Have Surplus Milk? Make Butter Cookies


August 31, 2020

Written By Sharleen Dsouza

India’s largest dairy brands, Amul and Mother Dairy, turned to baking during the pandemic.

When you have surplus milk, make butter—and then bake butter cookies. At least, India’s largest dairy brand is doing so.The world’s strictest lockdown to contain the Covid-19 virus forced 1.3 billion Indians

Source: bqprime

Reliance Retail-Future Group deal: How will it benefit RIL’s consumer facing businesses


August 30, 2020

Reliance Retail will get the benefit of economies of scale. The products can be bought in large quantities and sold at competitive prices, and would see further improvement in margins due to improving scale.

The numbers were already mind-boggling.

Reliance Retail is India’s largest, most profitable retail business and is the fastest-growing retailer in the world thus far.

Its revenues are higher than the rest of the organised retailers combined.

Reliance Retail’s business footprint spans across 11,806 retail stores in over 7,000 towns with 28.7 million sq ft of retail space.

It sells more fruits and vegetables than any of its peers. It sells more flour and oil, it sells more television, more washing machines, and more clothes.

Despite these fantastic sounding numbers that it has achieved in the 14 years since its launch, there are still some missing pieces to the retail ambitions of Chairman Mukesh Ambani.

Much of its revenue comes from consumer electronics segment. It makes up for almost 75 percent of the outlets, and about 25 percent of the revenue.

But its presence in other big segments, including groceries and fashion and lifestyle, is less intimidating.

With a total count of 800 stores, the grocery segment constitutes less than 10 percent of the stores, and 20 percent of sales.

Of all its retail stores, fashion and lifestyle retail contribute only 20 percent, but in terms of total sales it contributes 8 percent which is around Rs 13,500 crore.

Even in fruits and vegetables, the unorganized segment takes over 25 percent of the total pie.

That is where the deal with Future will help Ambani get closer to his vision for the retail business.

The mega transaction with a combined value of Rs 24,713 crore cements the position of Reliance Retail as the undisputed leader in the organised retail segment and adds muscle to the ongoing battle with Amazon for the Indian e-commerce market.

“Food and grocery retail is a fragmented market, so the acquisition is more of a consolidation of market share rather than establishing leadership. Reliance Retail is by far the largest retailer already, and the takeover of Future Group’s retail assets is more of a consolidation of its leadership position,” said Devangshu Dutta, chief executive of retail consultancy firm Third Eyesight.

In the last 4-5 months of lockdown, neighbourhood stores have done well, while large-format stores have lost ground. In the coming months, it will be important to see how Reliance bridges the gap with neighbourhood stores and expands its market reach using its digital footprint,” he added.

According to Euromonitor, India’s retail market size is about $635 billion (Rs 42 lakh crore) that is split 59:41 between grocery and other categories such as apparel, footwear and electronics.

What falls under Reliance Retail?

Reliance Retail, which was started in 2006, is the retail initiative of the group and is central to the consumer facing businesses.

Reliance Retail has adopted a multi-pronged strategy and operates chain of neighbourhood stores, supermarkets, wholesale cash and carry stores, specialty stores and online stores and has democratized access to a variety of products and services across diverse segments for Indian consumers.

Serving the food and grocery category, Reliance Retail operates Reliance Fresh, Reliance Smart and Reliance Market stores.

In the consumer electronics category, Reliance Retail operates Reliance Digital, Reliance Digital Express Mini stores and Jio stores, and in fashion & lifestyle category, it operates Reliance Trends, Trends Women, Trends Man, Trends junior, Project Eve, Reliance Footprint, Reliance Jewels and AJIO.com, in addition to a large number of partner brand stores across the country.

What falls under merged Future Enterprises?

FRL is engaged mainly in the home and electronics retailing, value retailing and operates Big Bazaar, Easyday, and Foodhall, among other format retail stores. The deal will also involve Future Consumer, which operates the food business, and has significant links with FRL, which is its largest customer, accounting for almost 80 percent of its annual sales.

Future Lifestyle Fashions (FLF) was the flagship fashion business of Future Group. It so far operated in more than 400 stores in 90+ cities, occupying 5.7 mn sq ft of retail space. It ran in-house retail chains Central and Brand Factory, exclusive brand outlets (EBOs) and other multi-brand outlets (MBOs).

Similarly, Future Supply Chain Solutions provides supply-chain solutions [for non-agro products] to Future Group companies as well as to outside companies. The supply-chain company gets 65 percent of its business from FRL.

Large becomes larger

Reliance Retail, which was already the largest retailer in India by a long shot, gets even larger and bigger.

Its network gets a big push in the cities, where 40 percent of Future stores are present. In comparison, more than two-thirds of Reliance Retail’s nearly 12,000 stores are operating in Tier II, III and IV towns.

The company can now pick and choose which of Future’s stores to retain and rationalize the network.

Much of the businesses will be integrated, and that will include the grocery business under Reliance Fresh, and the fashion vertical under the banner of Reliance Trends.

Reliance Retail will get the benefit of economies of scale. The products can be bought in large quantities and sold at competitive prices, and would see further improvement in margins due to improving scale.

The deal will help strengthen the vision created through the launch of JioMart, the online grocery delivery service that propels the company’s omni-channel plans. JioMart, which is currently available only at selective cities, will now be able expand its reach.

To meet customer’s requirements for essentials, the beta version of the JioMart grocery consumer platform (jiomart.com) was launched across 200 cities, followed by an app later on.

Within a few weeks of launch, JioMart was delivering over 4 lakh orders daily, which according to Reliance Industries (RIL) is significantly higher than any other grocery home delivery company.

JioMart, which went live in May, that saw an order flow four times that of the pre-lockdown period for partner kiranas, pointing to the potential an online-offline network has for stakeholders

Reliance Retail will ensure last-mile connectivity through tie-ups with Kirana stores in the remote region of the country. This ensures formalization of the retail sector as a whole.

Growth in retail will complement Jio’s growth because both are consumer-centric.

The deal will help RIL’s retail business to expand its offline retail presence and get it ready to tap O2O and B2B opportunities. With Reliance Retail having only begun its digital commerce business (JioMart’s online grocery delivery business and the Kirana B2B distribution business), brokerage houses believe value creation from this business will happen only over the medium term.

What now?

After attracting a series of marquee investors to back Jio Platforms, Reliance Industries’ telecom arm, Chairman Mukesh Ambani, addressing the company’s 43rd Annual General Meeting on July 15, indicated that the group’s retail venture, too, has received strong interest from strategic and financial investors and plans are underway to induct some in the next few quarters.

Tata-Tesco’s retail identity crisis is now an existential one


August 28, 2020

Written By Seetharaman G

The joint venture’s supermarket chain Star has been struggling to make a mark with only 57 stores across the country, compared to Reliance Retail’s 797 and DMart’s 214. Pushed into a corner, Star now has little choice but to think big

India’s supermarket war seems to be in its endgame. With the dust finally settling, the field is littered with the corpses of those who have tried and failed to make it their own. Some of India’s biggest conglomerates, like Aditya Birla Group and the Godrej Group, gave up the ghost and sold out.

India’s top two retailers—Reliance Industries-owned Reliance Retail and Avenue Supermarts-run DMart—are now squaring off against each other in a final fight for dominance. The third claimant to India’s retail throne, Future Group-owned Future Retail, which runs the Big Bazaar chain

Source: the-ken.com

Luggage companies rejig strategy as demand falls and recovery remains a distant prospect


August 24, 2020

Written By Devika Singh

According to Euromonitor International, the luggage market in India was valued at Rs 8,495 crore in 2019 and is estimated to degrow to Rs 7,305 crore in 2020, due to the impact of the Covid-19 pandemic

A recovery in this category, experts predict, could be expected only in FY22, as demand will remain muted. The luggage category has taken a big hit this year as travel came to a standstill, severely impacting its outlook for FY21. Some of the big players operating in the segment, the likes of VIP Industries, Safari Industries and Samsonite India, have reported a decline of 80-90% in sales in the April-June quarter. Lifestyle enterprises such as Wildcraft, Tommy Hilfiger and United Colors of Benetton, that have a presence in this segment, are feeling the pinch, too.

The impact has been augmented as the nationwide lockdown imposed from the last week of March till May coincided with the peak season for these companies. Sudip Ghose, managing director, VIP Industries, says, “Our sales in the first quarter of FY20 stood at about Rs 560 crore; this year, we were able to achieve only 10% of that (Rs 58 crore). The recovery is going to take time, and we do not see ourselves reaching the pre-Covid levels this year.”

Even though restricted travel has resumed, the demand for products like trolley bags, suitcases, rucksacks and other travel accessories remains subdued — around 30-35% in July, as compared to pre-Covid levels. According to Euromonitor International, the luggage market in India was valued at Rs 7,205 crore in 2017 and grew to Rs 8,495 crore in 2019. The company estimates that the market will degrow to Rs 7,305 crore in 2020, due to the impact of the Covid-19 pandemic.

Travelling light

As these companies wait for the travel market to pick up again, they are going back to the drawing board. Samsonite India, for instance, is relooking its retail strategy. The company has four brands operating in this market segment — Samsonite in the premium segment, American Tourister in the mid-level segment, the entry-level brand Kamiliant and backpacks under High Sierra.

“We had a strong retail network of about 500 outlets, but have now shut down 20% of our stores. By doing so, we aim to make the existing stores more attractive for customers,” says Jai Krishnan, CEO, Samsonite India. The company is building its omnichannel strategy, and claims to have seen an uptick in e-commerce sales, which earlier contributed 12% to its overall sales.

Meanwhile, VIP Industries is taking the discounting route. The company, which houses brands like VIP Bags, Skybags, Carlton, Aristocrat, Alfa and Caprese, is offering discounts of up to 50%. “The first quarter is a big season for us, and we had stocked up for it. However, due to the lockdown, we were not able to sell and, hence, are high on inventory now, which we would like to push out,” says Ghose.

Both these brands have cut down their advertising spends for this year, but have increased spends on the digital medium.

Wildcraft is betting on this phase to bring disruption to the market, and create demand for products like rucksacks and travel cases. “We believe that the consumer is going to transition from being a tourist to a traveller, and will seek more experiences and travel light going ahead,” says Gaurav Dublish, co-founder, Wildcraft India. He says Wildcraft has upped spends on television tenfold, and plans to make its travel gear available at 10,000 points of sale in the next one year, from the 1,200 currently.

Long wait

A recovery in this category, experts predict, could be expected only in FY22, as demand will remain muted. “Mass travel is not going to come back for some time now. There might be a partial recovery during October-December due to the festive and wedding seasons, but this year is a write-off for most brands offering discretionary products,” says Devangshu Dutta, chief executive, Third Eyesight.

Dutta says these companies would need to reinvent by foraying into other product segments until the demand for their core product offering returns.

Because consumers are likely to opt for domestic destinations in the next few months, Rishav Jain, senior director and lead – consumer and retail sector, Alvarez & Marsal, says that there could be a shift in preference towards smaller and convenient bags.

Jain says these companies could face challenges in the medium term, too, apart from struggling with low demand. “While most of these players are downsizing their business at the moment, they could potentially face challenges in operational scale-up as demand resumes,” he adds.

Source: financialexpress