The long-term strategic partnership with Godrej Nature’s Basket changes the game for the Magsons Group as it prepares for future challenges in the retail space. Founder and CEO, Kirit Maganlal spoke to AJIT JOHN about the reasons for the tie-up, its scope and the plans ahead for the group
HERALD: What does this tie-up mean for Magsons?
KIRIT MAGANLAL: This will mean a lot of improvement on the current processes we have. Being a leader in the retail space there is that much we can learn from our peers, most of our story has been built on trial and error. If it suits the customer and us then we go ahead with it. We are still not into the best practises nationally and internationally. We always wanted to scale that little gap that was present. We were looking all across for a strategic partner. We narrowed down on Godrej because it is a highly ethical company. The kind of basket and portfolio that they have is very similar to what we carry. On the gourmet side they focus on meats, cheese, fresh vegetables and fruits. We found we had a good marriage. On that basis we started discussions with them, what appealed to us was the tremendous amount of respect they showed us. We realised they were willing to respect everything we had done in the past thirty years. This factored when we entered into a tie up with them.
The tie-up comes at a cost and it will come in equity participation. They will have a team stationed here for the next five years. They are going to ensure that sourcing gets right. They source from the farm and what they get is three times the quality but at the same price you are getting now. It will be a huge change in terms of quality for the consumer. With regards to prices, there will not be any increase in prices but the quality is going to be ramped up 3-4 times. Goa will also be exposed to the super exotic range of vegetables where there is a very small niche clientele who cannot get that stuff here. There is small quantity of super exotic which is imported from France, Italy, let me put it this way, those that you see in Mumbai, you will now see in Goa.
HERALD: What are your plans, are you going to expand?
KM: We are now at 50 to 60 crore, our plan is when Godrej touches Rs 1000 crore in 2022, we want to be contributing 10 percent ie Rs 100 crore, we will be doubling our current revenues in these five years and that will also happen because of the inputs we will be getting from them. We are going to expand to 20 stores in Goa and our first store outside Goa in Sawantwadi will open in three months. We are trying out in these places so we have comfort. We are a small group and there is so much more to learn before we go all out in tier two cities. Sawantwadi will be our first stop then Kolhapur, Belgaum all these close by areas. Ultimate focus will be tier two and tier three cities. We don’t have access to the IT systems and this tie up will accentuate that process.
HERALD: Given the increasing cost of real estate per sq ft and the changing demographic pattern in the State, consumption patterns are changing what are the challenges for retail in the State in the next five years?
KM: The challenges are huge because the biggest cost to retail is real estate. This is the same issue in Goa, what we are trying to do is grow organically in a franchisee mode. It can only develop once you have brand equity for yourself. If you have equity in the market then it gets easier to push this model. He would then bring in the resources to run the operation which cover the real estate cost the operation cost. So, for us a typical franchisee would be someone who owns the place and who wants to run it under the Magsons brand and the technical expertise we can give. That’s one way for us to get over the high cost of real estate. With regards to changing consumption patterns, let me put it this way. We are proud of Magsons and when someone visits the State they will ask for Big Basket, Reliance and other national chains, this tie up will work on that recall value of them being familiar with the Godrej chain nationally. I have several friends outside who ask me about these chains and now when they come be reassured that this chain has tied up with us.
HERALD: When is the co-branding exercise going to commence?
KM: When we started the negotiations, we wanted a brand that followed the best practices in the business and a brand that would respect us. A brand which also respected our equity here in the Goa market. We were both going to leverage our strengths, we were not selling ourselves. Godrej was very open. Our first question was what arewe going to be called. Is it going to be Godrej Natures Basket Magson or the other way round? They asked us what did we want and I said I wanted it to stay as Magsons because I had worked hard for thirty years and I did not want to dilute it for anyone in the world till I develop a certain relationship. The MD said the deal is done and I love people who have such passion. That played a huge role in our discussions going ahead. They support our sentiment and maybe after six months to a year then the exercise will commence.
HERALD: The MD spoke of a stake in the partnership, could you expand?
KM: They have a minority stake.
HERALD: When you expand outside like Sawantwadi, will they be part of the expansion?
KM: This relationship is mandated for the State of Goa. You have to remember they may have their own plans for Maharashtra and Karnataka.
HERALD: What is your plan in the next ten years?
KM: I give myself another five years of very active involvement because I have got huge plans for what I want to do after sixty-five. I love sailing, painting, our relationship with Godrej is for five years and I want to grow the business to the value I want it to be. Post that it will be on the succession that we will plan either internally or externally. I give myself a five-year window.
