Lulu to set up sourcing hubs in the US

Dubai:

The Lulu Group has confirmed plans to set up sourcing offices in the US as part of a plan by which the Americas would contribute up to 20 per cent of goods sold at its branded supermarkets. Currently, anywhere up to 70 per cent is sourced from Asia and another 15-20 per cent from Europe.

The Group is scouting locations in New Jersey and California for the sourcing hubs. Fresh farm produce is to be the key commodity that will make up the bulk of future sourcing, with meat products a close second.

“The Group cannot, going forward, be limited to any particular geography on the sourcing side,” said Yusuffali M.A., Managing Director. “The US — and the Americas by extension, where we have opened in Sao Paulo — will create ample opportunities to cast our net wide. I don’t think a stronger dollar should be such a concern that we should put off the initiative to a later date.

“What we source from the US can also help grow our private label business, which currently constitutes a high-growth niche in our revenues.

“After we reach a certain scale, the Group could emerge as one of the biggest sourcing entities for US-made fresh produce in the UAE and the Gulf. With our 100-odd supermarkets and hypermarkets, we have the network to take it on.”

Apart from India, the prime sourcing hubs for the Group are in Malaysia and Indonesia. Incidentally, the Group had in the last two years confirmed sizeable investments of $500 million in setting up hypermarkets there.

But it will confine itself to a pure sourcing role in the US. But the Group does not rule out the possibility of getting into contract farming in those markets.

“In India and the Far East, we do own some farms — but it’s too early to talk about a similar business model in the US,” said Yusuffali. “The initial aim is to get a footing in the US and probably use that to expand the sourcing arrangements to southern and Central America. We want to change our underrepresented status in these territories.” (The company, incidentally, is holding a ‘Discover America Week’ at its flagship hypermarket in Abu Dhabi.)

The US plans are part of a wider shift in the Group’s overseas ambitions. In the recent past, it has made a concerted push to diversify beyond the Gulf, and picked up a stake in the UK-based high-end retailer East India Company. The deal was valued at $85 million. There have been exposures into real estate in London as well.