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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.
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June 28, 2022
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:
admin
April 24, 2022
Written By Devika Singh
The Enforcement Directorate (ED) on April 19 accused Amway India of running a “multi-level marketing (MLM) scam” and attached its assets worth Rs 757.77 crore. This is not the first time that Amway India has been accused of running a ‘pyramid scheme’. Read on to understand how direct selling is different from pyramid schemes and why has the ED attached Amway India’s assets?
The direct selling industry is again under the regulatory scanner in India with the Enforcement Directorate’s (ED) move to attach the assets of the Indian unit of US-based direct selling company, Amway. The ED has accused the company of running a “multi-level marketing (MLM) scam” and attached its assets worth Rs 757.77 crore.
According to an ED statement, the attached property includes Amway India’s land and factory building at Dindigul district in Tamil Nadu, plant and machinery vehicles, bank accounts and fixed deposits.
“Immovable and movable properties worth Rs 411.83 crore and bank balances of Rs 345.94 crore from 36 different accounts belonging to Amway attached,” the ED said. The seizures, the ED said, have been made under the Prevention of Money Laundering Act (PMLA).
This is not the first time that Amway India has been accused of running a ‘pyramid scheme’. The company faced accusations on similar lines in the US in the 1970s and has been under government scrutiny in Karnataka and Kerala in the past. In fact, in 2013, Kerala police arrested then Amway India chief William Scott Pinckney and its directors, accusing them of running a pyramid scheme.
Direct selling has come under scrutiny time and again, as over the years, consumers have been duped by fake sellers hawking defective products and services in the garb of direct selling. To discourage such schemes, the government had proposed a draft policy last year, which aims at regulating the direct selling market segment.
Read on to understand what is direct selling, why the ED attached Amway India’s assets, what is Amway’s stand on the issue, how is direct selling different from pyramid schemes, and what are government regulations around direct selling in India?
What is direct selling?
Direct selling firms deploy agents who buy products from the company and then directly reach out and sell to consumers at their homes or other places instead of through a retail format like a store. The direct selling entity and the agent share the profits made through the sale of products. According to industry estimates, there are about 60 lakh agents in the country, who pursue direct selling as a means of earning additional income.
The direct selling industry, as per estimates, is pegged at Rs 10,000 crore in India, and has been growing at 12-13 percent per annum over the last five years. Experts say multi-vitamins, and home care and personal care products are the top-selling categories through this channel.
Beside Amway, companies such as Avon, Oriflame, Modicare and Tupperware operate in the direct selling segment. Some of these companies have been in India for decades now.
What is pyramid scheme and how is it different from direct selling?
Pyramid schemes are defined as a form of investment in which a paying participant recruits further participants and gets rewarded for it. Over the years, consumers have been duped by fake sellers hawking defective products and services in the garb of direct selling, often bringing the direct selling industry too, under scrutiny.
“Pyramid scheme is a scam to make money for a few people and it is based on selling an empty promise, multiplying it through recruiting people,” said Devangshu Dutta, CEO of retail consultancy Third Eyesight.
However, he added, it has to collapse somewhere because you are selling a product or service that does not exist.
“As opposed to that, in direct selling, the companies are selling products and at the end of it there is a tangible exchange of goods or services. So, even if you have downline distributors, as long as at the end of it the customer is getting something of value, then it’s not really a pyramid scheme,” he added.
Why has ED attached Amway India’s assets?
According to the ED’s press statement, Amway India runs a multi-level-marketing scheme or pyramid scheme, which “induces the common gullible public to join as members of the company and purchase products at exorbitant prices.”
The ED said the prices of most Amway products are “exorbitant as compared to the alternative popular products of reputed manufacturers available in the open market”. The new members, who are asked by the company to join it, are not buying the products to be used by themselves, but to become rich by becoming members as showcased by the upline members, said ED.
“The reality is that the commissions received by the upline members contribute enormously to the hike in prices of the products,” the ED said.
And this, indicated the ED, makes Amway’s operations similar to a pyramid scheme, where new members are recruited by existing members with claims of amassing wealth and becoming rich.
The agency claimed that between FY2003 and FY2022, Amway collected Rs 27,562 crore, of which it paid commissions worth Rs 7,588 crore to affiliate members and distributors in the United States and India.
What is Amway’s stand on the issue?
Amway, however, claims that it does not offer any incentives to new members to join the company and the members are only paid once they make a transaction or sell the product, and hence they are not operating a pyramid scheme.
The company has released a statement saying that the action of the authorities is with regard to the investigation dating back to 2011 and since then Amway has been co-operating with the department and has shared all information as sought from Amway from time to time. Amway said it will continue to cooperate with the government authorities for a fair, legal, and logical conclusion of the outstanding issues.
“As the matter is sub judice, we do not wish to comment further. We request you to exercise caution, considering a misleading impression about our business also affects the livelihood of over 5.5 lakh direct sellers in the country,” it said in a statement to media.
In an conversation last year with Moneycontrol, Amway India CEO Anshu Budhraja had said that Amway India does not charge any registration fee to its agents.
“There are no charges for joining Amway business. Further, to ensure that the customers have a satisfying experience with Amway, our products are backed by a money-back guarantee for 100 percent satisfaction of use,” Budhraja had said.
What are the regulations around direct selling?
The government last year included Direct Selling under the Consumer Protection Act (Direct Selling) Rules, 2021. These new rules prohibit direct selling companies from charging registration fees from their agents, and bars them from charging their agents for the cost of demonstration to prospective buyers.
The rules also forbid direct sellers from engaging in pyramid and money circulation schemes. The rules mandate that the companies operating in the segment would have to appoint a Chief Compliance Officer, a Grievance Redressal Officer, and a Nodal Contact Person. The companies would also need to be registered with the Department for Promotion of Industry and Internal Trade and must have an office in India.
They would also be mandated to maintain a website with all relevant information.
“Every direct selling entity shall establish a mechanism for filing of complaints by consumers through its offices, branches and direct sellers through a person, post, telephone, e-mail, and website,” as per the regulation.
“Every direct selling entity shall establish a mechanism for filing of complaints by consumers through its offices, branches and direct sellers through a person, post, telephone, e-mail, and website,” as per the regulation.
It adds: “Every direct selling entity shall ensure that such registration number is displayed prominently to its users in a clear and accessible manner on its website and each invoice issued for each transaction.”
In addition, such companies would have to maintain a record of direct sellers working with them, including their ID proof, address proof, email ID, and other contact information.
Source: moneycontrol
admin
March 29, 2022
Writankar Mukherjee & Sagar Malviya, Economic Times
Kolkata / Mumbai, March 28, 2022
The war for instant grocery delivery is going to intensify with Reliance Retail entering the segment with its JioMart platform. The company will start the trial in next 2-4 days in Navi Mumbai for ‘JioMart Express’ which will sell and deliver around 2,000 stock keeping units (SKUs) in a few hours, two senior industry executives aware of the plans said.
Reliance has plans to take instant grocery sales to over 200 cities and towns where JioMart is currently operational by end of next quarter and double the reach in next few months to make it India’s largest instant grocer. The company will also tap its network of kirana stores for such fulfillment, apart from its own chain of grocery stores, the executives said. It is testing a separate app for express grocery deliveries as well as integrating it into the JioMart platform.
The plans of India’s largest brick-and-mortar retailer to enter quick commerce is to further grow its e-grocery business and Reliance will compete against Tata-owned Big Basket which will launch it in April, Zomato-funded Blinkit, Swiggy’s Instamart, Walmart-owned Flipkart Quick and Zepto. Earlier this year, Reliance had led a $240 million funding round in quick commerce hyperlocal firm Dunzo owning the largest 26% stake.
“JioMart Express will utilize Dunzo in the markets where it is strong like the metros as well as its own delivery fleet. JioMart Express can be quickly scaled up since Reliance has onboarded lakhs of kiranas under its B2B programme ‘JioMart Partner’ who buys the merchandise from Reliance and sells through the JioMart platform,” an executive said.
An email sent to Reliance Retail remained unanswered till Sunday press time.
Devangshu Dutta, chief executive of consulting firm Third Eyesight, said Reliance needs to ensure that it is in the right catchment which has a high concentration of demand, low competition and keep supply centres close to it to make instant grocery service profitable. “Margin contribution is low in grocery and hence apart from these there could be a higher focus on high margin products in the assortment,” he said.
To be sure, quick commerce is not new for Reliance Retail. It has been delivering orders in less than three hours placed through Reliance Digital online or app for smaller consumer electronics such as mobile phones and laptops. “However, order volumes are going to be much more frequent in grocery, and hence it would need a robust backend and delivery fleet,” an executive said.
While the pilot in Navi Mumbai will start with 1-3 hours delivery time, Reliance will progressively reduce the delivery time to match the industry standard of 45 minutes to an hour and will also expand the range. According to researcher RedSeer, India’s quick commerce market is all set to grow 15 times by 2025 reaching a market size of close to $5.5 billion. Online shoppers in the metros have been using quick commerce for their unplanned and top-up purchases.
(Published in Economic Times)
admin
November 1, 2021
Written By Vaishnavi Gupta
D2C brands are taking the traditional retail route to scale up
Analysts say that the move to offline retail makes sense for digital-first brands in categories where experiencing the product is an important driver for purchase
While brands across categories made a beeline for e-commerce during the pandemic, physical retail earned prominence among direct-to-consumer (D2C) brands. Melorra, Plum, Pee Safe and Libas, among others, have been building their offline presence over the past year.
The total retail market in India is estimated to be worth Rs 63 lakh crore, of which 95% buying happens through offline formats, according to Devangshu Dutta, founder, Third Eyesight.
Having started as an online-only brand in 2013, Pee Safe launched its first exclusive store in India in February, 2021. The personal hygiene brand currently operates a store each in Gurugram, Bengaluru and Ahmedabad; and plans to launch 50 offline stores in the next 12 months. “There is a strong demand for personal hygiene and wellness products in the offline market. Hence, opening exclusive outlets is a crucial element of our growth strategy,” says Srijana Bagaria, co-founder and director, Pee Safe. These exclusive brand outlets (EBOs) will be launched through the franchise-owned and franchise-operated (FOFO) model.
Online ethnic wear brand Libas, meanwhile, unveiled two brick-and-mortar stores in New Delhi in September, 2021. The brand has an ambitious target of 200 more stores by 2025 in malls and high streets across metro and tier II cities. A click-and-collect facility will be operational soon, says Sidhant Keshwani, managing director, Libas. “We are aiming for our offline market share to be 25% in the coming two years,” he adds.
The brand offers a range of wedding and occasion wear, as well as ready-to-stitch fabrics exclusively in its offline stores. Soon, it also plans to foray into the kidswear and menswear categories, as well as home décor.
Beauty brand Plum, which has been retailing online since 2014, launched its first store in Mumbai in October, 2021. Plum’s founder and CEO, Shankar Prasad, says the goal is to take the store count to 50 by 2023, and for EBOs to contribute “10-20% of our total sales in two-three years”.
Jewellery brand Melorra extended its presence offline back in December, 2020. “We have been growing 200% year-on-year; we expect to post even stronger numbers this year with the addition of offline stores. We are looking to touch $1 billion in revenue in five years,” says the company’s founder and CEO, Saroja Yeramilli.
A good step?
Analysts say that the move to offline retail makes sense for digital-first brands in categories where experiencing the product is an important driver for purchase. “D2C players have so far done a great job of owning the consumer journey which is largely online. They now see that for the next wave of growth and penetration, they need good representation in a larger set of touchpoints,” says Rachit Mathur, partner and MD, BCG.
However, online is likely to remain the primary revenue stream for these digital-first brands. “Brands such as Lenskart, Nykaa and FirstCry have done a great job in driving strong retail presence and viable productivity, but continue to have a higher bias of online sales,” Mathur notes.
D2C brands could perhaps try a mix of formats for an offline foray, from EBOs to a presence in departmental stores, or even small SIS (shop-in-shop) counters in shopping centres. But brands would need to be cognisant of the fact that consumers behave differently depending on the shopping environment they are in. Hence, the interface, service offering, and even the product mix may have to be tweaked. “Simply bringing in technology into an offline environment just because you are an online-first brand may do nothing to enhance the consumer experience, and may even detract from it,” Dutta says.
Source: financialexpress
