HLL sells Sangam to Spinach

Unilever India Exports Limited, a 100 per cent subsidiary of consumer goods giant, Hindustan Lever Ltd on Wednesday announced that it has reached an agreement with Wadhawan Food Retail to sell Sangam, a purely home delivery retail business, for an undisclosed sum. Wadhawan owns the Spinach chain of food and grocery outlets.

Hindustan Lever's exit from the home delivery retail business in food and grocery raises serious doubts about the viability of the business model in organised retail. HLL was one of the first to try out this model.

However, it's not among the early ones to have quit the home delivery space. After trying out the home delivery model, Haiko a popular supermarket in Mumbai had stopped online orders and delivery. Even the Future Group's Food Bazaar decided against going ahead with the model after a trial.

Damodar Mall, CEO, innovation and incubation, Future Group said, "As things stand today, the discovery of a viable organised model in home delivery has not happened". He added that while there is a definite need from the consumer for such a service, it was not clear if an organised player could offer similar service levels as the neighbourhood grocer and yet keep the costs low.

Susil Dungarwal, a retail industry expert and former CEO of Haiko said, "It's not a viable model since groceries and fresh produce need the feel and touch, irrespective of the retailer and the brand. Retailers cannot match the expectations of the consumer in terms of colour, quality and other qualities of fresh produce. It can work well in the packaged goods segment without much quality and price differentiation." Dipankar S Halder, CEO, Spinach, Wadhawan Food Retail, however, is confident.

"Taking over Sangam is a strategic fit for us since we are into convenient retailing with large number of stores and home delivery. We can leverage on the strength of Sangam Direct for our delivery model," he said.

Halder claimed that going forward, the company will integrate the businesses of Spinach and Sangam to offer best offer to the customers. "If we had to build the same model, it would have taken 2 to 3 years. We don't see any problem with the model. We will popularise it," he said.

Set up in 2001, Sangam Direct was HLL's initiative to capture the direct-to-consumer channel by combining the twin benefits of convenience and value. However, despite a six-year presence, the company never really managed to extend the concept across the country.

"The decision for a larger roll-out was put on hold in the context of evolving retail scenario in the country," said a company statement adding that it's not in the strategic interest of HLL to continue its presence being present in this format of organised retail.