India’s Reliance has ruthless Retail ambitions

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November 19, 2022

Chloe Cornish, Financial Times (select extracts)

Mumbai, November 19, 2022

Billionaire Mukesh Ambani’s oil-to-data conglomerate Reliance Industries, India’s biggest single listed company by market capitalisation, profits most from its refinery, the world’s largest. But Reliance wants to embed itself in India’s towns and cities by dominating the $800bn retail market as well, from partnerships with luxury fashion houses like Balenciaga to acquiring a Coca-Cola copycat.

Despite being India’s biggest retailer by revenues, Reliance’s 16-year-old shopping unit has often been overlooked, as Ambani’s Jio mobile network stole the limelight in transforming India’s data landscape.

Taking advantage of restrictions that hamper foreign companies’ ability to compete in India’s fragmented retail sector, still largely made up of mom and pop shops, Reliance is expanding its shopping empire at a rate of seven stores a day, using acquisitions to accelerate growth and investing around $3.6bn last financial year. It has 16,000 stores across India, while online purchases contribute 17 per cent of revenues, according to a person with direct knowledge of the matter.

India’s tycoons have long ventured into consumer businesses, from the Tata family, once best known for steel and now also boasting jewellery stores and a joint venture with Starbucks, to industrialists like Aditya Birla, whose conglomerate includes a large fashion business. Reliance, however, has aimed to control entire supply chains, all the way from the petrochemicals in the fibres it uses to produce textiles.

“The ethos of the group is dominance,” said Devangshu Dutta, founder of Gurgaon-headquartered retail consultancy Third Eyesight. “Unless other businesses step up to the plate, their dominance is a foregone conclusion.”

In its latest potential acquisition, Retail has reportedly bid $500mn for German wholesaler Metro’s Indian business. Indian rules allow foreign companies to own 100 per cent of a cash and carry business, but only if they do not sell directly to consumers. Reliance, by contrast, could unlock value by extending the business to sell direct to shoppers through Metro’s 31 distribution centres, said a person familiar with the company’s thinking.

Reliance has also announced it will launch its own fast-moving consumer goods company by the end of this year. The person close to the company said it would look to acquire brands to build the business, akin to its August deal for Campa, a nostalgic Indian fizzy drink, as well as exploring licensing and joint ventures.

While its ecommerce business JioMart has recently tied up with WhatsApp, owned by Reliance investor Meta, to increase its online reach, Reliance further boosted its physical shop space this year. It swooped to thwart potential foreign competitor Amazon in a battle over failing shopping group Future Retail.

Reliance Retail recorded quarterly revenue of around $8bn for the three months ending September 30, earning a net profit of $283mn, a 36 per cent increase year-on-year.

Reliance Retail declined to comment for this story.

Additional reporting by Andrea Rodrigues in Mumbai

India’s Tata to open 20 ‘beauty tech’ outlets, in talks with foreign brands

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November 16, 2022

Written By Aditya Kalra

NEW DELHI, Nov 16 (Reuters) – India’s Tata Group is planning to open at least 20 “beauty tech” stores where it will use virtual makeup kiosks and digital skin tests to get young, affluent shoppers to buy premium cosmetic products, according to a company document and a person familiar with its strategy.

The move pits Tata, whose interests range from cars to jewellery, against LVMH’s (LVMH.PA) Sephora and domestic rival Nykaa (FSNE.NS) for a share of the fast-growing $16 billion beauty and personal care market in the world’s second-most populous country.

Tata is eyeing what it calls a “beauty enthusiast” in India aged between 18 and 45 years who likes to buy foreign brands such as Estee Lauder’s (EL.N) M.A.C and Bobbi Brown, according to the document, which lists The Honest Company (HNST.O), Ellis Brooklyn and Gallinee as potential partners. Tata is in talks with more than two dozen companies to supply exclusive products to the new stores, according to the person familiar with the strategy, who did not name specific brands.

Tata declined to comment on its planned beauty stores and the contents of the document seen by Reuters. Representatives of The Honest Company, Ellis Brooklyn and Gallinee did not respond to Reuters requests for comment.

The store opening plans, still under wraps, follow the recent launch of Tata’s beauty shopping app, called Tata CLiQ Palette. The company is already in the brick-and-mortar retail business in India, where it has joint-venture partnerships with global brands such as Zara and Starbucks.

The stores will have a bright red facade showing Tata CLiQ Palette branding, with 70% of the products inside being skincare and make up, according to the Tata document. Inside the stores, Tata is planning to install technology allowing customers to try on dozens of lipstick shades virtually on screens and to get digital skin tests to find out what products might work best for them, according to the document.

The technology is not new and is in use by other beauty retailers around the world, but this venture into what industry experts call “experiential retail” is still a relatively new concept in Indian malls and high street shops.

“Experiential retail is going to be a big thing in India as more customers will spend their leisure time at such stores,” said Pankaj Renjhen, joint managing director at India’s Anarock Retail consultancy. “In the premium segment – where a customer is looking for things beyond price – experiential retail helps trigger impulse shopping and can entice them.”

Renjhen added, however, that “the product and the brands have to be exclusive and good – if they are not that, she (the customer) is not going to come back.”

MILLENNIAL DRIVE

As India’s economy grows, and people return to shops after coronavirus lockdowns, Tata is looking to target relatively young and affluent customers who like to shop in comfortable surroundings and are willing to pay the sticker price for premium international brands. Tata calls such customers “non-bargainers” in the document seen by Reuters, in contrast to most Indians who buy low-priced local brands of lipsticks or skin creams from small mom-and-pop beauty stores where haggling for discounts is common.

The company is targeting shoppers with an annual income of at least 600,000 rupees ($7,358), which is more than three times the average earnings of $2,000 per year among India’s 1.4 billion inhabitants. The new stores should drive “sales across channels as a leading Beauty Tech destination for Gen Z & Millennials,” the Tata document says.

India’s $16 billion beauty and personal care market is much smaller than China’s $92 billion, but market research firm Euromonitor estimates India’s will grow an average 7% a year over the next few years.

“The Indian beauty market is not saturated – far from it,” said Devangshu Dutta, head of New Delhi-based retail consultancy firm Third Eyesight. “If you are investing for the long term, with higher income profiles and changing lifestyles in mind, there’s a long runway of growth ahead.”

Tata faces strong competition to take advantage of the projected growth. Sephora, which has been in India for around a decade, has 26 outlets selling beauty and fragrance brands. Reliance, led by billionaire Mukesh Ambani, has a long-term plan to open 400 beauty stores, the first of which may open inside a Mumbai mall next month, according to a person familiar with its plans. Reliance did not respond to a request for comment.

Indian beauty retailer Nykaa, backed by private equity firm TPG, asset manager Fidelity and endorsed by a Bollywood celebrity, has said it plans to open as many as 300 stores, from 124 now. The 10-year old company, which started as an online-only retailer, attracted attention to the sector last year when its stock nearly doubled after listing on the Mumbai stock exchange, valuing the company at the time at $14 billion.

HURDLES AHEAD

Tata’s first “beauty tech” store will likely open by March, with further expansion stretching into next fiscal year beginning April that could see it open as many as 40 stores, according to the person familiar with the plan, who added the company will start with bigger cities such as New Delhi before considering smaller places.

However, Tata is struggling to persuade owners of upscale malls, where space is scarce, to take on a new beauty store where one already exists, if it does not have enough exclusive products or another differentiating factor to attract new customers and increase foot traffic to the mall as a whole, according to another person with direct knowledge of the discussions.

Alongside exclusive product launches, Tata is focusing on the in-store technology, which the document seen by Reuters describes as a “key differentiator.”

One of the tech tools will be a device Tata calls a “skin analyzer,” a device with a mirror that can read and analyse a customer’s skin to reveal 25 to 30 attributes that can help make product choices. There will also be “virtual try-on” kiosks for eye and face makeup. Among them will be a circular stand with lipsticks slotted in; as someone lifts one, a digital mirror-screen in front will automatically start showing how the colour shade will appear on the face, eliminating the need for repeated manual try-ons before a purchase.

Tata is also testing use of so-called geofencing technology to allow its store staff to detect when a customer using its app enters, and share the shopping history and wish-lists with staff to make better recommendations, the person familiar with the plans said.

Source: reuters

Bikaji Foods IPO: How traditional savouries captured the organised packaged snacks market in India

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November 3, 2022

The organised traditional snacks market in India is expected to double to Rs 20,400 crore by fiscal 2026, according to Bikaji Foods, aided by rapid urbanisation, a shift towards branded products and export demand.

Written By Devika Singh

Bikaji Foods is the largest manufacturer of Bikaneri bhujia with an annual production of 29,380 tonnes. (Image credit: www.bikaji.com)

A few years back, chips and kurkure packets would mostly adorn aisles in grocery shops across the country but now they jostle with enticingly packed bhujia, sev and other local savouries.

The upcoming initial public offering (IPO) of Bikaji Foods has put the spotlight on the huge inroads made by traditional snacks in the organised packaged snacks segment.

Till a few years ago, the traditional segment was mostly unorganised but bhujia, chana chor garam, ganthia, bhel puri, among others, have made their place in the organised packaged snacks market. Though western snacks like chips still dominate packaged snacks, with a 57.2 percent market share, traditional Indian sweets now command a 42.8 percent share. Of this, the traditional savoury bhujia has a 15.9 percent share.

A few years ago, these snacks were sold by small regional players, often loose, while organised players like Haldiram’s, Bikaji Foods, Bikano had a small share in the packaged snacks market.

“The traditional Indian snacks segment had been a fragmented market mostly sold by individual retailers and the brands in it were small,” said Devangshu Dutta, chief executive at retail-focused consultancy Third Eyesight.

However, with the introduction of packaging and processing along with the consumer preference for local taste, Indian brands have significantly picked up the pace.

According to the draft red herring prospectus (DRHP) filed by Bikaji Foods, the overall market for savoury snacks was valued at Rs 75,100 crore in FY22, in which the organised segment had a 56.3 percent share at Rs 42,300 crore. Of this, the organised ethnic or traditional snacks market was Rs 11,400 crore and expected to grow at a compounded annual growth rate (CAGR) of 16 percent to reach Rs 20,400 crore by FY26, said DRHP. This sub-segment was valued at Rs 5,700 crore in FY15.

Haldiram’s (Delhi and Nagpur), as per an IPO note issued by Axis Capital, have the largest share of the traditional savoury snacks market in India at 38.5 percent, followed by Balaji at 9.6 percent, Bikaji at 9 percent, Bikanervala (Bikano) at 6 percent and PepsiCo at 3 percent. Haldiram – Prabhuji (Kolkata), Prataap Snacks, DFM Foods and other organised players have the rest of this market.

Here are a few factors that have led to the growth of traditional savoury snacks in India.

The Covid factor

The entire market for savoury snacks, Western and traditional, has been rapidly growing, triggered by Covid-19-led restrictions in 2020 and 2021. “Snacking in between meals has always been traditional in Indian culture and Covid-19 forced lockdown has increased this habit of snacking multi-fold and is driving the growth of this industry,” said Bikaji Foods’ DRHP. The document projects the overall market for savoury snacks, which stood at Rs 75,100 crore in FY22, to reach Rs 1,22,700 crore by FY26. The DRHP added that increased concerns over health and hygiene are also pushing consumers towards the organised market and branded products will be a major beneficiary of this growth.

Rapid urbanisation

According to the DRHP, while traditional savoury snacks were consumed in specific regions earlier, with urbanisation and working population migration to different regions the demand for regional snacks is increasing pan-India. This has led to the domestic expansion of many regional players like Bikaji and Chitale, it added.

Packaging and processing

As stressed by Dutta of Third Eyesight, several traditional snacks were not sold in packaged form earlier but brands are launching more and more products from Indian cuisine in the packaged form now. Bikaji’s DRHP says this trend is expected to continue as companies discover processes to increase the shelf life while retaining the authentic taste of traditional food.

The shift towards branded products

Consumers who earlier used to buy traditional snacks in loose and unbranded forms are switching to branded, packaged products now. “The boom in branded or organised namkeen is driven by consumers who are upgrading from unbranded segment rather than consumers of western snacks shifting to ethnic segment,” said the DRHP.

The rise in exports

Home-grown companies such as Bikaji, Haldiram’s, Bikano have also cracked the export market over the years and their products can be found in several countries abroad. “Earlier, these products were found in stores catering to the Indian diaspora in the US, the UK, or Canada but now they have even made their way to large chains,” said Dutta. Bikaji, for instance, drew about 5 percent of its revenue from exports in FY21. The company currently exports to 35 countries.

Source: moneycontrol

Retail penetration in India has a lot of catch-up to do, according to Cushman & Wakefield analysis

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October 31, 2022

Written By Faizan Haidar, ET Bureau

Synopsis
“Physical spaces are built to encourage lifestyle-oriented consumption, moving away from hard sales push. Hence, given the current retail real estate supply, there is a strong likelihood that retail spaces where experiences can be curated will be in short supply even in large cities,” said Anshul Jain, managing director, India and Southeast Asia.

India’s top three cities will need 9 million square feet of retail space every year till 2027 to reach the level of organised retail area available in a country to match cities of a small country like Vietnam’s retail space per capita (RSPC), according to an analysis by Cushman & Wakefield. Currently India adds about 3.8 million sq ft of retail area every year with developers mostly focusing on office and residential assets.

Source: economictimes

Walmart and Ikea continue to bleed in India as losses widen

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October 29, 2022

By Pranav Balakrishnan & Writankar Mukherjee

Global retail giants Walmart and Ikea continued to bleed in India as their losses widened in 2021-22, despite a surge in sales, as per the latest regulatory filings.

Three of Walmart entities in the country – Flipkart Internet, which operates the namesake e-commerce marketplace, Myntra and Walmart India, which operates Flipkart Wholesale stores (formerly known as Best Price) that sells goods to mom-and-pop stores, all expanded losses by 40-50% largely due to higher spending on delivering orders, advertisement and promotions, while their revenues grew by up to 45%.

Ikea India’s net loss too went up by 12%, while revenue jumped by 77% in FY22, filings made to the Registrar of Companies and sourced from business intelligence platform Tofler showed.

“Walmart and Ikea are currently in a market acquisition mode in India to establish a dominant position and may sacrifice profit in the short term,” said Devangshu Dutta, chief executive of consulting firm Third Eyesight. “But in the long term, these companies will definitely chase profit in India. Also, the market environment has been tough last fiscal due to increased competition despite a bounceback post-Covid,” he said.

Walmart is yet to publish the FY22 results of Flipkart India Private Ltd, which is a business-to-business entity which supplies goods to online sellers and also Flipkart’s online B2B business. The entity posted a revenue of Rs 7,840 crore in FY21.
Furniture and home décor store Ikea India reported revenue from operations at Rs 1,076 crore in 2021-22, while the net loss was Rs 902 crore.

In the filings, the company said it continued to work on its plans towards positioning, growth and profitability of the omni-channel business in India. It said expansion plans and operations were impacted due to Covid-19 in FY22, but the management is optimistic about future prospects.

Of the Walmart arms in India, Flipkart Internet, posted a 33% rise in operating revenue of Rs 10,476 crore in the year ended March 31, 2022, while its loss widened to Rs 4,361 crore from Rs 2881 crore in FY21. The filings showed the company spent Rs 5,045 crore in delivering orders, which was 46% higher compared with the year before, while advertisement and promotional expenses almost doubled to Rs 1,945 crore from Rs 1,073 crore.

The company’s revenue comes from multiple sources, including platform fees collected from sellers, and services such as shipping and carrying advertisements. Revenue from marketplace services remained largely flat at Rs 2,823 crore while that from advertisements increased 50% to Rs 2,083 crore. The Indian company is the top contributor to parent Walmart’s ad revenue globally. Revenue from logistics services grew 57% to Rs 3,848 crore.

Meanwhile, Walmart India – which owns and operates 28 cash and carry wholesale stores – posted 6% jump in revenue at Rs 5362 crore in FY22, while net loss went up by 49% at Rs 299 crore as compared to the year ago.

Myntra Design, the Walmart entity which owns the fashion marketplace Myntra, reported a 45% jump in revenue from operations to Rs 3,501 crore while losses widened 40% to Rs 597 crore in FY22. Revenues of Myntra Design come from commission and service charge collected from brands and sellers on the platform.

Revenue from marketplace service increased 18% to Rs 1,610 crore, while income from logistics services almost doubled to Rs 1,498 crore and revenue from advertisement jumped 76% to Rs 344 crore.

ET reported on September 13 that Amazon Seller Services, which runs the Amazon India marketplace, reported a 32% jump in overall revenue to Rs 21,633 crore on a standalone basis in FY22.The local unit of Seattle-based Amazon had also cut losses by almost 23% to Rs 3,649 crore in FY22.

Source : economictimes