Samar Srivastava, Forbes India
April 24, 2023
A board meeting scheduled for May 2 promises to be the start of the value unlocking process for Reliance Industries [Disclaimer: Reliance Industries is the owner of the Network18 group, which publishes Forbes India]. Shareholders of India’s largest company, which has a presence in industries as diverse as petrochemicals, retail and telecom, will each receive shares in its financial services unit—Jio Financial Services.
User data—what consumers search for, their demographic profile as well as their likes as dislikes—are available to India’s largest telecom company with 426 million users. If it can use that data to underwrite credit for consumers, it has a winner. Jio Financial is in a unique position.
Loans to India’s middle class have grown at three percent in the last year. Compare that with credit to industry that has grown at a mere seven percent and it becomes clear why the company is keen to spin this off an independent entity and list it separately on the bourses. A successful listing could result in telecom and retail being eventually listed separately.
An analysis by Jefferies, a brokerage, shows that loans to India’s consuming class present a large market opportunity. Home loans account for about ₹25,00,000 crore, auto loans for ₹471,400 crore, consumer durable loans for ₹37,000 crore, and microfinance for ₹280,000 crore. And there is the rapidly growing personal loan segment at ₹79,000 crore. These all present a large whitespace for the company to tap into. Jeffries also points out that a key advantage of the business would be their access to low-cost capital due to the high credit rating to Reliance Industries.
The step also marks an important milestone in Chairman Mukesh Ambani’s aim to cement his position in the world’s list of billionaires. At $83.4 billion, Ambani is rank 9 on the 2023 Forbes list of world billionaires. Since the pandemic in March 2020, the second-generation entrepreneur has started work on a new energy business, strengthened his retail operations with the acquisition of Metro Cash and Carry, and broadened Jio’s subscriber base with the launch of 5G services.
As he sets out to independently grow his businesses, Ambani finds himself occupying the largest retailer spot by revenue. In the last year, store count is up 52 percent to 17,225 stores while revenues are up 17 percent to ₹67,000 crore and profit up six percent to ₹2,400 crore.
Reliance Retail has adopted a multi-format approach. There is Ajio.com and JioMart that make up its online offering. Digital plus new commerce accounts for 18 percent of sales, according to CLSA, a brokerage. Reliance Trends is its cut price fashion format. There is the soon-to-be-launched Azorte to compete against the likes of Mango and Zara, as well as Reliance Brands that houses global names like Burberry, Armani Exchange, Canali and Jimmy Choo, among others. Add to that its private label business with brands like Campa Cola and Independence and the growth drivers for the next decade are in place.
“Reliance has been clear about dominating the landscape in any sector it has entered in the last 30 years, whether it is petrochemicals, telecom or retail,” says Devangshu Dutta, founder and CEO of Third Eyesight, a retail consultancy. He believes the company is getting into many sectors or formats to capture a larger share of the consumer wallet.
At Jio, its strategy to add subscribers (mainly from Vodafone Idea), increase average revenue per user as well as spread the 5G network has paid off. At 426 million users, it is now the largest telecom operator in the country with an average revenue per user (ARPU) of ₹177. The business has delivered a topline of ₹29,195 crore and profit after tax of ₹4,881 crore. CLSA expects the launch of its portable 5G device, Jio AirFiber, as well as an affordable 5G smartphone to drive growth.
Add to this the synergies that could play out with Jio Financial Services. The business starts with a net worth of ₹1,07,200 crore, giving its balance sheet the strength to leverage and make loans. Even a conservative gearing of five times net worth would make its loan capacity ₹6,00,000 crore—or twice the size of Bajaj Finance—today.
In the new energy business, the company is working on plans to commence production at its new gigafactory in Jamnagar. The company is yet to share updates on progress on this front.
These developments have prompted upgrades by brokerages who believe Reliance Industries offers a favourable risk reward as the downside is capped on account of strong profit growth. In a recent report, CLSA termed Reliance Industries a ‘bargain buy’. In the last 12 months, sales were up 36 percent to ₹2,17,164 crore, while profits were up 16 percent to ₹70,782 crore. Still, the stock price is down eight percent to ₹2,346 per share, and its market capitalisation stands at ₹15,87,500 crore, making it the most valuable company in India.
They point to key monitorables being the rollout of its green energy ventures as well as the execution in its 5G rollout. For now, the company has a comfortable position with regard to leverage. In the quarter ended September 2022, Reliance Industries had reserves of ₹7,83,283 crore and borrowings of ₹3,16,030 crore, leaving it with scope to borrow if new business opportunities come its way. Ambani usually uses the Reliance AGM to announce new plans. Expect the next meeting in a few months to possibly come up with some.
(With inputs from Varsha Meghani)
(Published in Forbes India)
Akanksha Nagar, Christina Moniz; Financial Express
April 7, 2023
Reliance Retail’s (RR) launch of an omnichannel beauty and personal care (BPC) retail platform Tira this week brought the fight in the $27-billion market right to the doorstep of entrenched brands such as Nykaa, Sephora, Shoppers Stop, Tata Cliq, Myntra et al. Along with the app and website, the Isha Ambani-led company unveiled a 4,300 sq ft flagship store at Jio World Drive at BKC, Mumbai, and is working to set up stores in at least 100 locations across the country over the next few months.
RR already sells BPC products via its large network of department store chains and on its JioMart platform and last year, acquired a controlling stake in makeup and personal care brand Insight Cosmetics. RR was also in talks with Arvind Fashions to acquire Sephora, but media reports suggest the deal was called off earlier this year.
Clearly, RR has been working hard to capture the lion’s share of the fast-growing market.
According to Statista, revenue in the market will amount to $27.23 bn in 2023 and is expected to grow annually by 3.38% (CAGR 2023-27). Calling it a bottomless market, Samit Sinha, managing partner, Alchemist Brand Consulting, says, “There is definitely a huge untapped opportunity for beauty. Though we have seen a fair bit of growth in India over the past few years, we have barely scratched the surface. Its consumers are no longer just women, but also men. Additionally, differences between young female consumers in small cities and those in metro markets are reducing.”
Taking on competition
No doubt Tira has a lot going for it.
Reliance Retail Ventures Ltd, through its subsidiaries and affiliates, operates an omnichannel network of 17,225 stores and digital commerce platforms across categories including grocery, consumer electronics, fashion and lifestyle, etc.
Sinha points out that RR has a huge advantage in terms of its distribution reach and suggests it look at tapping the huge, pent-up demand in the smaller markets more than the metros, as consumers in these markets today have similar aspirations as metro consumers.
When it comes to categories like colour cosmetics or fragrances, consumers still will opt for offline retail than online, especially in smaller cities since they have limited retail outlets for product trials. That is what Reliance should be focussing on – creating a large offline footprint for its brand and if there is any company that can meet that need, it is the large corporates like Reliance, he adds.
Distribution apart, RR also needs to have a very clear positioning for the brand, notes Devangshu Dutta, chief executive, Third Eyesight. “Differentiation is the key and for that, it has to be clear about what segment of the market it is targeting and its offering. RR formats and the online presence provides a certain possible viable size of distribution, but beyond that, it has to create its own distinctive position in the market.”
Of course, competition hasn’t been sitting tight. Online market leader Nykaa, for instance, has 141 stores and plans to add another 50 in 2023; Tata Group too has announced the launch of over 20 beauty tech stores in the country.
While it has opened multiple outlets, experts say, Nykaa is still primarily an online brand. And this marketing is getting increasingly cluttered.
The online BPC market is roughly around Rs 10,000 crore in India (which is $1.2 billion) and could double in the next 3-4 years, points out Karan Taurani, senior VP, Elara Capital. That means the category could grow to reach $2.5 billion in 3 to 4 years with a CAGR of 25%.
Also, the BPC market requires a differentiated approach compared to other categories, with a lot of influencer-led campaigns and other marketing efforts to build consumer recall. “Other companies have struggled to acquire the kind of success and growth that Nykaa has seen,” he says.
That said, we have all seen how Reliance’s Ajio has given Myntra a run for its money in the fashion category with heavy discounting; so it is quite possible RR will play spoilsport in the online BPC marketplace and give Nykaa tough competition in the medium to long-term.
Tira is leaving no stone unturned. Its online platform has shoppable videos, blogs, tutorials, trend-setting tips, personal recommendations, and a virtual try-on feature, while its brick-and-mortar store offers beauty tech tools such as virtual try-on, skin analyser, fragrance finder and gifting stations to personalise purchases, along with trained beauty advisors.
Even as Tira is looking to differentiate itself via technology or by offering personalised services, Nisha Sampath, managing partner, Bright Angles Consulting, believes the only way Tira can truly stand out will be through the experience it offers. The proof will lie in how seamlessly it guides the customer through the purchase experience, she sums up.
(Published in Financial Express)
Nivedita Jayaram Pawar, Moneycontrol
March 25, 2023
Campa Cola, that much-loved soft drink from the ’70s and ’80s, is set to return to supermarket shelves this summer. Mukesh Ambani’s newly floated FMCG flagship Reliance Consumer Products (RCP) bought the brand from its makers Pure Drinks in August last year, reportedly for Rs 22 crore. The cola will be re-launched in a new contemporised avatar this summer. Campa Cola, Campa Lemon and Campa Orange will be rolled out in phases starting with Andhra Pradesh and Telangana and then across the country. The company is on a drive to acquire and promote homegrown Indian brands with a deep-rooted connect with Indian consumers. RCP has also acquired a 50 percent stake in the 100-year-old legacy brand Sosyo from Hajoori Beverages Pvt. Ltd this January. Lotus Chocolate from the Pai family, Sri Lanka’s leading biscuit brand Maliban and its own JoyLand confectionery, and Independence and Good Life food brands are other important pieces of its portfolio.
The back story
Coca-Cola entered India in the 1950s but made a hasty retreat two decades later when the Indian government introduced a regulation that would have required it to reveal its formula. Interestingly, it was the Pure Drinks Group that first introduced Coca-Cola in India in 1949, and was its sole licensed manufacturer and distributor. The Group which also owns the Le Méridien hotel in Delhi, decided to launch its own cola in the market after the unexpected and overnight exit of Coca-Cola from India. Since the company already had the expertise and the infrastructure — 12 bottling plants, plus manpower in excess of 10,000 — this seemed the natural thing to do. Pepsi had not yet arrived and the only other competition was the state-owned Double Seven and Thums Up owned by Ramesh Chauhan’s Parle Bisleri.
Campa which promised “The Great Indian Taste” was launched using locally developed concentrate in three flavours — cola, orange and lemon. Though apple and jeera flavours were added later, cola made up almost 80 percent of the product mix. In the 15 years that followed Campa went on to rule the Indian soft drinks market. It even used the same Coca-Cola font. During its heyday, it was manufactured in over 50 factories across the country, including four in Delhi. However, Campa started to lose its fizz by the mid-’90s, when Coca-Cola returned and homegrown Thums Up started gaining ground. It gradually disappeared from stalls and shelves across the country. Production of the drink at the Delhi factory stopped in 1999. The heroic comeback of the ‘Made in India’ brand after more than three decades is making many Indians nostalgic. And the fact that it’s backed by a home grown conglomerate is only adding to the excitement.
Will nationalism and nostalgia alone suffice to throttle the strong base, aggressive marketing campaign and sprawling distribution network created by Coca Cola and Pepsi? Experts feel that nostalgia will definitely drive people to try the cola especially since its challenging international giants in the segment. But it will take a lot more than that believes Devangshu Dutta, founder of retail consulting firm Third Eyesight. “Though the brand has some latent awareness, it’s with a different segment — people in the late 40s and upwards. But the consumption pattern is driven by a younger profile. So Reliance will have to build the awareness and the stickiness for the product with the segment. And that’s a hard piece of work which is why I believe they have brought in the tried and tested tactic that they use — price wars. They have launched it at a price which has forced the incumbent two international brands to lower their prices.” Campa is priced at Rs 10 for a 200 ml bottle and Rs 20 for a 500 ml bottle.
Positioning will also play an important role in this, he adds. “Reliance will have to figure out how to position the brand correctly and make that positioning distinct from the existing players. Coca-Cola has always been about happiness, whereas Pepsi is all about the younger generation and Thums Up is about daring. Campa Cola will have to find its own distinct positioning. Without that they will just be a generic cola drink. Of course being the largest retailer in the country helps and their vast retail network will definitely be an advantage. But that can’t be the end of it.” According to sources, the company is expected to advertise Campa Cola heavily during the Indian Premier League (IPL).
According to brand strategy expert Harish Bijoor, Campa has the potential of emerging a viable competitor to the two big MNC colas Coke and Pepsi. “The brand has the power of being a local one, in an environment where the local is celebrated over the global. I do believe Campa can enjoy the power of desi-revival to give it wings,” he says but cautions that nostalgia won’t suffice. “The brand and its taste is long forgotten. It is important to stoke these dead embers. It is important to position the brand distinctly with USPs that scream the ‘desi taste’! Desi tone, desi tenor and desi decibel will help.”
The branded non alcoholic beverage market in India is pegged at Rs 450 billion with Coca Cola, PepsiCo, Parle, Dabur and ITC being the key players along with several regional brands. The strong wave towards healthier options will pose some problems for the iconic brand feels Angshuman Bhattacharya, national leader — consumer product and retail sector, EY India. “The carbonated soft drink (CSD) market is witnessing headwinds (4 percent growth) as consumers are moving towards healthier beverages (12-15 percent growth). In this context, CSD is a tough and highly competitive category, hinging on bottling and distribution strengths. Campa Cola is a brand which is familiar to Indians, but will need large investments to scale. However with the largest retail house backing the brand, it could well be a success story given the larger modern trade and general trade platform available to scale it up.”
The return of the cola
Though Campa was synonymous with cola in the 1990s, today’s urban 20-somethings have only heard of the drink through nostalgic ramblings of their parents and older cousins. Incidentally Campa Cola gave actor Salman Khan his first TV commercial, much before he became a mega star. The 1982 advertisement showed Khan guzzling on the cola while on a yacht along with Tiger Shroff’s mom Ayesha Shroff and other models, while a catchy jingle played in the background. This was a time when Bollywood actors used TV commercials to break into the industry. “The creative was pretty much left to me. I had suggested, for some strange reason, that we do it underwater. A lot of people had done beach scenes, a lot of people had done parties scenes, music, beach parties, stuff like that. It was something different and I also liked to travel while shooting ads,” says advertisement film-maker Kailash Surendranath who shot the ad in the Andamans.
“Campa Cola used to be a birthday party treat or a drink we had at get togethers. We would also pack crates of it for long drives and picnics. There was not much choice those days as Coke had just exited the country and Pepsi hadn’t entered. But above all it was a great tasting drink — not too fizzy like Thums Up or overtly sweet like Gold Spot. It was just right,” remembers Swati Roy, an advertising professional.
Aarti Khandelwal a housewife in Delhi remembers visiting the Campa factory in Connaught Place as a student. “We were packed in a school bus and led to this factory where we were dazzled with how colas were made. I remember we were even treated to a bottle each after the visit,” she says. “Ek cola dena actually meant ek Campa Cola dena,” recalls Shirish Date, who loved the soft drink and is eagerly looking forward to picking it up. “I will buy it just for the old times’ sake. It’s a part of my childhood. I just hope they don’t mess with the taste too much. The tag line then was ‘the great Indian taste’ and I hope they stick to that,” he says.
(Published in Moneycontrol)
Sharleen D’Souza, Business Standard
Mumbai, March 23, 2023
After sparking a price war in the carbonated beverages market through Campa Cola, Reliance Consumer Products has taken the pricing battle to the other segments in the fast-moving consumer goods market.
For instance, in soaps, it has priced its product lower than the market leader in the segment at Rs. 25 for 100 gms across its three brands – Glimmer, Get Real and Puric.
With Glimmer, Reliance Consumer competes with Lux, which sells a 100-gm soap bar at Rs. 36, while Get Real is similar to Hindustan Unilever’s Pears soap bar, which is priced at Rs. 54 for 100 gms. In the hygiene space, Reliance has taken on Reckitt Benckiser’s Dettol, priced at Rs. 40 for 75 gms. Godrej Consumer Products, one of the leaders in soaps sells its Godrej No 1 45 gms (each) pack of 4 for Rs. 40.
In the dish wash category, it captured the main price points of Rs. 5 for 75 gms, Rs. 10 for 145 gms, and Rs. 15 for 200 gms in bars, and Rs. 10 for 65 ml pouch, Rs. 20 for around 140 ml pouch, and Rs. 30 for 200 ml pouch in liquids. HUL’s Vim bar is priced at Rs. 5 for a 60-gm pack and Rs. 10 for a 125-gm pack, while a 300-gm pack retails at Rs. 30.
But Reliance has also moved a step further into the sachet space and is retailing a 5 ml sachet of dish wash liquid at Rs. 1. Other brands do not sell sachets.
On JioMart, the price of RCPL’s Enzo two-litre front-load liquid detergent is Rs. 250, a 43 per cent discount to the maximum retail price (MRP) of Rs. 440; the topload two-litre liquid detergent is available at a 35 per cent discount and now priced at Rs. 250. Its compact detergent powder one kg pack is priced at Rs. 149, after a 12 per cent discount on its MRP of Rs. 170. HUL’s Surf Excel Easy Wash detergent powder is priced at Rs. 150 and Quick Wash at Rs. 240 for a kilogram. But Rin detergent powder is priced for Rs. 103 and Wheel detergent powder at Rs. 73 for 1 kg. Surf Excel’s front load two-litre pack is priced at Rs. 390 and top load at Rs. 370. Tide’s 1.5 kg detergent powder sells for Rs. 225.
In detergents, Reliance has not disclosed which segment it intends to cater to and what price points it will offer in general trade.
Reliance is following the challenger strategy like in the telecom space, said Devangshu Dutta, founder at Third Eyesight. He said this is the fastest way to acquire market share, and since Reliance has deep pockets, it can easily fund market share acquisition by launching its products at a significant price difference compared to rivals.
“Customers will move at least to try the product and if they end up liking the product they will stick to it. This strategy is best suited for market share acquisition,” Dutta explained.
An executive from a top FMCG firm said on the condition of anonymity that there will eventually be a price war in whichever segment Reliance enters. He explained that while Reliance was still setting up its distribution network, over time due to its B2B supply chain, it will be able to push its products into retail
Some distributors who spoke on the condition of anonymity said it would not be easy to move the leaders in the segment as these companies have a fixed customer base and it might be difficult to topple brands that have been in the market for a while.
Reliance followed the same strategy with its carbonated beverage, Campa Cola. It relaunched Campa at a price point of Rs. 10 for 200 ml, Rs. 20 for 500 ml, Rs. 30 for 600 ml, Rs. 40 for one litre, and Rs. 80 for two
(Published in Business Standard)