admin
April 13, 2023
Economic Times / ETRetail
April 13, 2023
There will be blood!
An all-out war has started in India’s FMCG space. At one end are the behemoths – HUL, P&G, Dabur, Marico, Tata Consumer, ITC, and others – and on the other side is the master disruptor, Reliance.
Known to change the market dynamics by venturing into new segments, Mukesh Ambani-owned Reliance Retail Ventures, a part of Reliance Retail, has now set its eyes on India’s over USD500 billion grocery retail market, as estimated by Euromonitor International. And the company is depending on its distribution channel and kirana partners to conquer this feat.
The strategy
In the last couple of years, Reliance Retail has been slowly and steadily developing a distributor ecosystem to take on the FMCG giants. However, its strategy is different from the incumbents.
Helmed by Isha Ambani, Reliance Retail has announced its plans to go big on FMCG with the help of local brands and manufacturers. During its AGM last year, the company mentioned that it intends on launching affordable products.
To carve a niche in the sector, it is using four primary moves:
What can we expect from each of these moves taken by Reliance to take over the FMCG market?
Reliance Retail has been a few years behind in entering the retail space. It entered the e-commerce market as well in 2016. But the delayed entry did not stop it from giving a tough competition to its competitors. Reliance is perhaps planning to repeat the success with its delayed foray into FMCG business as well.
Out of the INR50,000 crore grocery retail market of India, more than 75% is still dominated by kirana stores. And Reliance is not just eyeing the 25%, it is working with kiranas, and hence, targeting the whole market and not just the organised sector.
Let’s deep dive.
Reliance’s ‘selling ecosystem’
The grocery retail market of India constitutes nearly 67% of the country’s total retail market, according to Euromonitor International. Within the grocery retail, the channels are further divided by modern and traditional retailers. The former covers hypermarkets, supermarkets, and convenience stores, while the latter consists of kirana stores.
Kirana stores are the lifeline of grocery retail in India — 75% of all grocery sales happen via this channel. A presence across this channel is imperative for any FMCG brand.
The biggest FMCG conglomerates are available pan-India across majority of kirana stores with their cheapest SKUs as well – this could be the smallest SKU, for example sachets for shampoos, or the largest to make it cost efficient and allow consumers to buy in bulk; read products like detergents.
In India, the grocery retailing is always driven by value and availability, and not just cost.
Reliance Retail Ventures started interacting with the kiranas during the pandemic the way no one had done before. The company decided to become distributors. It sold both its own products, and competitive brands.
Conquering distribution
Distributors form the backbone of FMCG sales in India. While manufacturers sell with no credit timeline to distributors, the latter allows discounts to wholesalers, who then extend a 30-day period of credit line to retailers. Retailers then finally sell the product to consumers.
Reliance is now on its way to becoming one of the most aggressive distributors in the country.
Abhijit Kundu, senior vice-president-research, Antique Stock Broking Ltd, says, “Reliance’s focus on the FMCG industry started with the distribution business. They are essentially creating an entire ecosystem of their own. They are now distributors of their own brands, their acquired brands, and competitor brands, all. And here’s the best part, they are providing one of the deepest discounts to wholesalers as well.”
Almost three years ago Reliance started its distribution business. The company is now developing that and calls it the “selling ecosystem” in its annual report.
According to Reliance Retail’s FY22 annual report, “The company has expanded its physical footprint into tier-II and tier-III markets, bringing the benefits of modern trade to consumers in smaller towns.”
“Extending its reach even further to reach India’s 200 million households, the company is building one of the world’s largest distribution platforms under its ‘new commerce’ initiative by leveraging its extensive supply chain and sourcing capabilities, as well as New Age technologies, to support and enable millions of kirana and merchant partners across the country, assisting them to modernise, provide easy access to a diverse product portfolio, become more efficient and generate revenue,” the report states.
The MCA filing of Reliance Retail Venture’s FY21 report says, “In the lockdown period, Reliance Retail established itself as the ‘preferred’ partner to kiranas by ensuring uninterrupted supply of essential items. JioMart kirana service, now active in 33 cities, launched self-onboarding application, aiding rapid merchant additions.”
Speaking of the developing distribution network of its own by Reliance, Devangshu Dutta, founder, Third Eyesight, says, “Disintermediation, that is removal of middlemen, is a natural outcome of consolidation of the market. However, even in the most developed and some of the most consolidated consumer markets, intermediaries continue to exist because they provide value in terms of aggregation of demand from smaller markets or segments, as well as providing some financial buffer for both buyers and sellers.”
Working with kiranas
What is interesting is how Reliance Retail is engaging with the kirana stores and using their strength to its advantage. The company launched JioMart in December 2019, in phases.
“Reliance is working very smartly as a distributor. Instead of giving deep discounts on all brands, across SKUs, the company is providing deep discounts on the fastest-moving SKUs. Imagine you run a kirana store, technically no one has loyalty only to one distributor or wholesaler. Now, if as a kirana store owner you know you need 10 packets of let’s say Surf Excel, 1 Kg SKU, chances are that kirana will order the same from Reliance, as RRL knows that is the fastest-moving SKU, and hence will give the deepest discount on that. The discounts offered by RRL are almost 15%-20% higher than what any other distributor is providing right now,” says Kundu.
“The same kirana store owner will probably order other things from other distributors, depending on discounts again. What Reliance is doing is focusing on the volume game, and on the fastest-moving SKUs and brands, cause as a distributor they know these will move, no matter what,” he adds.
According to a Kotak Securities report in March 2021, the average number of distributors that a retailer works with is 10-15. And foods, which include staples, dairy, packaged foods, beverages and such contribute 75% of average daily sales.
The same report surveyed at the time of freshly launched JioMart selling ecosystem kirana partners in Mumbai, the count of which was 60, and majority of these kirana store retailers surveyed mentioned that JioMart has lower pricing than other distributors and offers better profit margins. Around 37% respondents also mentioned that Reliance pushed its own private labels while having all brands in stock.
Isha Ambani during the 45th Annual General Meeting of Reliance Industries Ltd mentioned that the company now has a merchant partner base of 20 lakh partners and is adding 150,000 partners every month. The company has five-year plans to cover 7,500 towns and 3 lakh villages.
“JioMart, delivering in over 260 towns, was rated India’s No. 1 trusted brand for online grocery. JioMart works on a hyperlocal delivery model and is India’s largest deployment of omni-channel capabilities,” she said.
“The FMCG and grocery business of Reliance, back in 2021-2022, was nearly INR55,000 crore – INR60,000 crore already. And this was even before the company was involved in brand sales of its own. This was primarily driven by its distributor business,” says Kundu of Antique Stock Broking.
Acquisitions and private labels
Dutta of Third Eyesight says, “Regarding the FMCG and food/beverage brand acquisitions by Reliance Retail, while they are relatively small, they feed into a strategy that side-steps the need to create brands from scratch – both, as private labels for its retail formats and other acquisitions for its broader expansion into other retail channels.”
“Creating new brands takes time and success is not guaranteed, no matter who is behind the brand. Riding on the goodwill and awareness of existing brands provides a shortcut, and further growth can be fuelled by additional resources,” adds Dutta.
Clearly, something Reliance Retail seems to believe as well. Or maybe it just wants to shorten the process of establishing its retail brands’ presence amongst consumers.
One of the biggest acquisitions of the company was Metro Cash & Carry, the German B2B wholesale company. Reliance acquired the latter in a 100% stake sale for INR2,850 crore. This would give a huge leg-up to Reliance’s already burgeoning “selling ecosystem” business.
Speaking about this acquisition Isha Ambani said in the press release, “We believe that Metro India’s healthy assets combined with our deep understanding of Indian merchant / kirana ecosystem will help offer a differentiated value proposition to small businesses in India.”
Metro India, which entered in 2003, was operating 31 stores across 21 cities. The company was servicing nearly 3 million customers via its B2B channel, of whom 1 million (customers) were frequent buyers. As of FY22, Metro Cash & Carry generated revenues worth INR7,000 crore and losses of INR49.7 crore, as reported by Tofler.
In 2021, Reliance Retail also acquired online milk and dairy products delivery platform, Milkbasket. As per its FY22 annual report, the company integrated Milkbasket with JioMart, and there were double the number of subscriptions on the Milkbasket platform. The company seems to have dairy leadership plans as well. Reliance Retail has recently got RS Sodhi, ex-managing director of Gujarat Cooperative Milk Marketing Federation (GCMMF), the parent company of Amul, onboard. Sodhi was associated with GCMMF for 40 years, out of which 12 years he held the position of managing director.
Besides, the company is also targeting the FMCG market with the help of private labels and acquiring brands. Over the last few years, Reliance Retail has spent nearly USD1.1 billion on brand acquisitions – this is across grocery and non-grocery segments.
Reliance Retail acquired Chaudhary brothers’-owned Campa Cola for INR22 crore, and relaunched the brand in March 2023. Moreover, the company has also announced its plans to acquire 50% of the 100-year-old Gujarat-based beverage company, Sosyo Hajoori Beverages.
Prior to that, it acquired 51% stake in Lotus Chocolate Company for INR74 crore and plans to take over an additional 26% of the latter eventually.
In the non-grocery FMCG category, the company has acquired lingerie brand Zivame for INR1,200 crore in 2020, 89% stake in Clovia — another more affordable brand compared to Zivame — for INR950 crore, offline lingerie brand Amante (owned by MAS Holdings) for an undisclosed amount, British toy retailer Hamleys for INR620 crore in an all-cash deal, majority stake in online furniture company Urban Ladder for INR182 crore, majority stake in online pharmacy retailer Nedmed for INR620 crore, and 26% stake of task-runner and quick-commerce app Dunzo for INR1,488 crore.
While not fast moving, but consumer goods nonetheless, Reliance Retail acquired couture fashion brands namely, 52% of Ritu Kumar for an undisclosed amount, 51% of Abu Jani and Sandeep Khosla, 40% of Manish Malhotra’s couture brand, and the company has joint ventures with Anamika Khanna and Rahul Mishra.
In terms of private label, the company recently launched Independence, which will have an array of staples such as edible oil, packaged atta, and packaged pulses, under its umbrella, along with biscuits. Reliance Retail also has private label brands such as Good Life, Snac Tac, Pure It, and Enzo. These brands cut across almost all grocery FMCG categories such as packaged foods inclusive of noodles, home cleaning, beauty and personal care including hand wash brands, dishwash, and floor cleaners.
The company is not limiting itself to only Indian brands – national or regional when it comes to its acquisition strategy. Reliance Retail in February 2023 acquired Sri Lanka-based Maliban biscuits, and plans to bring the brand to India, and clearly will now be targeting the biscuits category as well. Biscuits in India is nearly INR38,000 crore market, with leaders such as Parle Products, Britannia, and ITC.
The bottom line
Reliance Retail is targeting the FMCG market of India from all angles namely retail outlets, national and regional brands, private labels, and distribution.
However, it doesn’t end there. The company is also providing financial services with the help of Jio PoS terminals, which is used by kiranas for both transactions and supply chain management. Jio Financial Services is expected to become the fifth-largest fintech company in the country soon.
The company is not just foraying into the FMCG market, it is on its way to create an entire ecosystem in the FMCG market. While acquiring a consumer is obviously the end goal, it is targeting the spine of the FMCG retail of the country first – the kiranas.
The company has added 2,500 stores in FY22, taking the total count of retail stores to 15,000, covering 42 million square feet. It has also doubled its warehousing fulfilment area to 670 million cubic feet. Warehousing and distribution are at the core of its retail plans, clearly.
“Most retailers in India are small, family-run operations that operate at a subsistence level, and that receive the financial and operational support of the distributors and wholesalers. So, removing intermediaries from the distribution chain in India will take time, unless deep-pocketed players like Reliance decide to explicitly price them out of the market while also providing credit to retailers,” concludes Dutta.
(Published in Economic Times)
admin
April 7, 2023
Akanksha Nagar, Christina Moniz; Financial Express
April 7, 2023
Reliance Retail’s (RR) launch of an omnichannel beauty and personal care (BPC) retail platform Tira this week brought the fight in the $27-billion market right to the doorstep of entrenched brands such as Nykaa, Sephora, Shoppers Stop, Tata Cliq, Myntra et al. Along with the app and website, the Isha Ambani-led company unveiled a 4,300 sq ft flagship store at Jio World Drive at BKC, Mumbai, and is working to set up stores in at least 100 locations across the country over the next few months.
RR already sells BPC products via its large network of department store chains and on its JioMart platform and last year, acquired a controlling stake in makeup and personal care brand Insight Cosmetics. RR was also in talks with Arvind Fashions to acquire Sephora, but media reports suggest the deal was called off earlier this year.
Clearly, RR has been working hard to capture the lion’s share of the fast-growing market.
According to Statista, revenue in the market will amount to $27.23 bn in 2023 and is expected to grow annually by 3.38% (CAGR 2023-27). Calling it a bottomless market, Samit Sinha, managing partner, Alchemist Brand Consulting, says, “There is definitely a huge untapped opportunity for beauty. Though we have seen a fair bit of growth in India over the past few years, we have barely scratched the surface. Its consumers are no longer just women, but also men. Additionally, differences between young female consumers in small cities and those in metro markets are reducing.”
Taking on competition
No doubt Tira has a lot going for it.
Reliance Retail Ventures Ltd, through its subsidiaries and affiliates, operates an omnichannel network of 17,225 stores and digital commerce platforms across categories including grocery, consumer electronics, fashion and lifestyle, etc.
Sinha points out that RR has a huge advantage in terms of its distribution reach and suggests it look at tapping the huge, pent-up demand in the smaller markets more than the metros, as consumers in these markets today have similar aspirations as metro consumers.
When it comes to categories like colour cosmetics or fragrances, consumers still will opt for offline retail than online, especially in smaller cities since they have limited retail outlets for product trials. That is what Reliance should be focussing on – creating a large offline footprint for its brand and if there is any company that can meet that need, it is the large corporates like Reliance, he adds.
Distribution apart, RR also needs to have a very clear positioning for the brand, notes Devangshu Dutta, chief executive, Third Eyesight. “Differentiation is the key and for that, it has to be clear about what segment of the market it is targeting and its offering. RR formats and the online presence provides a certain possible viable size of distribution, but beyond that, it has to create its own distinctive position in the market.”
Of course, competition hasn’t been sitting tight. Online market leader Nykaa, for instance, has 141 stores and plans to add another 50 in 2023; Tata Group too has announced the launch of over 20 beauty tech stores in the country.
While it has opened multiple outlets, experts say, Nykaa is still primarily an online brand. And this marketing is getting increasingly cluttered.
The online BPC market is roughly around Rs 10,000 crore in India (which is $1.2 billion) and could double in the next 3-4 years, points out Karan Taurani, senior VP, Elara Capital. That means the category could grow to reach $2.5 billion in 3 to 4 years with a CAGR of 25%.
Also, the BPC market requires a differentiated approach compared to other categories, with a lot of influencer-led campaigns and other marketing efforts to build consumer recall. “Other companies have struggled to acquire the kind of success and growth that Nykaa has seen,” he says.
That said, we have all seen how Reliance’s Ajio has given Myntra a run for its money in the fashion category with heavy discounting; so it is quite possible RR will play spoilsport in the online BPC marketplace and give Nykaa tough competition in the medium to long-term.
Tira is leaving no stone unturned. Its online platform has shoppable videos, blogs, tutorials, trend-setting tips, personal recommendations, and a virtual try-on feature, while its brick-and-mortar store offers beauty tech tools such as virtual try-on, skin analyser, fragrance finder and gifting stations to personalise purchases, along with trained beauty advisors.
Even as Tira is looking to differentiate itself via technology or by offering personalised services, Nisha Sampath, managing partner, Bright Angles Consulting, believes the only way Tira can truly stand out will be through the experience it offers. The proof will lie in how seamlessly it guides the customer through the purchase experience, she sums up.
(Published in Financial Express)
admin
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)
admin
February 23, 2023
India’s economy is in focus globally, and is also at an inflection point.
Join Devangshu Dutta at the Asia-Pacific conference of UFI, The Global Association of the Exhibition Industry. Registration Link: https://lnkd.in/dq89_rY3
See you at UFI Asia-Pacific Conference in Kuala Lumpur!
admin
December 12, 2022
Christina Moniz, Financial Express
December 12, 2022
This year has seen the entry of several brands into the plant-based meat category, from large players like ITC and Tata Consumer Products to newer brands like Licious. Mock meat, a growing trend especially in Western markets, is a plant-based protein processed to resemble and taste like meat. From vegetarian ‘chicken nuggets’ and sausages to meat-free ‘mutton’ seekh kebabs, most Indian players use ingredients like soya and jackfruit to mimic the texture and taste of meat.
The Indian vegan meat market is rather small currently — estimated to be around Rs 250-300 crore. But consider the potential: About 41 percent of respondents in India identified as either vegan, vegetarian, or pescatarian in a 2021 survey. A report by Wazir Advisors estimates that this category will grow 8-10 times to reach Rs 3,500 crore in 2026.
Looking from a global perspective too, this new category cannot be written off as just a blip. Worldwide, the consumption of such meat substitutes grew from 133 million kg in 2013 to 470 million kg in 2020.
While the projections are fantastic for this market, it is still very small within the entire food category, points out Sandeep Singh, co-founder of Blue Tribe Foods, a two-year-old start-up in this segment. What is needed to grow the category, he believes, is innovation. “The food items need to move beyond burgers and nuggets to appeal to the Indian non-vegetarian consumer. For example, someone needs to create a good chicken tikka masala or a good kheema to attract the Indian palate,” he explains. Earlier this year, star couple Virat Kohli and Anushka Sharma announced their investment in Blue Tribe Foods, a move that has boosted awareness for the brand and category, says Singh.
Variety & cost
Tata Consumer Products, which launched its vegan meat brand, Simply Better, in July this year is tapping into the trend of consumers moving towards healthier and sustainable lifestyle choices. Deepika Bhan, president, packaged foods (India), Tata Consumer Products, maintains that the market holds great growth potential. “Over 70% of the Indian population is flexitarian (consumes both vegetarian and non-vegetarian food). Surveys also show that over 73% of Indians today are protein deficient. These data points signify untapped potential in the plant protein segment. The consumer cohort, which is aware of the health and environmental benefits of plant protein, is likely to expand to a more diverse audience seeking to supplement their diet with alternate, plant-based meat,” remarks Bhan.
Cost is a factor hindering growth. Currently, the pricing for plant-based meat is 1.5 times the price of real meat products. “For premium consumers, price is not a challenge but to gain scale and reach the masses, pricing needs to be more attractive,” observes Devangshu Dutta, CEO, Third Eyesight. Indians have for decades consumed soya nuggets and products as a source of protein and as a meat alternative, but brands today are targeting urban consumers who are not price sensitive. “The consumers that brands are targeting are influenced by trends in Western markets and adopting veganism for ethical or health reasons,” adds Dutta.
Another consumption trend that is unique to Indian consumers is that there are around 100-odd non-meat eating days annually, on account of religious or cultural occasions. Meat and seafood company Licious is targeting these consumers on non-meat eating days with its newly launched vegan meat brand, UnCrave. Simeran Bhasin, business head, alternative protein, Licious, states that all brands in the category are still on a journey to improve their offerings . “Our plan is to create relevance before aiming to take a share in it. Eating is believing, and we want more of our consumers to sample our alternative protein offerings. So, we send samples of UnCrave along with Licious food deliveries to encourage consumption and drive brand awareness,” explains Bhasin.
While UnCrave is currently present in only four cities (Mumbai, Delhi, Pune and Bangalore), she asserts that there is a market for the brand in non-metros too and expects the brand to reach the top 20 markets by the end of the next fiscal.
(Published in Financial Express)
