120 Indian cities over years. Biyani’s success with Big Bazaar under Future Retail had turned him into a revered figure in the Indian retail sector and a magnet for media attention. He was running the largest retailer in the country and was named as retailer of the year by the National Retail Federation, which at one earlier point had refused even to admit him.

Future group’s flagship comapny Future Retail operated 1,550 stores with its flagship brands Big Bazaar, FBB and Foodhall, Easyday, Heritage Fresh and WHSmith. Future Lifestyle Fashion operates 354 stores of Brand Factory, Central and Planet Sports. On any given day, over 2 millions visit future group stores and digital networks as claimed by Future group website (www.futuregroup.in). In addition to retailing, the group also has presence in FMCG, insurance, media, logistics & supply chain as well as apparel design and manufacturing. The group operations were performing ok with Future Retail clocking a total revenue of Rs 20185.37 cr and a net profit of Rs 732.81 cr in FY 2018-19. Also, Future Enterprises Ltd that holds largest shares in Future Retail and other group companies had a revenue Rs 5433 cr and a net net profit of Rs 133 cr in FY 2018-19 against a revenue of Rs 6065 cr and a net profit of Rs 175 cr in FY 2019-20.

However, when the group was earning profit in FY2019, what happened to “The King of The Indian Retail’ –  Kishore Biyani led Future group that compelled it to sell out its flagship retailing and logistics businesses to RIL in August, 2020. Let’s us try to understand the underlying factors/reasons.

Why Future Group Failed

Selling of its complete stake in Future Retail to Mukesh Ambani’s RIL is seen as the biggest setback to Koshore Biyani, known as one of the best minds in retail business in India. But how did he come to this point? What were the reasons behind the sell out? Lets us understand ‘why Future group failed’?

Key Reasons – Why Future Group Failed?
Huge debt
Aggressive expansion, Unrelated Diversification
Inability to leverage online retailing
Corona-virus pandemic

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