India’s economy is in focus globally, and is also at an inflection point.

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ET Bureau, Dec 23, 2022

Reliance Retail Ventures, a subsidiary of Reliance Industries and the holding company of the group’s retail businesses, signed definitive agreements to acquire German wholesaler Metro AG’s India business – Metro Cash & Carry India-for a total cash consideration of ₹2,850 crore.

As part of the deal, Reliance will get 31 large format stores in 21 cities as well as the realty portfolio that includes six store-occupied properties, 3,500 staff and Metro’s 3 million B2B customers, of which 1 million are frequent buyers. The deal is subject to regulatory and other conditions and is expected to be completed by March 2023, the companies said on Thursday. ET had first reported in its edition dated Oct 15 that Reliance is the frontrunner to acquire Metro’s India business.

Metro AG said in a release that the India business valuation implies a sales multiple of 0.6x based on sales in the year ended September and takes into account lease rental and other related liabilities of e150 million (₹1,320 crore). Metro India generated sales of ₹7,700 crore (926 million euros), its best ever, in the year ended September.

Metro expects a transaction gain of about 150 million euros and an earnings per share (EPS) gain, once the deal closes.

The move will help Reliance consolidate its presence in the B2B trade segment, which it calls new commerce and is among its next big growth drivers, intensifying competition with Udaan, Amazon and Walmart-owned Flipkart. Reliance owns and runs the country’s largest retail business. All Metro India stores will continue to operate under the Metro brand during an agreed transition period.

Reliance Retail Ventures director Isha Ambani said the acquisition of Metro India aligns with its new commerce strategy of building a unique model of shared prosperity through active collaboration with small merchants and enterprises.

“We believe that Metro India’s healthy assets combined with our deep understanding of the Indian merchant and kirana ecosystem will help offer a differentiated value proposition to small businesses in India,” she said.

Metro AG chief executive officer Steffen Greubel said it is selling a growing and profitable wholesale business at the right time. “Indian trade industry is currently experiencing strong consolidation and disproportionate growth in ecommerce, including the B2B segment,” he said. “Due to the market dynamics, a sizable investment would be required to further grow the business. Therefore, now is the right time to use the momentum and open a new chapter for Metro India.”

Metro said it aims for a leading market position in wholesale. Due to increasing market consolidation, accelerated digitalisation and intense competition, Metro India’s operations don’t fit Metro’s core growth strategy, it said. Abneesh Roy, executive director, institutional equities at Nuvama, said the price to sales ratio is 0.37, which seems fair, given the B2B segment is a low-margin business.

Reliance will gain a significant jump in revenue and established locations that it can expand or optimise under its own branding and formats, said Devangshu Dutta, founder of retail consulting firm Third Eyesight. “The additional shelf space will also be very welcome for its own FMCG brands,” he said.

(Published in The Economic Times)

Over the past five years, legacy players have made a slew of investments in D2C startups. 

Marico has acquired men’s grooming brand Beardo, beauty brand Just Herbs and breakfast brand True Elements. Similarly, Emami acquired vegan cosmetics brand Brillare Science and grooming brand The Man Company. It recently picked up a minority stake in nutrition company TruNativ. Colgate-Palmolive and Reckitt both hold minority stakes in Bombay Shaving Company, whereas Wipro Consumer Care has invested in The Ayurveda Company. ITC has invested in baby and mother care brands Mother Sparsh and Mylo.

Devangshu Dutta explained the reasons behind the trend of larger FMCG companies acquiring D2C brands.

June 28, 2022

Edited by Surabhi Shaurya, India.com

The blanket ban on single-use plastic items from next month poses a challenge to cool beverages such as Frooti, Real, Tropicana and Maaza. Earlier, beverage company Parle Agro, which owns Frooti and Appy had also urged the government to extend the deadline to implement the ban on plastic straws by six months. For the unversed, the government’s ban on single-use plastics, including plastic straw, is going to be effective from July 1, 2022.

Calling the government’s decision a ‘hasty ban’, Parle Agro had said it will ‘negatively impact’ overall businesses of the industry players in the FMCG (Fast Moving Consumer Goods) and beverage segment. “While Parle Agro endorses the government-led ban on the use of plastic straws, our plea is to postpone the implementation of the injunction by six months,” the company had said in a statement.

Amul Urges Environment Ministry to Postpone Ban

Besides, leading dairy firm Amul has urged the environment ministry to postpone the ban imposed on plastic straw by one year due to lack of adequate availability of paper straws in the domestic as well as international markets. “We have written a letter to Environment Secretary on the proposed ban on single use plastic straw,” Gujarat Cooperative Milk Marketing Federation (GCMMF) MD R S Sodhi had said last month.

GCMMF markets its milk and other dairy products under Amul brand. “The plastic straw in our butter milk and lassi is attached to tetra pack. It is part of primary packaging. So we have urged the Environment Ministry to include it as part of Extended Producer Responsibility (EPR) and recycling,” Sodhi said.

Amul needs 10-12 lakh plastic straws daily. Besides, Sodhi said, the company has urged the ministry to provide local industry one year to set up dedicated facilities for producing paper straws. “Paper straws are not available in domestic market. We don’t have capacity. We are not getting paper straws in international market,” he added.

Why Are Beverage Makers Worried?

To ensure a smooth transition to environment-friendly options like the paper of PLA straws, non-alcoholic beverage makers would require at least 6-8 months.

Parle Agro said that India produces and sells around 6 billion packs of paper-based beverage cartons with integrated plastic straws per annum. The available capacity to provide alternatives like biodegradable PLA straws or paper straws by a local Indian manufacturer is 1.3 million units per day, which is much less than the actual requirement.

“Packaging companies will need to invest in the right infrastructure to accommodate the changes which will require time to ensure the alternative is appropriate and cost-effective, especially during inflationary times,” the company said in a statement, adding that currently, there is no local manufacturer who can accommodate the demand.”

How Will Ban Impact The Sale Of Cold Beverages

The supply chain of beverages sold in small tetra packs will be disrupted with the blanket ban. Moreover, the beverage makers might have to incur heavy import and logistics costs as they import paper straws to replace plastic straws.

Speaking to Moneycontrol, Devangshu Dutta, CEO of retail consulting firm Third Eyesight said, “The companies have to look at alternative solutions, which may increase the costs. It will be challenging for the companies to pass on the increase in cost to the consumer as it may dampen demand, especially given the fact that these products are priced at low price points to target a certain consumer cohort.”

Full list of items to be banned from July 1:

1. Earbuds with plastic sticks
2. Plastic sticks for balloons
3. Plastic flags
4. Candy sticks
5. Ice-cream sticks
6. Polystyrene (Thermocol) for decoration
7. Plastic plates, cups, glasses, cutlery such as forks, spoons, knives, straws and trays
8. Wrapping or packing films around sweet boxes
9. Invitation cards
10. Cigarette packets
11. Plastic or PVC banners less than 100 micron
12. Stirrers

Written By Mukherjee, ET Bureau

Top listed retail chains such as Aditya Birla Fashion & Retail, Avenue Supermarts and Tata-owned Trent are going to lead store additions through the next financial year, as they double down on expansion after the pandemic, company executives and analysts said.

As per a recent report by ICICI Securities, 16.7 million square feet of retail space would be added by eight large, listed retail chains between FY21 and FY24 as compared to 8 million square feet added in the preceding four years of FY18-21. These companies also include Titan, Bata, V-Mart, TCNS and Shoppers Stop.

The buoyed sentiment comes after the recovery of retailers to more than their pre-Covid levels in the last two quarters, and is also driven by pentup demand, strong sales despite increasing prices and expansion into small-tier towns, the report said. There has been an expansion of the market which is happening along with a consolidation, said Devangshu Dutta, chief executive of consulting firm Third Eyesight. “Not all locations might turn out to be viable, but in every expansion cycle there are boom and bust. And the bust is not as big as the boom. Right now, we are in the expansion cycle,” he said.

Aditya Birla Fashion & Retail managing director Ashish Dikshit told analysts recently that the company would expand rapidly since plans were held up in the last two years due to the pandemic, with faster growth for fashion business, ethnic wear and inner wear. The company, which had raised ₹2,195 crore from GIC Singapore, intends to invest ₹600-800 crore for expansion in the next couple of years.

“…we continued to believe both in the long-term growth potential of the market and intrinsic strength of our brands and we feel now the time is to accelerate to catch up on what we have not done over the last 12 to 18 months and I would go back almost till the beginning of the Covid period from 18 to 24 months where some of our growth initiatives have held back,” said Dikshit.

As per the ICICI report, Avenue Supermarts would add 7.5 million sq ft during FY21-24 for the DMart stores as compared to 3.9 million sq ft added in FY18-21. Aditya Birla Fashion & Retail would add 3.1 million sq ft as compared to 1.2 million sq ft in preceding four years, while, among others, Trent would add 2.7 million sq ft (vs 1.5 million sq ft), Shoppers Stop would add 0.8 million sq ft (0.2 million sq ft) and Bata would add 0.7 million sq ft (0.2 million sq ft).

India’s largest retailer, Reliance Retail, too has accelerated expansion plans including taking its stores into new geographies, Gaurav Jain, head of strategy and business development told analysts recently.

Source: economictimes