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May 1, 2026
Yuthika Bhargava & Vikash Tripathi, Outlook Business
Mumbai, 1 May 2026
For generations of Indians, the word Tata hasn’t just been a brand, it has been a permanent resident in our homes. Think back to the kitchens of your childhood. It was the familiar packet of Tata salt, the Desh ka Namak, that seasoned every meal. It was the steaming cup of Tata tea that signalled the start of the day for elders at home.
In every Indian household, the name represents trust and legacy.
Yet, when N Chandrasekaran, chairman of Tata Sons, wanted to hire Whirlpool India’s head Sunil D’Souza to lead Tata Global Beverages (TGBL) in September 2019, he got a shock refusal.
Who in their right minds wouldn’t want to join a Tata company?
Well, D’Souza hadn’t heard much about TGBL. In fact, his colleague at Whirlpool India had called it a “sleepy company”.
At the time, TGBL’s revenues were a meagre ₹7,408cr compared to close to ₹50,000cr and ₹40,000cr logged by fast-moving consumer goods (FMCG) heavyweights ITC and Hindustan Unilever (HUL), respectively, in 2018–19.
Experts had noted TGBL had not much to show in terms of major product innovation for years. Primarily a tea and coffee company, it was locked in a low-growth cycle.
In 2018, various analysts had remarked that TGBL’s growth was muted as it wasn’t selling anything beyond tea and coffee.
At TGBL’s annual general meeting on July 5, 2018, Chandrasekaran said the company would exit loss-making subsidiaries and focus on profitable ones that can be scaled up. “Even though in volume terms, the company continued to be number one in the Indian market, the same was not true in value terms,” he said.
So, D’Souza’s immediate “no way” to the job offer was justified. TGBL wasn’t on his radar or anyone’s at the time.
But the headhunter convinced him to meet Chandrasekaran.
This meeting, says D’Souza, made all the difference for him. He recalls the Tata Sons’ chairman saying “I have the money. But I don’t have the team to run it.”
But the clincher for him was Chandrasekaran’s larger plan to foray into the FMCG space and the intent to disrupt the market.
In December 2019, Tatas announced D’Souza’s appointment as managing director and chief executive effective April 2020. One more important addition to this FMCG team was Tata Sons’ Ajit Krishnakumar as chief operating officer.
What followed was the duo’s visits to Mumbai, Bengaluru and Gurgaon. They walked to distributor offices and kirana stores and sat through market visits. “We drew out in great detail what we wanted this company to look like,” says Krishnakumar.
The mandate from Chandrasekaran was simple. He wanted a company commensurate with the Tata name, one that shared the same shelf space as the likes of HUL and ITC.
Humble Beginnings
The mission to become an insurgent company in the FMCG space kickstarted with the formation of Tata Consumer Products (TCPL) in February 2020 by merging TGBL’s tea and coffee units with Tata Chemicals’ salt and pulse businesses.
However, with established FMCG rivals like HUL, ITC and Nestlé India, D’Souza and Krishnakumar had their tasks cut out. The competition had a century of headstart in India.
Within the Tata group itself, TCPL ranked eighth by revenue in 2019–20, behind Tata Motors, TCS, Tata Steel, Tata Power, Titan, Tata Communications and even Tata Chemicals.
But “things couldn’t get any worse than this, right? We were already at the bottom of the heap in FMCG. You could only get better,” recalls D’Souza about his mindset at the time (see pg 24).
Building a brand name as a Tata company opens doors. But competing is another. Could this new company take on HUL, Nestlé and ITC?
TCPL started by trimming the portfolio, streamlining the consumer products businesses spread across five continents, from India and the US to the UK, Canada, South Africa and Australia.
In Australia, the company held a 7% share of the tea market but was also running an out-of-home coffee dispensing business that was losing millions of dollars. It was shut down in December 2020.
In the US, a food-service joint venture, including a tea factory and a distribution unit, was disposed of as well in March 2021.
“We had 45 legal entities. That’s not tenable,” D’Souza says. “We exited areas where we didn’t see value. The focus clearly shifted to not just the topline, but margins.”
Six years later, TCPL’s entity count stands at 25 and is well on the way to the target of 18 entities.
What stood out in the next six years is TCPL’s sole focus to dominate the food and beverages (F&B) category. The company’s mantra: think big, move fast.
By late 2020, once the initial scramble post the merger had settled, TCPL ran a strategic exercise called Project Falcon. The result was a playbook: categories to foray into, categories to stay out of, where to build and what to buy.
The year 2021 provided a starting point for TCPL. In March that year, the United Nations officially declared 2023 as the International Year of Millets, acting on a proposal from India. The country being the largest producer of millets, accounting for 20% of global production, wanted to raise awareness of millet’s role in improving nutrition and creating sustainable market opportunities.
The timing was fortuitous for TCPL. In 2021, its first acquisition, Soulfull, was a millet-based health-food brand. This ₹155.8cr deal gave Tatas a foothold in a category it couldn’t have credibly entered on its own.
Within three years of acquisition, Soulfull’s distribution had grown from 15,000 outlets to 300,000, carried on the back of the Tata’s existing network.
Three years later, in January 2024, when TCPL announced two deals with combined worth of ₹7,000cr in quick succession, its stocks fell.
The market wasn’t convinced initially. TCPL had just committed roughly 40% of its annual revenue to two brands it did not build. At the time, it was a new player with its core business running on single-digit margins.
Analysts at Ambit Capital estimated the acquisitions would cut 2025–26 earnings by roughly 10%.
The first, a ₹5,100cr deal, was to buy Capital Foods, the company behind Ching’s Secret.
The second was a wellness play, a ₹1,900cr cheque for Organic India, a Lucknow-based brand with a devoted following in the US.
D’Souza had faith in these big-cheque acquisitions. “We are not playing this game for the next one or two years. We do these acquisitions knowing that we put money there. It will bear out over a period of time.”
Ching’s Secret had spent decades building the desi Chinese category in urban Indian homes almost single-handedly—the Schezwan chutney, the noodles and sauces.
As for Organic India, it had a network of farmers across Madhya Pradesh and Uttarakhand, a manufacturing facility in Lucknow and decades of Ayurvedic credibility in the American wellness market. It was built over years of relationships that TCPL simply did not have and could not quickly acquire.
And the numbers weren’t disappointing. By the third quarter of 2025–26, Capital Foods and Organic India together were generating ₹354cr in quarterly revenue, up 15% year on year, at gross margins of roughly 48%, well above TCPL’s blended average of 43%.
Motilal Oswal expects integration costs to ease substantially by 2026–27, after which the margin story should become clearer.
Fight for Shelf Space
From the get go TCPL was clear about the categories it wanted to enter and to avoid as well.
It didn’t want any stake in the basic edible-oil segment. This shelf had far too many players led by the likes of Fortune and Saffola.
But cold-pressed oil was a different ballgame. Consumers here were buying into a health claim with no way to verify if the product was trustworthy. “The Tata name does the magic there,” says D’Souza.
In August 2023, TCPL launched a range of cold-pressed oils under its brand Tata Simply Better, a new brand that was launched in 2022 to enter the plant-based mock-meat category.
The logic: find the trust deficit, fill it with the four-letter Tata name, became the basis for every category TCPL considered entering.
The sweet spot for the insurgent company was categories that were fragmented, where consumers didn’t fully trust what they were buying and where a credible brand could change the equation.
Biscuits was another category that TCPL gave a skip.
Britannia and Parle owned 56% of the market, built over decades of backward-integrated manufacturing and distribution muscle.
This restraint, wrote Motilal Oswal, in a recent note, is “rare in Indian FMCG”. Categories like biscuits, snacks, colas and base edible oils are permanently off the table, crowded segments where the Tata brand adds no meaningful trust-led differentiation. “Such portfolio discipline is a positive indicator of capital allocation quality,” the note observes.
Built organically, cold-pressed oil is now running at an annual revenue of ₹350cr. Dry fruits, another category Tatas entered with the same trust deficit logic is at a ₹300cr run rate.
What differentiates TCPL from other FMCG players?
The categories that Tatas have built or bought into are still being defined. HUL and Nestlé, on the other hand, are dominant in mature markets where penetration is already high. HUL is buying established brands in categories it rules, plugging gaps in existing portfolios. TCPL is buying into categories it has never played in, at scale, while the core business is still being built.
Whether this is disciplined offence or over-extension is a question the next two years of integration will answer.
Even before acquisitions came into play, among the first things D’Souza and Krishnakumar did was to build accountability. There had been no one person who owned a category (tea, salt or pulses) from manufacture to sales.
They created category leaders who were responsible for the product’s profit and loss, bar the fixed costs. Functions that did not exist were created.
In 2020, Tata Salt was present in nearly 2mn retail outlets across India. TCPL’s own salespeople directly visited just 150,000 of them. The remaining 1.85mn stores were being supplied through a chain of middlemen, called super stockists or consignee agents.
These middlemen picked up Tata Salt in bulk from big distributors and moved it onward through their own networks. No one from TCPL knew what was selling fast, what wasn’t or what product a rival had placed on the shelf just two rows away.
“That shows the strength of the brand and also the lack of distribution reach,” says D’Souza. In FMCG, this gap between a brand’s total reach and its direct reach is called the wholesale multiplier. It measures how many outlets are stocking your product for every outlet you directly supply. A multiplier of five is considered normal. TCPL’s was 15, a number almost unheard of.
This meant TCPL had no direct relationship with over 90% of the shops and no mechanism to introduce anything new in those shops.
“There was this big layer [of middlemen] in each state. We removed that entire layer. That layer alone was about 1.2% in terms of cost. Then we appointed proper distributors, recruited the right people and rebuilt the distribution system,” says D’Souza. This was a saving of 36 paise on every 1kg pack of Tata Salt with an MRP of ₹30.
Rebuilding the entire distribution ecosystem took six to seven months. The distributor base was cut from 4,500 to around 1,500–1,600. These distributors were now carrying the full portfolio, reporting directly to TCPL. The sales force was expanded by 30%.
The results were quick. TCPL’s direct outlet reach stands at approximately 2.3mn today from roughly 500,000 in 2019–20. The total reach is 4.4mn outlets now.
“There are two key benefits to getting closer to the retailer. It supports margins and gives you better visibility into what’s happening at the point of sale,” says Arvind Singhal, chairman of The Knowledge Company, a management-consulting company.
Progress is real. But TCPL has miles to go. HUL reaches more than 9mn outlets, built over nine decades. ITC reaches 7mn. Nestlé 5.2mn. India has roughly 12–15mn kirana stores.
“The whole premise was to create a distribution funnel through which you can then push different products,” says D’Souza.
Bump in the Road
The first real test for TCPL was whether the idea of pushing new products through the distribution funnel would work.
Pradeep Gupta, a kirana store owner in Varanasi, has been a witness that it worked. Six years ago, two products were always on his shelf: Tata Salt and Tata Tea Premium. He didn’t need a salesperson to tell him to stock them.
Now, new products from Tata Sampann spices to Ching’s Secret sauces and Soulfull rusk are on the shelves of Gupta’s tiny store. TCPL’s distribution network made it happen. A distributor who had built his business around Tata Salt would now also handle Ching’s Secret. A salesperson who knew how to move a commodity would now pitch a branded sauce.
But not everyone was happy. The All India Consumer Products Distributors Federation (AICPDF) went up in arms against TCPL in 2025. Distributors were protesting excessive targets, stocks were piling up in warehouses and damaged goods sitting for months with no settlement.
The mismatch was structural. Salt moves through wholesale with 80% of it never seeing a retail salesperson. Most of the newer growth products like Ching’s Secret are sold almost entirely through direct retail.
Running both through the same distributor was asking a man who sold salt by the tonne to also build a market for Schezwan chutney.
The AICPDF president Dhairyashil H Patil explains what went wrong. “Salt is typically sold in large volumes. Products like Tata Sampann [a packaged pulses brand launched in 2017 under Tata Chemicals] and tea are the opposite, only about 8–10% goes through wholesale. After the merger with Capital Foods, there was a complete mismatch.”
Distributors built around salt did not find it viable to handle retail-heavy products. “Most Tata distributors derive 60–70% of their turnover from salt, so their focus remains there,” adds Patil.
TCPL eventually had to take back damaged goods sitting with distributors for six to eight months. D’Souza’s response was to separate the networks entirely.
TCPL’s growth businesses like Ching’s, Soulfull and Organic India had their own distributors and sales teams in just three months. “For any other company, it would have taken at least a year or more,” D’Souza says.
Also, the portfolio TCPL had inherited gave its own answer to what the distribution funnel could carry. Sampann, a “hobby for Tata Chemicals”, arrived at the merger doing ₹150–200cr in revenue. In 2025–26, Sampann is expected to touch ₹1,700–1,800cr, with pulses alone contributing ₹1,000 crore.
“The whole DNA of the company is to stay agile and make sure to move at full speed,” says D’Souza.
Fast and Furious
TCPL moved at full speed indeed when it came to trends. In May 2019, Beyond Meat, a company that made plant-based burgers from pea protein, listed on Nasdaq. Its stock more than doubled on the first day.
Within months, McDonald’s was testing a meatless McPlant and KFC was piloting plant-based chicken. Plant-based meat looked like the future of food.
TCPL bought into the trend. In 2022, it launched plant-based mock meat under the Tata Simply Better brand. However, the global buzz died sooner than expected. Two years later, TCPL exited the category.
The exit is not the point. What matters is that the product took 150 days from concept to shelf. TCPL had built something that would have been impossible two years before.
Mock meat required food science to replicate the texture of meat from plant protein, process technology, a team of chefs, food scientists and packaging engineers.
Capabilities were built from scratch. In the beginning, the R&D team was just 10–15 people. Today, it operates across three centres: Bengaluru as the research and packaging science hub, Mumbai for food innovation and product development, and Barabanki in Uttar Pradesh, anchoring the wellness work after the Organic India acquisition.
The team remains lean, around 60 people, roughly one-third the size of comparable FMCG rivals, estimates Vikas Gupta, R&D head at TCPL.
When D’Souza arrived in 2019, just 0.8% of TCPL’s revenue came from new product launches. The industry benchmark is 5%. TCPL was nowhere close. Today, that number stands at roughly 5%.
Onkar Kelji, research analyst at Indsec Securities, a brokerage firm, frames the economics of the chase: the early returns on innovation can be thin, he says, as companies push products aggressively and launch on e-commerce where margins are typically lower than general trade. “But if these products scale, they deliver better margins over time.”
Across the industry, the contribution of newly launched products has generally stayed under 5%. With acquisitions, that mix is expected to rise, notes Kelji.
In FMCG, innovation is not only about launching entirely new categories. It is also about rethinking what already exists. “We were singularly focused on vacuum-evaporated iodised salt,” says D’Souza.
The thinking that replaced it was simpler. “Give the consumer what they want. Plain salt. Salt with iron, with zinc. Low sodium for the health-conscious. Himalayan rock salt for the premium buyer. Sendha [during Navaratri]. One product became a portfolio,” adds D’Souza.
A patented granulation technology was developed for double-fortified salt, solving a long-standing industry problem of how to add iron to iodised salt and keep it stable.
TCPL also produced the Tata Coffee Cold Coffee liquid concentrate, a first-of-its-kind product in the Indian market that lets consumers make cold coffee at home without equipment.
The first 100 product launches after the merger took three-and-a-half years. The next 100 took 16 months. At one point, the company was turning out a new product every week, each one requiring its own supply chain, packaging, shelf-space negotiation and own sales story.
For a company that was criticised in 2018 for launching almost nothing new for years, this was a different metabolism entirely. “It’s easier when you are doing everything from scratch, says D’Souza, adding “As soon as we see a trend, we are on top of it and running with it.”
E-commerce is a good example of how TCPL, weeks into its merger, took on the very real challenge of lockdown and built a new digital vertical to boast of.
Lessons from Pandemic
In March 2020, most Indians had online grocery apps on their mobile phones. These were rarely used. But the Covid-19 pandemic and subsequent lockdown reshaped this landscape.
BigBasket’s servers strained with massive order volume surge. Dunzo crashed repeatedly. Amazon Fresh ran out of delivery slots. Millions of urban Indians were struggling to restock their kitchen shelves.
At the time, TCPL’s entire e-commerce operation was one person’s part-time responsibility. The southern regional sales head looked after e-commerce. TCPL had to race against time to build a digital channel. And D’Souza’s team built it fast.
E-commerce became a dedicated function with its own head. A modern trade team was created. Every new product launch went digital first. E-commerce gave TCPL something general trade never could: unfiltered data on what actually works.
While the company’s overall innovation-to-sales ratio was 3.4% by 2022–23, it was 10% on e-commerce. Products that proved themselves online were then pushed into general trade.
“The beauty of e-commerce is that it is only you and the consumer. It is the power of your product and your brand and your value proposition,” D’Souza said in an earnings call.
E-commerce’s revenue contribution at the time of merger was 2.5%. By late 2021, it was 7%, a growth of 130% in a single year. By 2024–25, it reached 14%, overtaking modern trade for the first time. By the third quarter of 2025–26, e-commerce and quick commerce together stood at 18.5%.
“I don’t think anyone else is in this ballpark,” says D’Souza. He is not wrong. HUL’s equivalent figure runs at 7–8%, Nestlé India’s at 8.5%. The company that almost missed the decade’s defining channel shift now leads it among its peers.
What makes the number more significant, according to Motilal Oswal, is TCPL’s margins on quick commerce are comparable to traditional channels, unlike most peers, who are seeing margin erosion on the platform.
The Tata group’s acquisition of BigBasket in May 2021 gave TCPL a window into how millions of Indians shop for groceries.
In an earlier earnings call D’Souza pointed out that BigBasket is a group company, not a TCPL asset. But within the group, he said, they were working closely to find synergies.
The channel shift also fits the company’s portfolio. Quick commerce skews toward the premium buyer: the person reaching for Himalayan rock salt at ₹100 rather than iodised salt at ₹30, Organic India’s tulsi tea rather than a commodity tea bag.
The premium end of TCPL’s portfolio, built over five years, is precisely what the fastest-growing channel wants. The mass business still dominates revenue.
Half-way Mark
In January 2021, D’Souza said, “If we get it right, the rewards would be endless. If we didn’t, we’d have to live with it for a long time.” Five years later, he rates himself “five out of 10”. Ask him what TCPL has that HUL and Nestlé don’t, and the answer is the four letters T-A-T-A.
Here is what five out of 10 looks like. TCPL’s revenue has grown over 80% between 2019–20 and 2024–25. In annual terms, that is a compound rate of roughly 13%, faster than HUL’s 9.8%, Nestlé India’s 10.5% and ITC’s 9.7% over the same period, albeit off a smaller base.
TCPL reported a consolidated annual turnover of ₹17,618cr in 2024–25. Its operating margin, what survives from every rupee of revenue after paying for everything, runs at 14–15%. HUL’s is 23–24%.
Closing this gap requires high-margin businesses like Ching’s, Organic India, Soulfull, cold-pressed oil to grow fast enough to become roughly a third of total revenue. Right now, they are 8–9%.
Tea costs, which TCPL cannot control, need to normalise. Integration costs from the 2024 acquisitions need to wind down.
Motilal Oswal projects margins reaching 17% in three years. The path to 20%-plus, where HUL and Nestlé operate, is considerably longer than that.
Return on capital, how much profit a company earns on every rupee invested, tells the same story from a different angle. TCPL’s sits at roughly 10%. HUL’s is 27%. D’Souza points out that the core business, stripped of the 2024 acquisition capital, delivers 30%-plus.
The acquisitions are dragging the consolidated number while they are still being absorbed. Most analysts expect the trajectory to improve. The question is whether it does so within the timeline management has guided.
D’Souza describes the portfolio in three segments: the international business: Tetley, steady and cash-generative. The India staples: tea and salt, large but low-margin, subject to commodity costs he cannot control. And the growth businesses: Ching’s, Organic India, Soulfull and cold-pressed oil, which are small today but carry the highest margins and expectations.
“All three pieces need to come together,” says D’Souza.
“Each piece in the portfolio has a very specific purpose,” explains Krishnakumar. International for steady margins. Sampann for growth. Capital Foods and Organic India for both. “The headline target ties it together: a double-digit-plus topline and a bottom line growing higher than that,” he adds.
Today, the portfolio spans tea, coffee, water, ready-to-drink beverages, salt, pulses, spices, ready-to-cook and ready-to-eat offerings, breakfast cereals, snacks and mini meals.
However, the product range is in the food and beverages (F&B) universe. The company does not yet cover much else. “Without personal care or home care, TCPL is not yet a comprehensive FMCG powerhouse,” says Devangshu Dutta, founder of Third Eyesight, a boutique management-consulting firm.
Krishnakumar’s response is: “On a revenue basis, F&B accounts for nearly 80% of the FMCG universe. Outside of F&B, it requires a very different set of skills, a very different DNA.”
TCPL is not making bets in personal-care or home-care segments in the near future.
The Long Game
“There’s no magic breakout moment,” says Krishnakumar. What he points to instead are accumulations: salt crossing million packets a day, the stock market re-rating and the innovation pipeline turning out a new product every week.
The competition, however, is not waiting. HUL’s quick commerce is logging 3% of revenue, growing at over 100%. ITC plans to spend ₹20,000cr over five years with the bulk for foods. Nestlé is deepening its product pipeline.
These rival FMCG companies are now moving faster than they have in years. For TCPL, the race has gotten harder.
At the same time, these giant competitiors have their own challenges. HUL draws only 25% of its revenue from foods. Nestlé is concentrated in dairy and confectionery.
ITC, which is still moving away from tobacco, draws 40% of its revenue from packaged foods and personal care combined.
While these Goliaths have their attention split, TCPL’s focused approach is perhaps the one thing they cannot replicate. “In any category that we have a stake in, we would be among the top three brands,” says a confident D’Souza.
Six years in, the pieces are in place. “Our strategic road map and the strong foundation we have laid for the business have yielded good results…Our overarching ambition is to evolve into a full-fledged FMCG company,” Chandrasekaran said in TCPL annual report 2024–25.
Whether TCPL becomes big and matches his vision is a question the next six years will answer.
Within the Tata group, TCPL’s revenue ranking may not have moved much: eighth in 2019–20, seventh today. Both profits and market capitalisation have grown more than three times. It’s now worth over ₹1 lakh crore, nearly seven times Tata Chemicals, and more than double that of Tata Communications.
The market is not pricing what TCPL is. It is pricing what it might become. “Because if you’re not in the top three, there is no point,” says D’Souza. The man who chose to walk into the “sleepy company” is not done yet.
(Published in Outlook Business)
admin
June 16, 2023
Sharleen D’Souza & Shivani Shinde, Business Standard
June 8, 2023
Why are companies finding it difficult to sustain the supply-chain business?
Experts point out that gross margins in supplying fast-moving consumer goods (FMCGs) are very low.
While it does look attractive because it is the largest part of the consumption market, the last-mile supply chain and retailer are not making money.
“FMCG brands have ensured high margins for their businesses by streamlining and smoothing their supply chains over decades and making them cost-efficient,” said Anshuman Singh, founder and managing director, Stellar Value Chain Solutions.
Singh said in rural markets, the costs of supply chains were proportionately high due to lower volumes.
He added: “The low margins in the last leg of the FMCG rural supply chain make it difficult for new-age rural distribution players to offset the high costs.”
Devangshu Dutta, chief executive officer, Third Eyesight, a consultancy firm, said modern B2B (business-to-business) players had tried to step in to replace the traditional links in supply chains with price incentives and a large selection of products.
“Traditional distributors and wholesalers don’t just add costs but also add value, including aggregating demand for brands, disaggregating supplies for small retailers, providing market intelligence to both ends of the chain, and giving credit to retailers and a sort of financial guarantee for manufacturers,” Dutta said.
He said for their business models to work — online or offline — B2B businesses needed a significant concentration of demand, which had been tough to get in many locations.
On July 6, 2022, the Competition Commission of India (CCI), in the dispute between biscuit manufacturer Parle and B2B player Udaan, upheld the plea of the former, saying it did not violate competition laws. Parle had refused to sell its products directly to Udaan.
Udaan was the first B2B start-up to have a run-in with a well established brand, which was not interested in moving away from the traditional distribution model.
What has that meant for Udaan? It has meant tweaks to its business.
It further diversified its product portfolio so that its access to the market was not impacted.
It forayed into the mobile accessories segment as local brands tapped into its network of over 3 million retailers.
Earlier, this year it expanded its reach in the miller segment, which supplies staples like pulses, grains, wheat, rice, and oil.
Udaan aims to take on board about 100 miller partners per quarter.
It works with over 500 miller partners, supplying over 10,000 SKUs (stock-keeping units) to retailers and kirana owners, according to the company in an interaction with Business Standard.
The other company that recently had to tweak its business or go back to its focus on rural India is Pune-based ElasticRun.
B2B start-up ElasticRun has decided to focus on the core business and wind up its new expansion plans.
Backed by SoftBank and Prosus Venture, ElasticRun, which typically runs distribution for FMCGs in rural areas, decided to expand and also cater to retailers within city limits, i.e. tier 1 and tier 2 markets that had a strong distribution owing to companies having direct distribution in those areas.
“We initiated a pilot for urban markets. But through the year, as the macro changed, we decided not to pursue the urban pilot and focus on our core of rural business … we have to part ways with almost 2 per cent of our employees,” said Sandeep Deshmukh, co-founder and chief executive officer, ElasticRun, in an earlier interaction with Business Standard.
ElasticRun extends the reach of the brands’ direct distribution networks to deep rural markets. It enables access to a set of net new stores and customers, who were not accessible through traditional distribution networks.
The need to spend in order to get market share has caused well-entrenched players like Amazon to pull out of some of its distribution business.
Amazon India has decided to shut down Amazon Distribution, according to sources. This follows its recent decision to close down its food delivery and edtech offers. The moves are part of the annual operating planning review process amid global macroeconomic uncertainties. The e-commerce giant is looking to focus on its core businesses, sources said.
Amazon Distribution operates a platform where sellers sell FMCGs and apparel products from companies and distribute them among kiranas and small neighbourhood stores.
However, this unit operated in only three cities of Karnataka — Bengaluru, Mysuru, and Hubbali.
(Published in Business Standard)
admin
April 21, 2023
Viveat Susan Pinto, Financial Express
April 21, 2023
Retailers of Apple products in Mumbai and Delhi, which account for around 20-21% of the brand’s annual sales in the country, fear the launch of stores by the US giant within these cities may dent their business.
In particular, retailers in the vicinity of these outlets, at Bandra-Kurla Complex (BKC) in Mumbai and Saket in Delhi, say consumers will prefer to go to these company-owned stores rather than make it to their outlets to purchase Apple products.
“That is a visible danger for those Apple retailers who are located near these outlets,” a senior executive at Unicorn Infosolutions, an Apple premium reseller in Delhi and Mumbai, said. Unicorn has 37 outlets in the west and north of India and is looking to its increase its footprint to 75 stores in the next three years.
“You have to keep in mind that the base of consumers for Apple is growing, both in Mumbai and Delhi as well as other cities. It will not be feasible for all the consumers to make it to these outlets. Yes, some high-end consumers may choose to shop at these Apple stores in the two cities, but for those staying away from these stores, it will be difficult to make it to these outlets,” the Unicorn executive said, declining to be quoted.
Nilesh Gupta, managing director of Vijay Sales, an electronics retailer, which has stores in the west and north of India, had reiterated a similar point on Tuesday (April 18), the day the Apple BKC store was launched in Mumbai. He said that he saw the store launches in Mumbai and Delhi as an opportunity for brand-building and further growth in sales.
“Apple is launching just two stores in India, one in Mumbai and the other in Delhi, for now. Even if they launch more outlets, not everyone will be able to make it to these stores, given the size of India and the aspirations of people wanting to own an Apple. The word-of-mouth and excitement going around following the launch will positively impact all of us who stock and sell Apple products in the country. I see more consumers wanting to buy Apple products in the future,” Gupta said.
While Apple has been in India for more than 25 years, it has had no direct retail presence in the country until now. An Apple online store in India was launched around three years ago. In other words, say experts, the Cupertino-based tech giant has depended largely on a network of online and offline retailers, including premium resellers, multi-brand operators and e-commerce channels, for sales in India.
“And Apple will want to ensure that its retail partners are not impacted because of its direct retail foray into India,” says Devangshu Dutta, founder and chief executive officer, Third Eyesight, a Gurugram-based retail consultancy.
“The Apple premium resellers, for instance, may choose to upgrade their retail experience at their outlets to ensure that there is no loss of business, especially in Mumbai and Delhi,” Dutta said.
Apart from Unicorn, some of the other Apple premium resellers in India include Maple in Mumbai and Ample Technologies, which runs the Imagine brand of stores in cities such as Bengaluru and Chennai.
Both the Apple stores in Mumbai and Delhi are high on experience, visitors to these outlets have said, coming at a time when the brand, amongst the most valuable in the world, has clocked a record revenue in India.
A Bloomberg report this week said that Apple had reported a turnover of $6 billion in India in FY23, up from $4.1 billion in FY22.
The Apple craze has drawn huge crowds both to the Mumbai and Delhi stores this week. The retail push will come as the company looks to expand manufacturing in India, experts said.
While Apple has been manufacturing older iPhone models in India since 2017, it began assembling the most recent smartphone models in 2022, with the iPhone 14.
According to the International Data Corporation (IDC), Apple’s iPhone shipments in India stood at 6.7 million units in 2022 against 4.8 million in 2021 and 2.7 million in 2020.
Apple also captured 25% of the ‘Made in India’ smartphone shipments in terms of value in 2022, compared to 12% in 2021, according to Counterpoint Research.
Among cities, Mumbai accounted for 10% of iPhone sales in India, trailing only Delhi, which accounted for 11% of sales, Counterpoint Research said.
(Published in Financial Express)
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
August 31, 2022
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.
