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)

Chloe Cornish, Financial Times (select extracts)

Mumbai, November 19, 2022

Billionaire Mukesh Ambani’s oil-to-data conglomerate Reliance Industries, India’s biggest single listed company by market capitalisation, profits most from its refinery, the world’s largest. But Reliance wants to embed itself in India’s towns and cities by dominating the $800bn retail market as well, from partnerships with luxury fashion houses like Balenciaga to acquiring a Coca-Cola copycat.

Despite being India’s biggest retailer by revenues, Reliance’s 16-year-old shopping unit has often been overlooked, as Ambani’s Jio mobile network stole the limelight in transforming India’s data landscape.

Taking advantage of restrictions that hamper foreign companies’ ability to compete in India’s fragmented retail sector, still largely made up of mom and pop shops, Reliance is expanding its shopping empire at a rate of seven stores a day, using acquisitions to accelerate growth and investing around $3.6bn last financial year. It has 16,000 stores across India, while online purchases contribute 17 per cent of revenues, according to a person with direct knowledge of the matter.

India’s tycoons have long ventured into consumer businesses, from the Tata family, once best known for steel and now also boasting jewellery stores and a joint venture with Starbucks, to industrialists like Aditya Birla, whose conglomerate includes a large fashion business. Reliance, however, has aimed to control entire supply chains, all the way from the petrochemicals in the fibres it uses to produce textiles.

“The ethos of the group is dominance,” said Devangshu Dutta, founder of Gurgaon-headquartered retail consultancy Third Eyesight. “Unless other businesses step up to the plate, their dominance is a foregone conclusion.”

In its latest potential acquisition, Retail has reportedly bid $500mn for German wholesaler Metro’s Indian business. Indian rules allow foreign companies to own 100 per cent of a cash and carry business, but only if they do not sell directly to consumers. Reliance, by contrast, could unlock value by extending the business to sell direct to shoppers through Metro’s 31 distribution centres, said a person familiar with the company’s thinking.

Reliance has also announced it will launch its own fast-moving consumer goods company by the end of this year. The person close to the company said it would look to acquire brands to build the business, akin to its August deal for Campa, a nostalgic Indian fizzy drink, as well as exploring licensing and joint ventures.

While its ecommerce business JioMart has recently tied up with WhatsApp, owned by Reliance investor Meta, to increase its online reach, Reliance further boosted its physical shop space this year. It swooped to thwart potential foreign competitor Amazon in a battle over failing shopping group Future Retail.

Reliance Retail recorded quarterly revenue of around $8bn for the three months ending September 30, earning a net profit of $283mn, a 36 per cent increase year-on-year.

Reliance Retail declined to comment for this story.

Additional reporting by Andrea Rodrigues in Mumbai

Sagar Malviya, The Economic Times

September 13, 2022

Uniqlo, Asia’s biggest clothing brand, has turned profitable in India in less than three years after it opened its first store in the country despite operating in a period marked by Covid-led lockdowns and restrictions.

The Japanese brand posted a net profit of ₹21.4 crore for 2021-22 compared to a loss of ₹36.1 crore in the previous year, according to business intelligence firm AltInfo. Its sales rose 63% year on year to ₹391.7 crore for the year to March 2022, a slower pace compared to FY21 when it clocked 86% sales growth on a low base.

Experts feel Uniqlo’s strategy of pricing its merchandise at least 20% higher than rivals Zara and H&M has helped it earn better margins despite inflationary pressures in terms of raw materials.

“The market is not easy and turning profitable at a time when most rivals are spending aggressively is a good indication of success. As an international brand, they (Uniqlo) are able to get good locations and are preferred tenants, which helps in generating sales, especially in top cities,” said Devangshu Dutta, founder of Third Eyesight, a strategy consulting firm. “However, the pricing is a bit premium and until they are able to source locally, selling products at a right value for the market will remain challenging.”

The Japanese brand opened its first door in the country in September 2019, but stringent lockdown measures announced in March 2020 to contain the Covid-19 outbreak delayed its store expansion plans, restricting its store count to about seven outlets so far.

Uniqlo has said India is one of the most priority markets where consumers are increasingly shifting from ‘fast-fashion’ to long-lasting essentials and functional wear. “India is an important and very big priority market,” Tomohiko Sei, CEO of Uniqlo India told ET in June.

(Published in The Economic Times)

Devika Singh

Isha Ambani, director of Reliance Retail Ventures Ltd, said on August 29 that the company would soon enter the packaged consumer goods segment. Here’s how the move would impact the segment and existing FMCG players.

With this foray, Reliance Retail will be competing with the likes of FMCG behemoths like Hindustan Unilever, Nestle, and Britannia.

Reliance Retail’s announcement on August 29 that it would enter the packaged consumer goods segment has created buzz in the market.

The retail giant’s entry into the so-called Fast-Moving Consumer Goods (FMCG) sector is set to intensify competition as it does in every new industry that its parent, Reliance Industries Ltd (RIL), enters, experts say.

With the venture, Reliance Retail will be competing with FMCG behemoths like Hindustan Unilever, Nestle and Britannia in an industry valued at over $110 billion.

Even so, the company potentially confronts multiple challenges in its intended venture into FMCG.

“The competition intensifies in every segment that Reliance gets into because of their approach of being aggressive and not just in terms of growth. The company also wants to acquire market share very rapidly. The telecom sector was a prime example of this,” said Devangshu Dutta, CEO of retail consulting firm Third Eyesight.

“However, Reliance’s entry into any consumer-facing business has always been a long play,” he added.

The intended entry of Reliance Retail, the retail arm of RIL, into FMCG was announced by Isha Ambani, director of Reliance Retail Ventures, at RIL’s 45th Annual General Meeting (AGM) on August 29.

“I am excited to announce that this year, we will launch our Fast-Moving Consumer Goods business. The objective of this business is to develop and deliver high-quality, affordable products which solve every Indian’s daily needs,” Ambani told shareholders.

Isha Ambani was introduced as the leader of the company’s retail business by Mukesh Ambani, her father and Chairman and MD of RIL, at the AGM.

In his speech, Mukesh Ambani also said that he is hopeful of the retail arm emerging as the largest segment within the group.

Private labels

Reliance Retail already has a presence in the FMCG segment in the form of private labels that are sold in the company’s chain stores such as Reliance Smart, Reliance Mart, and its online grocery platform JioMart.

Brands like Good Life, Best Farms, Desi Kitchen, Snac Tac, Yeah!, Safe Lite, Petals, Mothercare and Calcident are some private label FMCG brands that the company sells.

Private labels (including in the fashion and lifestyle segment) contribute 65 percent of the company’s revenue.

According to analysts, the company initially is going to expand its private label offerings and will focus on segments in which it already has a presence.

“The products which it plans to sell range from groceries like pulses and grains, edible oils, flour, dry fruits, spices, pickles, pastes, idli dosa batter, snacks which include biscuits, namkeens and sweets, ready-to-cook meals, ketchup, jams, carbonated drinks, fruit juices, breakfast cereal, oats, muesli, honey, sauces, tea and coffee in the foods space,” said a note by Edelweiss.

In the non-foods space, the company sells products like soaps, shower gels, hand wash, face wash, hair oils, talcum powder, sanitisers, sanitary pads, diapers, toothpaste and toothbrushes, nail enamel, beauty and hair accessories, and daily essentials including deodorants, nail clippers and scissors, the securities firm said.

Edelweiss said it expects Reliance Retail to initially target the commoditised parts of FMCG like pulses and grains, edible oils, flour, dry fruits, spices, pickles, pastes, idli and dosa batter, namkeens, sweets and lower-end detergents.

Potential strategies

Experts indicate that much on the lines of its earlier playbook, Reliance Retail is likely to adopt organic as well as inorganic strategies for growth in the sector.

“Reliance aims to be a dominant player in every segment and, hence, the company, besides organic growth opportunities, is also likely to look out for acquisitions in the space,” said Dutta of Third Eyesight.

Edelweiss also expects Reliance Retail to acquire regional entities and Direct-to-Consumer (D2C) brands and also target unorganised/regional brands in most FMCG segments it enters.

The company, analysts said, will also look at value-play to gain penetration into the categories.

Impact on the competition

According to experts, the move is set to intensify competition in the segment and may have an impact on existing FMCG companies in the near term.

“We don’t expect a big impact on numbers of existing players from a two-three years’ perspective. However, near-term multiples could come under risk for some companies Hindustan Unilever, Britannia, Marico, Adani Wilmar, Godrej Consumer Products, etc. It will not have much impact on Nestle, Colgate, Dabur, ITC,” Edelweiss wrote in its note.

The impact on the industry will depend on the level of aggression Reliance Retail summons in product launches.

Challenges

FMCG is a well-established segment with well-known brands that have a huge distribution network, and cracking the market would be the biggest challenge for Reliance Retail, industry experts suggested.

“It is tough for new players to get shelf space in kirana (grocery stores). Earlier, we have seen some retailers entering the segment but with little success,” Edelweiss said.

“The existing players have decades of loyalty with consumers and relationships with distributors,” it added.

Analysts indicate that even after getting shelf space, new FMCG players have to constantly innovate to stay ahead of the curve.

“A company can offer early-stage incentives, launch offers to retailers to grab the shelf space but then it has to keep reviving that engine constantly, which is not easy,” said Dutta.

Although Reliance Retail has a significant share of modern retail trade through its grocery chains, the company needs to build a multi-tier distribution network, especially in general trade, which commands 80-90 percent of FMCG sales.

Disclosure: MoneyControl is a part of the Network18 group. Network18 is controlled by Independent Media Trust, of which Reliance Industries is the sole beneficiary.

moneycontrol

By Sharleen D’Souza & Sourabh Lele

‘First-ever end-to-end shopping experience’ on messaging platform, says Mark Zuckerberg

Meta Platforms Inc, the parent company of WhatsApp, will partner with Reliance JioMart for a service where WhatsApp users can buy groceries on the messaging platform from the Indian retail firm.

Mark Zuckerberg, chief executive officer (CEO) of Meta Platforms, said in a Facebook post, “[I am] Excited to launch our partnership with JioMart in India. This is our first-ever end-to-end shopping experience on WhatsApp–people can now buy groceries from JioMart right in a chat.”

“Business messaging is an area with real momentum and chat-based experiences like this will be the go-to way people and businesses communicate in the years to come,” he said in an announcement coinciding with the annual general Meeting (AGM) of Reliance Industries the parent company of JioMart.

A Reliance press statement said the service “will enable users in India, including those who have never shopped online before, to seamlessly browse through JioMart’s entire grocery catalog, add items to cart, and make the payment to complete the purchase–all without leaving the WhatsApp chat.”

WhatsApp users can shop on JioMart via by messaging “Hi” to +917977079770.

Mukesh Ambani, chairman and managing director of Reliance Industries, said, “The JioMart on WhatsApp experience furthers our commitment to enabling a simple and convenient way of online shopping.”

“Reliance Retail is looking at touching as many consumers across the country and WhatsApp is a logical platform as India is the largest market for the messaging app in the world,” said Devangshu Dutta, CEO of Third Eyesight, a retail consultancy firm. While WhatsApp is important for growth, Reliance Retail will also need to work on product availability and the cost of delivering to the customer, he said.

Ambani said Reliance’s retail business model has “five imperatives”, or ‘Panch Pran’. These include: enriching customer experience using technology; operationalising and growing multiple channels; integrating with small merchants and providing them a platform to prosper. The fourth imperative is to expand the product portfolio and the fifth one is to strengthen logistics and supply chain.

Isha Ambani, director at Reliance Retail Ventures, said at the AGM that the digital commerce platforms–reliancedigital.in and JioMart–enabled the retail major to deliver 93 per cent of online orders from stores within six hours. “We rolled out our JioMart Digital (JMD) initiative during the year. The platform enables small electronics merchants to sell the entire product portfolio of Reliance Retail on an assisted selling model, helping them deliver superior customer experience and growing their income,” she said.

The company’s new commerce initiative is on course to partner with one crore merchants as it expands to cover the entire country in the next five years, Isha Ambani said.

Last year, Reliance Retail entered pharmacy retail with the acquisition of Netmeds. That year, it launched new operations through Netmeds Wholesale and onboarded merchants in 1,900 towns and cities.

Source: business-standard