The retail subsidiary of India’s largest private company is set for a top-level churn for the second time in two years as the country gears up to open its food and grocery retail market to foreign companies .
Reliance Retail has named Rob Cissell, former chief operating officer of Walmart China, as CEO. Shawn Gray, vice-president in-charge of store operations of the same company, will join the Mukesh Ambani firm as COO, the company said in an email to its top executives on Saturday.
The two Walmart China executives will join in September, according to the email whose contents were described to ET by people familiar with it. They spoke on condition of anonymity because the changes had not been publicly announced.
The Reliance Retail spokesperson declined comment.
Gwyn Sundhagul, incumbent CEO of the retail arm who was hired from the Thailand arm of British retailer Tesco early last year, will move to Reliance Industries’ consumer businesses comprising insurance and telecom.
“RIL is sharpening its focus on consumer businesses-retail, telecom and insurance-because it wants to balance its portfolio and derisk its core business. You will see many senior-level hires across these three businesses as they are top priority for the company now,” a company insider said, requesting not to be named. He said RIL has no plans to sell out or form a joint venture with a foreign partner if food and grocery retail is opened to foreign companies.
“Both digital and physical retail are priorities for us,” the company executive said. Large-scale expansion will begin next fiscal onwards.
Cissell and Gray have resigned from Walmart China over the last three months. The two were part of the top team of Walmart’s China arm that has around 333 outlets, generating $7.5 billion revenues, or 1.8 per cent of the Bentonville, Arkansas-based company’s total sales of $420 billion last year.
Cissell was responsible for store operations, merchandising, merchandise development, marketing and supply chain for all retail and Sam’s Club formats at Walmart China. Before going to China, Cissell held senior positions in Europe with 10 years of senior executive experience in both Kingfisher Plc and Argos.
He was also the chief executive of B&Q Plc and managing director of Comet Group Plc.
Gray was with Walmart for over 19 years, having spent nearly 13 years in China where he led the team that opened and integrated hypermarkets. Launched in 2006, Reliance Retail has had its share of ups and downs. It runs about 1,000 stores across formats in 86 cities. It has a line of specialty stores such as Trends, Timeout, Digital, Footprints and Jewels. Its other retail chains include joint ventures with Marks & Spencer, Vision Express and Hamleys.
Like most other organised retailers, Reliance Retail has faced political opposition to its expansion. The Uttar Pradesh government ordered closure of Reliance Retail operations in 2007 while it was also forced to shut several of its grocery stores (Reliance Fresh) in Kolkata and Jharkhand due to political agitation against large organised retailers perceived as threats to small kirana shops.
Besides, Reliance Retail was hit hard during the economic slowdown in the autumn of 2008 following the global recession.
Retailers, including Reliance Retail and Aditya Birla Retail, had expanded rapidly, opening many stores without putting the vital supplies in place. But when the economy slowed, these companies shut hundreds of stores and sent home thousands of employees to stay afloat.
Subhiksha, once the largest retail chain in the country, went bankrupt. Reliance Retail went through a series of restructuring, which ended in a complete clampdown on expansion and the appointment of a new management team from Thailand entrusted with the task of consolidating operations.
CEO Sundhagul led a team of 25 executives, mostly from Tesco’s Thailand arm who joined Reliance Retail two years ago, to streamline operations in value retail formats-Reliance Super, Reliance Fresh and Reliance Hyper-that sell goods such as soaps, biscuits and vegetables and account for nearly 70 per cent of the total sales of Reliance Retail.
Earlier, Sundhagul had helped Tesco Lotus secure market share in Thailand, which once resembled India’s retail market with its freshlyminted organised players competing with a well-entrenched network of kirana shops.
“We have cleaned up the company and put processes in place. It is time for speed and execution now,” a company insider said, confirming the two new appointments.
BETTING BIG ON RETAIL
In the recent past, Reliance Industries has unveiled major initiatives in telecom and retail.
Last year, Reliance Industries picked up a majority stake in Infotel Broadband Services, originally owned by Mahendra Nahata of Himachal Futuristics, for close to Rs 4,800 crore, to offer high-speed data on mobiles and computers.
It is also acquiring Bharti Enterprises’ stakes in two insurance joint ventures with France’s AXA Group to move beyond its core energy business.
In an interview to ET in May, Reliance Industries Chairman Mukesh Ambani had described energy and consumer sectors as the two pillars of his growth strategy. The consumer initiative has major parts, telecom and financial services, he had said.
At the 37th annual general meeting of Reliance Industries in June, Ambani had outlined ambitious plans for retail. “We are positioning Reliance Retail to be the undisputed leader in retailing in India,” he said. Asserting that the company has already become the largest food retailer in the country, Ambani said all the specialty formats of the company would attain top positions in their respective segments in next two years.
Reliance Retail reported revenues of close to $1 billion (around Rs 4,500 crore) for the year ended March ’11. The conglomerate plans to invest aggressively in its retail business and will launch cash & carry, or wholesale outlets, Ambani said. The company had exited cash & carry business in early 2009 to conserve cash in a deteriorating market. India’s cash & carry market has attracted global retail behemoths such as Walmart, Tesco and Metro. The global giants see it as an opportunity to enter India where foreign direct investment is barred in direct-toconsumer retail.
Ambani also said Reliance Retail already has the largest portfolio in terms of number of formats and 25 lakh customers were shopping at the company’s various stores every week.
The company is also focusing onlarge formats, with 13 hypermarkets already operational and another 20 under different stages of construction.
“As India grows rapidly, transformation is at the top of the Reliance agenda; a talent transformation that will endow Reliance with new competencies in new business domains and attract best talent in India and abroad,” Ambani had said. Reliance Retail is known to have attracted talent through huge compensation packets in the past, thus creating exit barriers for executives.
In 2006, the company reportedly roped in top performers such as Gunender Kapoor and the late Raghu Pillai at pay packages as high as Rs 3-4.5 crore, the highest in the industry then.
Shanghai-based Marie Jiang, retail analyst with Pacific Epoch, had reportedly said the departures of Cissell and Gray could cause some concern to Walmart China.
“The psychological impact [of the departure of the executives] is seen to be larger than the material as employees of its China operation may see an unstable top management team,” she said.
Walmart International grew 11.5 per cent in the first quarter of this year, key growth drivers being markets such as China, Chile and Mexico, the company said in a statement in May.
Walmart entered China in 1996 and now has 333 stores, including 104 stores operated by Trust-Mart, in which it bought a 35 per cent stake in 2007. The retail giant competes with France’s Carrefour and the UK’s Tesco in China.
Source : Economic Times