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August 28, 2023
Bindu D. Menon, Financial Express
August 28, 2023
Calvin Klein, Levi’s, Adidas and Lacoste are among the several players who are looking to tap the potential of Outlet malls, which are generally located on the peripheries of cities and major highways. These malls are fast replacing the old factory outlets of major brands, which were located in the cities in crowded places.
Real estate developers are also strategically choosing such locations to attract a wider customer base. Value-driven customers are thronging to such malls as it offers branded products at a discounted price ranging from 30-70%.
A few companies FE spoke to said Outlet malls are refined version of factory outlets and companies are able to generate revenue by liquidating stocks at a lower price.
Outlet Malls are a concept popular in the international market and are a huge hit among travellers. They are typically large group of shops outside city periphery that sell apparel, shoes and luggage at a discounted price. In the last decade, Outlet malls have sprung all over the country especially adjoining highways.
In New Delhi’s Jasola district, Pacific Premium, real estate firm has opened premium shopping space. Pacific Group operates around six malls spread across Delhi and Dehradun. Its new premium outlet mall is its largest to date and has four storeys and sizeable parking area.
The mall houses aspirational brands such as Birkenstock, Tommy Hilfiger, CalvinKlein, Levi’s, Adidas, Madame, Lacoste, Vero Moda and American Eagle among others. Other leading brands such as Nykaa and CaratLane, too have signed lease for occupying mall space.
Players like Village Groupe are developing mixed use development space in off location like Khapoli on Mumbai-Pune highway, Ludhiana and even Jaipur highway. A company disclosure says that it is developing over 500,000 sq feet mixed use space off-city limits.
“Outlet malls are a great opportunity for consumers who want to get the touch and feel experience. To that they offer brands at a discounted price is huge attraction for consumers,” said Susil S Dungarwal, promoter, Beyond Squarefeet Advisory, a mall management advisory firm.
Asked if online companies will pose a challenge to Outlet malls, Dungarwal says that there is no competition. “Outlet malls are an impulse destination. A consumer may be travelling along a highway, a good mall with discounted brands will be sure shot attraction,” he said adding growth in private vehicles has given a shot in the arm to Outlet malls.
“Till mid 1990s only 20% of vehicles on highways were private vehicles (cars and buses) and the rest were commercial vehicles (trucks and lorries). However, in 2023, almost 60% of the vehicles on highways are private vehicles,” he said.
Devangshu Dutta, Founder, Third Eyesight, said, “Outlet (discount) stores sit at the confluence of a mutual need. Branded chains with excess inventory to liquidate which they don’t want to carry at their primary stores, and consumers who want lower prices for their purchases”.
He points that outlet malls can offer brands some of the same advantages as regular malls, in terms of acting as footfall magnets, and offer shared services, but at lower costs due to a cheaper location.
“Rather than creating their own standalone outlet stores, brands can take up spaces in an outlet mall. The challenge of maintaining and managing footfall is shifted to the mall. However, as with regular malls, outlet malls need to be located well and need to be also managed well,” he added.
According to consultancy firm Anarock, top cities have over 51 million sq feet of mall stocks across the country with Delhi-NCR, Mumbai Metropolitan Region and Bengaluru accounting for 62% of the total stock.
(Published in Financial Express)
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August 18, 2023
Viveat Susan Pinto, Financial Express
August 18, 2023
Retail activity in the country is set to increase with some 20 foreign brands likely to enter India in the next 6-8 months, according to retail consultants and experts. This is double the number of about 10 foreign brands that would enter India annually in the pre-pandemic period.
An attractive retail market and growing affluence and consumer tastes are among the key reasons for the interest shown by foreign brands in India, said experts. Also, large groups such as Reliance and Aditya Birla are open to partnerships with foreign brands, with Reliance Brands, part of Reliance Retail, in particular, being the most aggressive of the lot.
“Global markets are witnessing slowdown and recessionary concerns, which is hurting retail sentiment. In contrast, retail sentiment in India is upbeat despite food inflationary pressures. Spending across non-essential categories will also grow as the festive season nears,” said Abhinav Joshi, head of research, India, Middle East & North Africa at consultancy CBRE.
The consultancy on Thursday released a report which said that retail leasing activity in India had grown 24% year-on-year in the first half of CY2023, led by foreign and domestic brands. The second half of the year was also expected to see a strong double-digit rate of growth in terms of leasing activity, with overall retail leasing likely to touch 5.5-6 million sq. ft. at the end of the CY2023, second only to the peak of 6.8 million sq. ft. seen in CY2019.
Of the names eyeing an India-entry in the next few quarters include labels such as Italian luxury fashion brand Roberto Cavalli, American sportswear and footwear brand Foot Locker, Armani Caffe, the luxury cafe brand of Armani, British luxury brand Dunhill, Dubai’s Brands for Less, Old Navy and Banana Republic from Gap, Chinese brand Shein, Maison De Couture from Valentino, Spanish luxury brand Balenciaga, EL&N, a UK-based boutique cafe, Galleries Lafayette from Paris, Kiabi, Mavi, Damat, Dufy, Tudba Deri, Avva, Boohooman and Miss Poem, all apparel brands from Turkey and Europe, say industry sources.
Barring Galleries Lafayette which has tied up with Aditya Birla Fashion and Retail for its India entry, most other names are either talking to Reliance Brands (part of Reliance Retail) or have tied up with the company, persons in the know said. For instance, Balenciaga, EL&N, Shein, Gap’s Old Navy and Banana Republic, Armani Caffe, Maison de Couture from Valentino have tied up with Reliance Brands for their India entry. Executives at Reliance Brands were not immediately available for comment.
Most of these brands are eyeing a presence in cities such as Mumbai, Delhi-NCR, Bengaluru and Hyderabad in the first phase of launch, before expanding their presence to other cities such as Pune, Ahmedabad, Chennai and Kolkata.
“The India retail opportunity is a compelling one, which most foreign retailers don’t want to miss,” says Devangshu Dutta, chief executive officer at Gurugram-based consultancy Third Eyesight.
“Some of the brands who’ve come earlier have also tasted success especially in the fast fashion category. This is an indication that brand awareness is growing and that people are ready to spend on global products as discretionary incomes grow,” he says.
On Wednesday, Japanese fast fashion retailer Uniqlo said that it was setting up two new stores in Mumbai in October, after launching 10 stores in the north over the last four years. The company’s chief executive officer Tomohiko Sei indicated that the retailer was open to new markets and store openings, but would focus on Mumbai for now.
CBRE says that Mumbai has seen retail leasing grow by 14.6% year-on-year in the first half of CY2023 on the back of a push by foreign brands to acquire space in the city. Delhi-NCR, meanwhile, reported a higher 65% year-on-year growth in retail leasing in the first half of the year, led by retail activity by both foreign and domestic brands.
(Published in Financial Express)
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July 25, 2023
Suprita Anupam, Inc42
Jul 25, 2023
– Following a stock downgrade, Nykaa might lose some visibility among public market investors at a time when competition in the beauty ecommerce space is intensifying
– Nykaa, which has been the most popular beauty marketplace, has had to fight off Reliance Tira, Flipkart-owned Myntra, Tata CLiQ and others but has to invest heavily in omnichannel and private label expansion
– As its profitability and traction have declined, Nykaa needs to fix things for the long run without losing too much money as it does not have the capital reserves similar to its rivals
In the first week of July, the Nykaa stock took a significant hit, falling 42% from its 52-week high. Further, the Association of Mutual Funds in India (AMFI) downgraded the stock, dropping it from the top 100 listed companies in the country. As of now, the company is ranked somewhere between 101 and 250 on the market capitalisation threshold.
From a near monopoly in the beauty ecommerce space, Nykaa has lost its top spot. Not to mention, new competition, in the form of D2C brands and behemoths such as Tata and Reliance, has complicated the situation even more.
The downgrade by the AMFI means that Nykaa is no longer an attractive largecap stock in India, and this could have an impact on the company’s visibility in the near future.
So, what exactly triggered this collapse?
It was only in November 2021 that Nykaa’s INR 5,352 Cr IPO saw 82x subscription, the highest among large startup IPOs in India. Having withstood competition from marketplaces such as Amazon India and Walmart-backed Flipkart and Myntra, Nykaa seemingly set a new benchmark for Indian ecommerce startups with its blockbuster IPO.
But the last 20 months have been nothing short of disruptive. Reliance-backed AJIO has grown in stature, and the Indian conglomerate has also launched Tira in the beauty ecommerce space.
Meanwhile, Tata has also bolstered its beauty and personal care product assortment on its platform Tata CLiQ. Furthermore, the Tatas have added 20 beauty tech stores across the country, aligned with its ecommerce operations, while Myntra Beauty has registered 2X-3X growth in recent months and expanded its brand collection. Therefore, Nykaa needs to come up with something exceptional to compete with the aforementioned well-funded BPC contenders.
Adding to the company’s woes was the announcement of the issue of bonus shares in a 5:1 ratio and changes in key management personnel after a successful IPO. This did not go down well with investors. Bonus shares announcement was largely perceived as a way to keep the company’s anchor investors from offloading shares at the end of their IPO lock-in period.
Experts believe that amid declining year-on-year profitability, Nykaa could see a cash crunch as it prepares to combat with deep-pocketed corporations. For now, it will be interesting to see if Nykaa can hold onto its market share?
Nykaa’s Losing Its Footfall To AJIO & Myntra
First, let’s look at the bread-and-butter for ecommerce platforms such as Nykaa — that is visits, page views, engagement and repeat orders.
It must be noted that Nykaa has separate properties for fashion (Nykaafashion.com) and beauty (nykaa.com). If we look at the performance over the last 3-4 months, the fashion vertical has definitely seen some gains, but Nykaa.com itself has experienced negative growth in total visits.
The flagship property is bleeding users due to an ever-intensifying competition, which is quite clear in the graph given below.
Further, Nykaa, Nykaa Man and Nykaa Fashion have the lowest numbers when it comes to average visit durations.
On the ecommerce front, Nykaa has a lot of catching up to do against its competitors. Some of Nykaa’s private labels — take Dot&Key for instance — have become popular discounted items on Myntra, AJIO, Amazon India and other marketplaces, which shows that the company is forced to use its competition to sell its products.
In contrast, Myntra, AJIO, Tira and Amazon’s private labels are largely walled inside their respective marketplaces. To beat the competition and stay in the public spotlight, Nykaa has opted for the omnichannel strategy, and it is looking to add brand-owned stores on the retail front. But here too, the competition is stiff.
Nykaa Faces Challenges With Its Online-To-Offline Strategy
When we look at the omnichannel operations, Nykaa has 145 physical stores, 38 fulfilment centres, and 2,749 stores of its owned brands. The company plans to open more physical stores this year, according the announcements made in its last earnings call.
Nykaa’s founder and CEO Falguni Nayar had earlier said, “Physical retail is a necessary investment that we need to make, even if it adversely affects overall profitability. So, we are aiming for the optimal mix of online, offline, and duty.”
This is where the situation becomes more complicated. Being primarily an online platform, Nykaa has managed to stay lean and achieve profits thus far. However, opening more stores means more investments and a significant increase in operational expenditure, including higher employee expenses.
Plus, this entails entering into fierce competition with Tata and Reliance.
Reliance Retail alone has launched over 3,300 new stores in FY23 under its various brands, including Tira Beauty, Trends, and others.
Similarly, Tata has been a well-known name in the BPC and fashion industry. It introduced the first-ever cosmetics brand, Lakme Cosmetics, to India (later sold to Unilever). Tata has over 22 in-house labels for its Westside brand, which operates over 200 stores across the country.
While Tata plans to open 20 beauty tech stores, equipped with AI and VR, it already has 391 Zudio stores nationwide.
For Tata and Reliance, it is relatively easier to build an online business backed by their offline stores compared to Nykaa’s strategy of building an offline presence backed by online operations. These large conglomerates have years of experience in building retail brands in the offline space.
So, essentially, Nykaa seems to have lost ground in its strength areas of ecommerce and offline retail, as it is not as experienced as its rivals.
Speaking to Inc42, Devangshu Dutta, the founder and CEO of Third Eyesight, a boutique management consulting firm explained, “Apart from the impact of Covid, in the last 3-4 years, many brands have started moving offline because that’s where the bulk of the business happens. But moving offline means entering a completely different business. You’re not able to centralise inventory as much, and you may not be able to respond to market-specific segments as quickly.”
He also believes, like any other offline retail business, Nykaa will face high operational costs, but it has an advantage in the fact that it may be able to use data more effectively from its online operations. Nevertheless, this is a minor advantage.
“Your store locations have to be correct, and self-sustaining quickly, at least on a cash operating basis. At the business level you may look at profitability in a longer term,” Dutta added.
Profits Plummet: Nykaa’s Other Big Worry
India’s beauty and personal care market, presently valued at $16.8 Bn, is poised to grow at a compound annual rate of 11%, with cosmetics and perfumes categories growing at a faster clip.
According to a joint report by international beauty brand Estée Lauder and Gurugram-based business insights firm 1Lattice, a substantial portion of sales worth about $1.3 Bn are through ecommerce channels. This is expected to grow at a CAGR of 30% during FY22-27, followed by companies that retail beauty products in health and beauty stores and modern retail shops.
With 30% of India’s BPC market share, Nykaa has so far managed to stay ahead in the race. Nykaa’s beauty category (55% of the broad BPC category) saw 33% full-year growth with a GMV of INR 6,649 Cr. On the fashion side, the GMV grew 47% for the full year at INR 2,570 Cr.
BPC and fashion are the two mainstays of Nykaa’s business, even though fashion is a relatively new vertical for the Mumbai-based company. The company had earlier launched Nykaa Man, a separate platform for men’s grooming, beauty and fashion, but with less than 1 Mn visits, it has failed to grow over the last few years while AJIO has grown from 0-37 Mn users, as per analysts.
“At one end, Nykaa’s online PAT has been going down for the last two years, while Nykaa Fashion’s loss for the year has grown consecutively, putting Nykaa business in a fix,” said an analyst from PwC.
Nykaa needs to bring a balance between short-term losses and long-term profits. However, the company’s current strategy fails to show a way out, the analyst added.
The Balancing Act For Nykaa
As per the analyst quoted above, the company’s BPC products have so far had lower prices than Myntra and AJIO, where discounts are typically lower.
However, when compared to Amazon India and its long list of D2C brands and private labels, Nykaa products were slightly more expensive. Amazon also scored over Nykaa with its better supply chain and distribution.
Nykaa banked on product assortment, the assurance of quality and authenticity of products, but as more and more brands join Tira, AJIO and Tata CLiQ, this is also fast eroding.
Access to international brands is no longer exclusive to Nykaa, so it needs to tackle distribution and supply chain, where its rivals score heavily.
Giving Nykaa the benefit of the doubt, a consultant from brokerage firm Motilal Oswal recently said, “There is no clear playbook for these businesses. When Nykaa entered the segment, it was pioneering many aspects in India.”
However, now the company needs to exercise extreme caution regarding expenses and investments because of heavyweight competition with deeper pockets.
P Ganesh, chief financial officer at Nykaa, highlighted that the company still has funds remaining from the IPO, which will be utilised to secure future capital needs.
Ganesh added, “It’s worth noting that while we have observed a considerable increase in working capital as the company scales up, the number of working capital days is expected to stabilise. This means that the amount of funding allocated to working capital should moderate in the future.”
But analysts also believed that Nykaa cannot afford to sacrifice its market share in India’s rapidly growing beauty, personal care, and wellness segment. One thing that is advantageous for Nykaa is that Reliance-owned Tira is still new in the market and will take some time to get to critical mass adoption.
This is a window of opportunity for Nykaa to stretch its lead and fight off its rivals. Nykaa’s brand value primarily comes from its online business, so it must not let offline expenses hinder its online growth plans. However, given the competition, Nykaa is in a Catch-22 situation.
In the BPC segment, owned and private label brands play a vital role in increasing long-term profitability and repeat purchases. All of this will require extensive investment from Nykaa’s leadership — there are segments in BPC where Nykaa has no private label or owned brands.
As of now, the question remains: Can Nykaa maintain its dominance in the online market while facing fierce competition on multiple fronts?
(Published on Inc42)
admin
July 19, 2023
Faizan Haidar, ET Bureau
19 July 2023
E-commerce companies’ share in warehousing space leasing has fallen to 3% amid declining demand from more than 20% during Covid-19. With the easing of the pandemic, demand faltered for e-commerce companies, even as bricks-and-mortar rivals rented 14% of space during the January-June period as they witnessed a demand resurgence.
In 2020, during the pandemic, e-commerce took more than a fifth of warehouse space while physical retailers had a 9% share, according to data by Savills India.
The overall leasing activity in India continued to grow, with a total space take-up of 22.4 million square feet in the first six months of 2023, up from 20.9 million sq ft a year ago.
“E-commerce companies had over-committed space during Covid, expecting the exponential growth they experienced at that time to continue. There are many facilities where they continue to pay rentals without utilising the full space,” said Gagan Randev, executive director, India Sotheby’s International Realty.
According to Savills data, after increasing demand for warehousing space over the past five years, tier-2 and tier-3 cities saw the share of e-commerce declining to 4% in the January-June period from 34% a year ago.
“In the past three years, year-on-year space absorption from e-commerce has undergone a significant change due to increased investments in their warehousing operations and footprint optimisation through automation, shelving and improved racking systems. These investments have enabled them to increase their existing storage space and enhance overall operational efficiency,” said Srinivas N, managing director, Industrial and Logistics, Savills India.
Experts said the companies are also looking to outsource the space they had taken during the pandemic.
“E-commerce overbuilt the capacity as Covid-led growth was harvested by them. Now that capacity is vacant. That’s why you see a lot of marketplaces trying to externalise their services. That is not coming out of a business model, that is coming out from vacant space,” said Ashvini Jakhar, founder of Prozo, which manages supply chains for companies.
In the first half of 2023, the third-party logistics sector continued to drive warehousing demand, accounting for 44% of the total absorption, up from 37% a year ago, followed by the manufacturing (22%), retail (13%) and fast-moving capital goods and consumer durables sector (6%).
“E-commerce, grew exponentially during Covid when physical retailers were constrained by prevailing conditions and immediately after that when chain stores were still recovering from the pandemic shock,” said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “However, the retail business in India is predominantly offline; as demand continues to grow overall, it is only natural for physical retailers’ own growth to be driven by the market’s momentum and that would be reflected in warehousing space taken up by them across the country.”
For most retailers, after Covid-19, the warehouse is the epicentre for omnichannel distribution network for offline as well as online clientele.
(Published in Economic Times)
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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)
