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March 23, 2023
Sharleen D’Souza, Business Standard
Mumbai, March 23, 2023
After sparking a price war in the carbonated beverages market through Campa Cola, Reliance Consumer Products has taken the pricing battle to the other segments in the fast-moving consumer goods market.
For instance, in soaps, it has priced its product lower than the market leader in the segment at Rs. 25 for 100 gms across its three brands – Glimmer, Get Real and Puric.
With Glimmer, Reliance Consumer competes with Lux, which sells a 100-gm soap bar at Rs. 36, while Get Real is similar to Hindustan Unilever’s Pears soap bar, which is priced at Rs. 54 for 100 gms. In the hygiene space, Reliance has taken on Reckitt Benckiser’s Dettol, priced at Rs. 40 for 75 gms. Godrej Consumer Products, one of the leaders in soaps sells its Godrej No 1 45 gms (each) pack of 4 for Rs. 40.
In the dish wash category, it captured the main price points of Rs. 5 for 75 gms, Rs. 10 for 145 gms, and Rs. 15 for 200 gms in bars, and Rs. 10 for 65 ml pouch, Rs. 20 for around 140 ml pouch, and Rs. 30 for 200 ml pouch in liquids. HUL’s Vim bar is priced at Rs. 5 for a 60-gm pack and Rs. 10 for a 125-gm pack, while a 300-gm pack retails at Rs. 30.
But Reliance has also moved a step further into the sachet space and is retailing a 5 ml sachet of dish wash liquid at Rs. 1. Other brands do not sell sachets.
On JioMart, the price of RCPL’s Enzo two-litre front-load liquid detergent is Rs. 250, a 43 per cent discount to the maximum retail price (MRP) of Rs. 440; the topload two-litre liquid detergent is available at a 35 per cent discount and now priced at Rs. 250. Its compact detergent powder one kg pack is priced at Rs. 149, after a 12 per cent discount on its MRP of Rs. 170. HUL’s Surf Excel Easy Wash detergent powder is priced at Rs. 150 and Quick Wash at Rs. 240 for a kilogram. But Rin detergent powder is priced for Rs. 103 and Wheel detergent powder at Rs. 73 for 1 kg. Surf Excel’s front load two-litre pack is priced at Rs. 390 and top load at Rs. 370. Tide’s 1.5 kg detergent powder sells for Rs. 225.
In detergents, Reliance has not disclosed which segment it intends to cater to and what price points it will offer in general trade.
Reliance is following the challenger strategy like in the telecom space, said Devangshu Dutta, founder at Third Eyesight. He said this is the fastest way to acquire market share, and since Reliance has deep pockets, it can easily fund market share acquisition by launching its products at a significant price difference compared to rivals.
“Customers will move at least to try the product and if they end up liking the product they will stick to it. This strategy is best suited for market share acquisition,” Dutta explained.
An executive from a top FMCG firm said on the condition of anonymity that there will eventually be a price war in whichever segment Reliance enters. He explained that while Reliance was still setting up its distribution network, over time due to its B2B supply chain, it will be able to push its products into retail
stores.
Some distributors who spoke on the condition of anonymity said it would not be easy to move the leaders in the segment as these companies have a fixed customer base and it might be difficult to topple brands that have been in the market for a while.
Reliance followed the same strategy with its carbonated beverage, Campa Cola. It relaunched Campa at a price point of Rs. 10 for 200 ml, Rs. 20 for 500 ml, Rs. 30 for 600 ml, Rs. 40 for one litre, and Rs. 80 for two
litres.
(Published in Business Standard)
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March 15, 2023
Faizan Haider, ET Bureau, 15 March 2023
Value apparel brands are set to grow in India.
The success of Tata Group’s Zudio that sells clothes below Rs 1,500 has prompted Reliance, Shoppers Stop and several global brands to enter the mass-priced retailing segment.
While Reliance Retail is planning to launch a value apparel format, likely to be named ‘Youth’ to compete directly with Tata’s Zudio and Landmark group-owned Max, Shoppers Stop is coming up with a mass-priced brand, internally called InTune, people in the know said.
Aditya Birla Fashion & Retail has been eyeing shoppers in tier-2 and -3 cities with Style Up, a similar format, while affordable French brand Kiabi is in talks with retail space providers and potential partners to enter the India market.
“Although there is a significant concentration of demand in the metro cities and tier-1 cities, these are also hypercompetitive markets. With economic growth spreading into the smaller cities and rising aspirations, especially among young consumers, there is an opportunity for brands to expand into these markets,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight.
“However, keeping price-sensitive segments in mind, companies are creating new labels and brands, rather than pulling down their existing brands’ selling price,” Dutta said.
Trent, the Tata Group company that houses retail brands such as Westside, Zudio and Landmark, had earlier said that while Westside accounted for 70% of its standalone business, Zudio had the potential to outpace the department chain due to the size of the opportunity in the value segment.
“While the value format can offer growth in smaller cities, in metro cities the retailers are trying to target youth through this format. The youth is also aware of the sustainability part and most of these brands are focusing on it,” said Shriram PM Monga, who cofounded retail consultancy firm SRED.
Both Reliance and Shoppers Stop are looking for 6,000-9,000 sq ft space at malls and high street for their new brands, said a person familiar with the development.
Experts said India’s consumption structure was skewed in the past over a narrow base of rich consumers accounting for a large chunk of the market. However, as the economy is broadening across many more cities and the impact is reaching further down the income ladder, the opportunity for value formats and value brands is expanding.
For Lifestyle International, its value brands Max and Easy Buy have already outpaced the department stores by sales, indicating that consumers are increasingly seeking either lower-priced merchandise or opting for global brands such as Zara and H&M for fashion apparel instead of department stores.
(Published in The Economic Times)
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March 13, 2023
Tushar Goenka, Financial Express
March 13, 2023
Flipkart Supermart, the online grocery delivery platform of the Walmart-owned ecommerce company, is betting on regional brands to unlock the next phase of growth. Over the past few months, the e-tailer has been listing brands and making them more readily available in cities where their recall value is high.
The regional push targets staples and is pronounced across categories such as atta, tea, pulses, among others. So, instead of offering, say, just the Tata brand of tea, Flipkart also showcases local favourites like Nameri Tea for the residents of Assam. Similarly, instead of selling Nestle’s Maggi and ITC’s Yippie noodles across the country, Flipkart will also let customers pick brands selling Korean noodles, popular among north east teenagers.
The shift in focus is vital in a country whose grocery bill totals $600 billion, of which offline sales account for a staggering $592 billion, while online is a much smaller $8 billion. Further, of the total grocery bill, the share of regional brands at around 60% is much higher than organised national brands that stood at 40%, according to rough estimates from EY.
So far, the plan seems to have worked for the company. Smrithi Ravichandran, head of grocery, says her unit has grown 2.5X between June 2022 and February 2023.
The reason for this shift in focus is easy to understand. In Ravichandran’s own words, “The Indian palette changes every 150 kilometres.” Consider this. The kind of toor daal consumed in Chennai is different from that consumed in Madurai. That is, even within a single state (Tamil Nadu in this case) there is a huge difference in preferences. And that is true for most categories.
Next, look at the potential. Ravichandran’s department sees about 65-70% of its orders coming from Tier 2 and beyond, with metros and Tier 1 cities accounting for the rest.
Analysts believe Flipkart’s initiative is a step in the right direction. Says Devangshu Dutta, CEO, Third Eyesight, a retail consulting firm, “Focusing on regional brands makes eminent sense not just to cater to tastes in a particular geography but to also serve consumers who have moved away from their hometowns and might find it difficult to buy their chosen brands.”
That said, catering to regional preferences is easier said than done. “If one has the same selection even for the same state, it doesn’t help. But there is a cost in catering to that varied choice and we’ll need to operate more fulfilment centres,” Ravichandran adds.
From what to how
Flipkart’s plans to double down on the regional selection in grocery will mean partnering with some of them. Here consumer data available with Flipkart will come in handy, says Ravichandran.
Angshuman Bhattacharya, national leader, consumer product and retail, EY India, believes that by offering more regional brands in categories like atta, Flipkart will deepen penetration, giving smaller players a chance to tap a wider customer base. “Smaller, regional brands will be hungrier for growth and may end up offering healthier margins than what a nationalised player would do,” he adds.
In this, Flipkart’s approach is similar to that of Future Retail under Kishore Biyani, who underscored the importance of a regional brand-led strategy. “The Future Group had launched around 10 private labels of atta and that is no easy feat. A regional brand-led focus might prompt Flipkart to toy with the idea of launching its private labels at a later stage. Or it may even end up asking the regional brands to package staples under its brand, thereby yielding much higher margins,” Bhattacharya of EY points out.
Flipkart isn’t drawing the line just yet. The company will invest in technology to tell customers about the origin of the products they order. “Conscious consumerism is another aspect we will focus on. So, on the packet of a toor daal, consumers will have traceability regarding where and when exactly the daal was harvested,” Ravichandran adds.
This journey will not be a cakewalk for Flipkart. Analysts point out that to be able to partner with Flipkart and address its customer base of over 450 million, smaller brands must up their supply chain spends. That apart, there is always the fear that if the e-commerce giant does not get the desired results, it might discontinue such tie-ups, leaving the regional players in the lurch. Flipkart must allay these fears right at the outset.
(Published in Financial Express)
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February 23, 2023
India’s economy is in focus globally, and is also at an inflection point.
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January 18, 2023
Faizan Haidar, ET Bureau
Jan 18, 2023
Tension has built up between retailers and malls across India, with leading malls planning to increase rentals every year instead of the current arrangement of every three years.
Industry insiders said large retailers are opposing the move given the number of stores they operate. Malls usually sign nine-year agreements with the retailers with a 15% increase in rentals every three years. If rents increase 5% each year, retailers will have to shell out about 17% in three years.
“It does not make any sense because we sign our properties for a long term, which is generally 12-15 years. An annual escalation in rent will not be viable and we would want to not go ahead with such short-term demands,” said a chief executive at a departmental store chain, who did not wish to be identified.
Rajendra Kalkar, president-west at Phoenix Mills, which operates more than half-dozen malls in Mumbai, Pune and Bengaluru, and in some tier-2 cities, said rentals are revised as per the originally agreed terms of the agreement. But in new agreements, the issue of annual rent revision is being negotiated on a case-by-case basis.
Another retailer said on condition of anonymity that brands invest a lot in fit-outs and annual rental hikes will make the business unviable. “A brand has to manage so many stores that annual hikes will lead to a chaotic situation where every month brands will have to keep rental hikes in mind,” said the retailer.
Other malls such as those of DLF, Nexus and Oberoi, Select City Walk and Vegas are also mulling over the issue, said industry executives.
“We have started something like staggered rental so that we can hike the rental every year. However, in the first year. we don’t put much pressure because the brand is trying to settle in. But once they start doing well, we push for a rental hike,” said the director of a leading mall, who did not wish to be identified.
Single-brand retailers said the demand is strong and they may be able to absorb rent inflation, if at all it goes through.
Mall developers said they will push for a 20% rental hike in three years given the inflation and cost of raw materials.
“The cost of everything has gone up and we will have to put it in a fresh condition to sustain. Retailers are doing good and they should not be hesitant in absorbing the hike,” said another mall developer.
India’s top ten listed retailers, including Aditya Birla Fashion & Retail, Shoppers Stop, Jubilant Foodworks and Tata Trent, have together saved more than Rs 1,500 crore in rents over the past two financial years, after negotiating discounts with malls and other landlords for the lockdown period.
“Covid impacted both mall developers and retailers, and mall developers may possibly be trying to recover from those lockdown losses,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “Where there’s a dearth of quality retail spaces, well-managed malls may be able to negotiate more strongly for a frequent hike. But both retailers and malls need to come together for a symbiotic solution that works for both.”
Rentals have now returned to pre-Covid levels, as malls have returned to normal business and their tenants are seeing healthy footfall. According to ICRA, rental income reached 80% of pre-Covid levels during 2021-22 and is expected to surpass 2019-20 levels by 4-6% in the current fiscal.
“We have seen double-digit growth and understand that it was an unfavourable time for mall operators during Covid. So during renewal, we may accept rent escalation if we are not able to hold it. However, we don’t expect any adverse impact on our financials,” said Satyen Momaya, CEO of Celio, a French apparel brand.
Rental incomes have improved at a faster pace after the second wave of the pandemic, with recovery at 74% during the second quarter of 2021-22, as against 34% a year ago, and reaching 102% of pre-Covid levels in the second half of the current fiscal, said ICRA.
“Malls are investing heavily in events and every month there are two-three events to ensure footfall. With these initiatives, the mall expects sales to increase and the retailer to pay higher rent,” said a Kolkata-based mall developer, who did not wish to be identified.
