Shoprite calls off India Franchise Agreement with Nirmal Lifestyle

4th Feb 2010 MUMBAI: Shoprite Holdings, the South Africa-based retail heavyweight has called off its franchisee deal in India with real estate developer, Nirmal Lifestyle Group, top officials close to the development said. Kishore Biyani led Future Group is now buying out Shoprite’s single hypermarket in Mumbai with its existing employees to set up a food store which will be rebranded as Food Republic. 

It is learnt that Shoprite which also has a cash and carry operation in India may consider the option of tying up with an existing Indian retailer to scale up operations in the country. Shoprite is also concerned over opening more stores in India given the lack of clarity by the Indian government on opening up foreign investment in retail, a company official said on conditions of anonymity.

The retailer had signed a franchisee deal with the Nirmal group in 2004 and set up its first hyper market in Mumbai. The existing hypermarket in Mumbai is understood to be quite profitable but the retailer has not been able to expand beyond the first store in Mumbai. Suppliers to the store confirmed that Shoprite has announced its decision to call off its hypermarket operations and send a notice that the Shoprite store would cease to exist by January 2010.

“Probably, the JV did not seem viable with the existing partner. However, Shoprite has been extremely efficient in its dealings with suppliers and have ensured timely payments” said a well-known wine supplier on conditions of anonymity. Senior officials from Shoprite global is understood to have held meetings with Nirmal group management late last year but later sent a notice terminating the agreement, an official privy to the JV said.

Ram Harishankar, executive Director of the Shoprite Group in India was not reachable for comments. Dharmesh Jain managing director, Nirmal Lifestyle declined to comment on the development. An email sent to Shoprite’s US headquarters too did not elicit any reply. When contacted, Kishore Biyani, CEO of Future Group declined to divulge details. “We are currently in talks and I do not want to comment on anything further” he said. 

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