admin
August 9, 2024
Sagar Malviya and Rica Bhattacharyya, Economic Times
9 August 2024, Mumbai
Reliance Industries Ltd. reduced its workforce by 42,000, or nearly 11%, in FY24, in what is being seen as an outcome of a cost-efficiency drive and reduced hiring, especially in its retail segment which also saw store closures and slower expansion.
The employee strength at the country’s largest company by market value, stood at 347,362 in FY24 compared with 389,414 a year ago. The intake of new recruits was slashed by more than a third to 171,116, according to its latest annual report.
“The new lines of businesses (at Reliance) have matured now and have significant support from digital initiatives. Now they are at a stage to better manage the operations with optimum strength,” said an analyst with a leading broking firm, requesting not to be named. “It doesn’t mean that the numbers (of headcount) won’t increase when new business opportunities emerge and strategy changes. They understand very well how to drive cost management and efficiency.”
Most of the job cuts were in its retail business, whose 207,552 employees last fiscal accounted for about 60% of RIL’s total employee strength. The number was 245,581 in FY23.
“Overall voluntary separations in FY24 are lower than FY23. The retail industry typically has a high employee turnover rate, especially in store operations,” RIL said in the report, adding that its employee benefits expense increased by 3% year-on-year to Rs 25,699 crore. In FY23, it had gone up by 33%.
In FY23, Reliance Retail expanded its physical store network, adding more than 3,300 new stores to take the total store count at the end of the year to 18,040. In FY24, the store count stood at 18,836–a net addition of some 800 after factoring in unviable store closures.
Last year, RIL’s online wholesale format JioMart aligned its operations with Metro Cash and Carry, which it acquired. With the addition of Metro’s permanent workforce of 3,500 employees, there was an overlap of roles, both in the backend and online sales operations.
Experts said many of the large conglomerates are rebadging some of the front-end service functions to third-party rolls.
“Many companies in the retail sector have been getting people off their own roles and appointing staffing companies for a leaner structure and efficient management. This may reflect as a drop in headcount (on the company reports) but need not necessarily be loss of jobs,” said Lohit Bhatia, president of workforce management at Quess Corp. “This could include functions such as security guards at the store level, facility management, logistics, picking and packing, etc. That apart, digitisation and tech advancement is also leading to some job roles being redundant across sectors.”
India’s retail sales expansion slowed to 4% last year after a surge in spending across segments—from clothes to cars—in the post-pandemic period, triggered by revenge shopping. Reliance’s retail division, however, grew 18% in sales to Rs 3,06,848 crore.
“Focus on store productivity usually happens in cycles; we have seen consumers unleash their spending post pandemic, which led to retailers expanding their network or square footage. However, if some of the stores are unviable, then management teams are now highly objective, even ruthless, and will shut stores,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “In addition, any company planning to list would like to have healthy and lean operations, although we cannot pin-point it to Reliance in this case.”
Another analyst, who did not wish to be named, said, “Reliance’s annual report reveals that the group, spanning petrochemicals, telecom, and retail, has moved beyond its core investment phase and is now poised to reap substantial benefits from operating leverage, efficiency gains, and investments in technology and talent.”
(Published in Economic Times)
admin
July 28, 2024
Writankar Mukherjee, Economic Times
Kolkata, 28 July 2024
Top retail chains such as Reliance Retail, Shoppers Stop and Spencer’s Retail are facing a prolonged slowdown in consumption, pushing them to exit unprofitable markets, raise debt and control costs.
India’s largest retailer Reliance Retail shuttered 249 stores in the three months ended June. The company is also going slow on expansion, opening 331 new stores in the quarter compared to 470-800 stores opened every quarter in FY22, FY23 and FY24. The closures mean the retail business of Reliance Industries made 82 net new store additions last quarter–the lowest in 15 quarters.
Spencer’s Retail has decided to completely exit North and South India markets by closing 49 stores in the National Capital Region (NCR), Andhra Pradesh and Telangana. The step will erase Rs 490 crore of annual revenue, but the company is hopeful it will improve profitability.
Shoppers Stop chief executive officer Kavindra Mishra told investors last week that it may have to defer a few store openings this fiscal due to regulatory and other issues. The company will also borrow Rs 100 crore for expansion with demand remaining soft.
Meanwhile, V-Mart Retail has closed 22 stores in the first six months of 2024, as per its latest investor presentation.
“Pruning underperforming locations is a natural reaction during times of demand stress,” said Devangshu Dutta, CEO of retail sector consulting firm Third Eyesight.
Pure Economics
“Demand forecasting can never be perfect due to a lag between demand assessment and supply. Retailers now try to do away with underperforming stores at the bottom of the pile quickly. Earlier there were prestige issues in shutting down stores, but now it’s acceptable industry practice and pure economics,” said Third Eyesight’s Dutta.
Analysts say most retailers expanded rapidly after the pandemic, banking on pent-up demand and revenge shopping at the time. With demand turning sluggish, the industry is now being forced to take various steps to sustain operations. At Reliance Retail, net profit rose by a modest 4.6% from a year earlier in the June quarter to Rs 2,549 crore while revenue grew 6.6% to Rs 66,260 crore. It was the slowest pace of revenue growth and came after a 9.8% increase in Q4FY24. Net profit and revenue from operations fell sequentially in the June quarter.
Spencer’s Retail CEO Anuj Singh told analysts on Thursday the 49 stores it is closing make up nearly 22% of revenue, but also Rs 56 crore of losses at the regional Ebitda level in North and South India. “They were a drag on the balance sheet. We will now focus on Uttar Pradesh and the East where there is a sizable consumption opportunity with a 250 million population,” he added.
Singh said the store rationalisation exercise and about 35% headcount reduction at corporate offices will reduce overheads from 8% operating cost to 6.3% of total sales. “We now expect to achieve Ebitda breakeven by March 2025 which will give us the option to raise capital,” he said.
Mishra at Shoppers Stop said demand remained subdued last quarter due to fewer wedding dates, long election season with polling dates on weekend, heatwaves, and high level of cumulative inflation. All these factors combined hit growth and volume recovery, except in value fashion and beauty.
More stores shut than opened
In fact, the sustained demand slowdown saw chains like Pantaloons, Spencer’s Retail and Nature’s Basket close more stores than they opened last fiscal. Retailers like V-Mart Retail, W, Aurelia and Titan Eye+ had a higher rate of store closures than openings in the March quarter.
(Published in Economic Times)
admin
July 8, 2024
Sharleen D’Souza, Business Standard
Mumbai, 7 July 2024
In 2023, after more than two years of development and testing, Mondelez India launched a version of Bournvita that delivers about half the recommended daily allowance of key micronutrients for children, including iron, iodine, and zinc, as well as vitamins A, C and D. All this while having 15 per cent less added sugar.
“Prior to this and around two years ago we also introduced Bournvita 50 per cent less sugar variant to provide an option for consumers. We have made adaptations to our portfolio products like Bournvita biscuits, which now have 15 per cent less sugar, and our most loved Oreo chocolate variant has also seen a 5 per cent decrease in sugar content,” the company said in an email.
This drive is not confined to Mondelez. Other multinational companies, too, such as Coca-Cola, PepsiCo, and Nestle India, have been working on bringing down the sugar, salt, and sodium content. They could be patting themselves on the back for doing this. Not only has the Indian consumer become more health conscious than ever — with all the talk going around that salt and sugar are two of the monsters in your kitchen (the third being maida) — but also the country’s food regulator has swung into action.
On Saturday, the Food Safety and Standards Authority of India (FSSAI) approved a proposal that information about the sugar, salt and saturated fat content on labels of packaged foods and beverages should be bolder and bigger. “Along with empowering consumers to make healthier choices, the amendment will also contribute towards efforts to combat the rise of noncommunicable diseases and promote public health and wellbeing,” the FSSAI said in a statement.
Earlier, the regulator advised ecommerce platforms to ensure that dairy-, cereal-, and maltbased beverage mixes were not available under the “health drinks” or “energy drinks” categories. The recommended sugar intake is 20 grams a day for adults and 25 grams a day for those below 18. Not more than 5 to 10 per cent of a person’s total energy intake should come from sugar. Children under two are not supposed to consume any added sugar. However, these guidelines are often breached because people tend to consume packaged foods.
Therefore, experts and activists have been calling for a different labelling, which would announce out loud what lies inside.
Eating right, drinking right
Some multinationals had already been working on reducing the salt and sugar content. For instance, Coca-Cola removed more than 900,000 tonnes of added sugar globally since 2017, and 19 of its top 20 brands offer reduced-sugar or zero-sugar options. In India, Coca-Cola’s Minute Maid Honey Infused drinks offer added dietary fibre for healthy digestion in three flavours.
“In 2022, approximately 68 per cent of our global beverage portfolio contained less than 100 calories per 12-ounce serving (350 ml), with 246 low- or no-sugar options launched,” Coca-Cola India said in a statement to Business Standard.
The company added that it prioritised transparency by placing calorie information on the front of all its packaging worldwide and did not market its products directly to children under 13.
Nestle India joined the FSSAI’s Eat Right movement and signed the pledge to reduce an average of 6 per cent added sugar, 10 per cent salt, and 2.5 per cent fat in its relevant product categories. “The company has achieved these commitments,” it said.
Varun Beverages, PepsiCo’s India bottler, told its investors on a conference call that its gross margins improved significantly, rising by 385 basis points to 56.3 per cent — and sugar had a role to play in it.
“This increase was largely driven by our focus on reducing sugar content and the light-weighting packaging material, incidentally, also meeting our sustainability initiatives along with the benefits from reduced PET prices which contributed to this improvement,” Raj Pal Gandhi, chief financial officer of Varun Beverages, said on the investor call.
Approximately 46 per cent of the company’s reconsolidated sales volumes, he said, came from low-sugar or no-sugar products. The no- or less-sugar trend is working for the company as it optimises its cost structure and enhances its overall efficiency.
“These efforts have had a tangible impact on our financial performance with EBITDA increasing by 23.9 per cent to the level of Rs. 988.76 crore year-on-year, and the Ebitda margin improving by 240 basis points to the level of 22.9 per cent in quarter one of 2024 (January-March),” Gandhi said. Ebitda, a widely accepted benchmark of profitability, is short for earnings before interest, tax, depreciation, and amortisation.
“So, we are developing more and more — Gatorade, we mentioned a new launch which PepsiCo has given us formulation with zero sugar. So, effort is there, and constant effort is there to reduce the sugar content,” Gandhi said. PepsiCo India said in an earlier statement it had initiated trials of a blend of sunflower oil and palmolein oil in certain parts of its portfolio last year, thus becoming one of the few players in the food industry in India to do so.
Rush of junk
Experts say the standards for food and beverages vary across the world and India should have its own. “There should be thresholds for healthy and unhealthy and, in my view, this should be labelled boldly on the front of the pack,” says Arun Gupta, convener, Nutrition Advocacy for Public Interest (NAPi), a think tank.
A report titled The Junk Rush, jointly brought out by the Breastfeeding Promotion Network of India and NAPi, said: “India faces a severe public health crisis of obesity and diabetes.” In 2022, a group of public health experts, consumers, lawyers, and patient groups had called upon the government of India to check the soaring consumption of junk food among the country’s youth.
“Certain countries are more stringent than others. Even global brands have the same product, but the ingredients differ across countries and continents,” says Devangshu Dutta, founder of Third Eyesight. He explains that India still has some road to travel on food safety, alleging that some ingredients benefit companies more — such as by providing a longer shelf life — than the consumer.
“The Indian regulator is still very new to the game. If you look at processed foods, it is a newer market and the regulator needs to pick-up pace,” Dutta says.
On Saturday, the FSSAI picked up pace.
(Published in Business Standard)
admin
May 8, 2024
At the recent Phygital Retail Convention in Mumbai, Devangshu Dutta anchored an engaging “Fireside Chat” with Bhavana Jaiswal of IKEA India and Kapil Makhija of Unicommerce , on retailers engaging with their customers across channels and formats, and the opportunities as well as challenges in managing experiences seamlessly across online and offline interfaces.
Watch the video at this link:
admin
May 3, 2024
SAYAN CHAKRABORTY, Nikkei staff writer
Bengaluru, 2 May 2024
India’s packaged spice manufacturers MDH and Everest are under regulatory scrutiny in several countries after their products were allegedly found to contain carcinogenic elements, barely a year after cough syrups made in the South Asian nation were linked to the deaths of over 140 children in Africa.
Countries like Australia, New Zealand and the U.S. are weighing investigations into the packaged spices made by the companies after Hong Kong authorities raised a red flag over their quality. This isn’t the first time that the two — among the largest such companies in India — have faced these kinds of issues, with the U.S. Food and Drug Administration ordering a recall of Everest spice mixes in 2023 and some MDH products in 2019, both due to salmonella contamination.
The Centre for Food Safety (CFS) in Hong Kong said in a statement on April 5 that it found ethylene oxide (ETO), a pesticide that can cause cancer if consumed in large amounts, in three types of packaged spices manufactured by MDH and one made by Everest. The products were taken off the shelves and recalled, the CFS said.
Taking its cue from the Hong Kong authorities, the Singapore Food Agency (SFA) a couple of weeks later recalled the Everest Fish Curry Masala product, saying in a statement that consumers who had purchased it were “advised not to consume it.”
The SFA also said, “As the implicated products [in Hong Kong] were imported into Singapore, the SFA has directed the importer to recall the products.” The agency clarified that “although there is no immediate risk to consumption of food contaminated with low levels of ethylene oxide, long-term exposure may lead to health issues.”
India’s Spice Board, a government agency that oversees spice exports, said that the limit for ETO varies between countries, from 0.02 milligram per kilogram of spices in places like the U.K. and Norway to 7 milligram per kilogram in Canada and the U.S.
Pesticides are widely used in agriculture in India, often leaving traces in food products. According to Indian government estimates, the cultivated area where chemical pesticide is used grew 33.4% from the fiscal year ending March 2019 to fiscal 2023, reaching 108,216 hectares. That was about seven times the area cultivated with biopesticides in 2023.
“We tend to look critically at the end product, but even more rigor is needed at the level of the ingredients,” said Devangshu Dutta, CEO at consultancy firm Third Eyesight, referring to the use of pesticides in cultivation. “Otherwise, we will end up kind of catching the product at the last point of control, which is not enough.”
Hong Kong and Singapore did not disclose the amount of ETO content in the recalled products. MDH and Everest had not responded to requests for comment by the time of publication.
Authorities elsewhere have also taken note of the allegations. “Food Standards Australia New Zealand is working with our international counterparts to understand the issue with federal, state and territory food enforcement agencies to determine if further action is required in Australia, e.g., a food recall,” the agency told Nikkei Asia in an email statement on Wednesday.
The regulatory scrutiny in the U.S., Australia, New Zealand, Hong Kong and Singapore, raises questions over an export market worth about $700 million, research firm Global Trade Research Initiative (GTRI) said in a report on Wednesday.
“Swift investigations and the publication of findings are essential to re-establish global trust in Indian spices,” GTRI said, adding that the “lack of clear communication [from government agencies] is disappointing.”
Indian food has been under scrutiny in Europe as well. The European Commission Rapid Alert System for Food and Feed estimates that since the beginning of 2023, Indian food products were deemed to pose “serious” risks in 166 instances. These included nine cases of ethylene oxide found in food supplements and spices in countries including Sweden, Greece and Italy.
Chinese food imports were found to pose serious risks on 115 occasions and those from the U.S. on 152 occasions.
The recalls come at a time when New Delhi is rolling out incentives to support local manufacturers and exporters in transforming India into a $5 trillion economy. India is the world’s largest exporter of spices with shipments worth $3.9 billion in 2023, followed by Vietnam and Mexico, according to data provider Tendata. Those figures give India a market share of 37.2%, with Vietnam at 28.1% and Mexico at 9.6%.
The issue with food products follows an outcry over the quality of medicines manufactured in India. Since 2022, the World Health Organization has linked the deaths of at least 141 children in Gambia, Uzbekistan and Cameroon to cough syrups made by India’s Maiden Pharmaceuticals, Marion Biotech and Riemann Labs that it alleged contained toxins.
But while the pharma companies are small local players, MDH and Everest made revenues of $260 million and $360 million respectively, in the fiscal year ended March 2023.
Poor food quality in India stems from a general lack of awareness about food safety and insufficient resources to track ingredients, among other reasons, said U.S.-based food and beverage consultancy AIB International in a report in October.
The Food Safety and Standards Authority of India found 16,582 samples unsafe in the fiscal year 2022, the latest such data available. That was a threefold jump from the previous year.
“Most of the food and beverage manufacturers in India are focused on reducing costs to make their product affordable to the public,” the report said. “As a result, many cannot prioritize food safety as a pillar of their business because it could prevent them from meeting their profit margins.”
“Food manufacturing and processing facilities can lack the resources to maintain proper hygiene,” it noted, adding that food-borne illnesses in India is estimated to top 100 million every year.
(Published on Nikkei)
