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Reliance Vs Adani Vs Tata: India’s $110-billion soap opera

Reliance Retail Ventures Pvt. announced its foray into the fast-moving consumer goods sector with the rollout of ‘Independence’ brand, whipping up a battle between national brands in a world of private labels.

After testing the market with its own food brands, the country’s largest retailer is now developing a strategy to fully participate in the country’s $110-billion fast-moving consumer goods industry outside its own distribution network. Its plan to build a powerhouse national brand will put billionaire Mukesh Ambani-controlled company in direct competition with the labels owned by Hindustan Unilever Ltd. and Nestle India Ltd. And also billionaire Gautam Adani’s conglomerate and the Tata Group.

With Independence, Ambani’s Reliance Retail Ltd. said it plans to tap the traditional kirana stores–the backbone of India’s retail market that contributes 80-90% of consumer goods sales. The pilot will start in Gujarat before rolling it out nationally.

Reliance already sells staples to snacks. The basket includes pulses and grains, edible oils, flour, dry fruits, spices, pickles, pastes, idli dosa batter, biscuits, namkeens and sweets, ready-to-cook meals, ketchup, jams, carbonated drinks, fruit juices, breakfast cereal, oats, muesli, honey, sauces, and tea and coffee. These are available on the JioMart app as well on the shelves of its 2,460 grocery stores, including Reliance Fresh and Reliance Smart supermarkets and hypermarkets.

Reliance’s existing private labels include:

  • Good Life: Pulses, flour, rice, sugar, oils, spices.
  • Best Farms: Frozen peas and pulses.
  • Desi Kitchen: Flour, pickles, millets, blended masala and mixes.
  • Snac Tac: Noodles, biscuits, namkeen, ketchup, pasta, etc.
  • Healthy Life:- Honey, chocos.
  • Aw So Yum: sauces and spread.
  • Aarambh: Tea, breakfast cereals, etc.
  • Kaffe: Instant coffee

The retailer incorporated Reliance Consumer Products Ltd. to sell its own branded biscuits to edible oils. Similarly, it set up a separate company to sell its cosmetics to shampoos on Nov. 28.

According to Nomura analysts, Reliance Industries is incubating separate firms with the idea of listing them over medium term and unlocking value.

Reliance’s Twin Challenge To Rivals
Reliance said its products will be priced affordably. What that means is that it will not only take on multinational giants like Unilever Plc. and Nestle in India, but also unbranded and regional players. The company is known to deeply undercut its rivals with its private labels.

“There is a lack of large dominant national players in the FMCG segment, and the organised segment is currently a small part of it,” said Abneesh Roy, executive director, Nuvama Institutional Equities.

“There is room for three to four big players. Small, regional players will lose out in favour of Reliance, Adani, and Tata in these commoditised parts of FMCG,” he said. The slowdown-hit FMCG industry has also turned to cheaper variants as costs surge and Reliance could fill the gap with Independence.

It could be a powerful driver of customer loyalty to the retailer. That’s because consumers return to their preferred brands, reversing the Covid-19 trend when consumer packaged goods disappeared from store shelves due to panic buying and private labels turned more appealing.

Isha Ambani, who helms Reliance’s retail business, said the high-decibel integrated launch of Independence will be supported by on-ground visibility and sampling activities in Ahmedabad, complemented with outdoor and print, radio and local television advertising.

Reliance is also incentivising super-stockists by offering double the margins compared to other FMCG companies at about 5-6%, a dealer in the western part of the country told BQ Prime on the condition of anonymity out of business concerns.

For a company that built its Rs 2 lakh crore retail business from scratch within 16 years, entering into the top 10 list in Asia, the target to achieve Rs 50,000 crore turnover for the FMCG business does not seem far-sighted.

What Works For Reliance

  • Its sprawling retail network and deep pockets are an advantage.
  • Isha Ambani said the company aims to grow its current merchant base from 20 lakh to 1 crore in five years to cover the entire country, serving over 7,500 towns and five lakh villages.
  • Parallelly, it is also growing its FMCG business inorganically with the acquisitions of Campa Cola and Sosyo.
  • The company has also integrated JioMart on WhatsApp to provide a convenient end-to-end shopping experience from discovery to payments without having to exit the application. It is now expected to leverage its tie-up with WhatsApp to enable sales of branded products across its user base of 490 million.
  • Its quick commerce delivery start-up Dunzo and instant grocery delivery app Jio Mart Express, still in pilot in Mumbai, are also expected to help the company acquire new customers.
  • In FY22, Reliance Industries invested Rs 30,000 crore in its retail business.

What Does Not
The journey won’t be easy though.

“In FMCG, it takes a lot of time for new players to make an impact as shelf space in kirana is limited and there are very entrenched incumbent brands,” Roy said. “However, the greater and more direct risk appears to be on Adani Wilmar and Patanjali Foods, and to a lesser extent on Tata Consumer Products. ITC, however, won’t be at direct risk as it is a very diversified and premium player.”

“The actual distribution reach of Independence into kirana stores, acceptance from consumers, its product price points and addressable market, and innovation will be key before concluding that Reliance’s foray will be a headwind for FMCG companies.” Bloomberg

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