Reliance Is Ready To Take On Hul, Itc, And More In Everyday Objects – Here’s What It Takes To Disrupt The Space | Techno Glob

Reliance Industries, worth $214 billion (by market capitalization) – which is present in everything from telecommunications (Reliance Jio) to retail, from petrochemicals to oil and gas, entertainment and financial services – will soon make a foray into the fast-moving consumer goods (FMCG) business, a $100 billion market already dominated by companies like Hindustan Unilever, ITC and Britannia, among others.

Mukesh Ambani, one of the world’s richest men with a net worth of $91.1 billion as of September 2, wants to have his own brands of everything from soaps and shampoos, to sugar and spices, and everything the rest. “The goal of this company is to develop and deliver affordable, high quality products that meet the daily needs of every Indian,” Isha Ambani said at RIL’s 45th Annual General Meeting (AGM).
Ambani’s daughter, Isha, will run the conglomerate’s retail business. Meanwhile, former Coca-Cola boss T Krishnakumar, who joined Reliance in 2021, will lead the new FMCG segment, multiple sources, who requested anonymity, have confirmed.

Reliance Group may start small but eventually it will lock horns with entrenched space giants who have spent decades and millions of money, to have established brands, distribution channels and customer bases.

However, Mukesh Ambani has already shown he can disrupt like no one else in the telecom space, as a newcomer taking on Airtel and Vodafone Idea who have been around for decades. Today, Reliance Jio has the fastest growing subscriber base.

In June 2022, Jio held a 36% market share while Airtel and Vodafone Idea’s shares stood at 31.63% and 22.37% respectively, according to data from the Telecommunications Regulatory Authority. of India (TRAI).

Reliance Retail will face challenges, but not too many

While Reliance already offers a relatively smaller range of FMCG products in the market, most of its brands are only sold through its own network of stores, while it sells products from other brands like HUL through its B2B platform. , which sends its products to kirana stores. . Some of them may need to be upgraded with better packaging and communication.

Research firm Edelweiss believes RIL’s track record in B2C has been mixed. It did not fare very well in jewelry, footwear, etc., contrary to initial market expectations. Existing players like Titan, Metro, and Bata continue to co-exist and perform well despite years of RIL presence and decent aggression in ads.

He also thinks it’s very difficult for new players to get shelf space for kiranas, as several other retailers have tried and failed. “FMCG is a daily treadmill with the need for continuous innovations, direct reach, strong feet on the ground, analytics, etc., unlike a wireless telecommunications company. FMCG are present in the price value equation, so white spaces are limited while existing players have decades of consumer loyalty and distributor relationships,” he said.

According to brand strategy consultant Harish Bijoor, Reliance has been very B2B through its branded and private label supermarket dealerships. “The IPO of private labels is a big step forward. The private label skill is back-end and the public brand is front-end,” he explained and said companies like Colgate and Reckitt have honed this skill over decades.

“Simply put, Reliance needs to tinker with front-end brand positioning capability and that will take a decade to set up. As he focuses on the shopping rather than the store, this skill will also be developed,” he told CNBC-TV18.
Reliance Retail may choose to build a portfolio of brands by combining its own brands, joint ventures and acquisitions under the “Reliance Retail Consumer Brands” umbrella.

In the first phase, the conglomerate will likely work with several strong heritage brands in the FMCG space, including staples, food and beverage, home and personal care, and beauty categories. The company will help modernize the brands and expand their business in India and globally.

Reliance can partner with brands to own or create a joint venture. He may also decide to buy existing brands to expand his business. There may be an opportunity for regional brands to partner with Reliance to expand their addressable market beyond their existing borders and take them to the national level.

Reliance already has the JioMart B2B platform, from which small mom-and-pop store owners source their inventory. The real success for Isha Ambani will be having Reliance’s brands and products on the shelves of a much larger pool of smaller neighborhood stores.

Arvind Singhal, CMD of management consulting firm Technopak Advisors, believes that India will see new consumers entering the scene and seeking branded products. They won’t use private labels, this (RIL) will be another choice available in a store and if they are happy they will buy it,” he said.

Therefore, he doesn’t see too much of a challenge for Reliance, given how the market will evolve over the next decade.

What RIL must do to avoid competition

According to global broker Morgan Stanely, for Reliance, entering the FMCG space makes sense. After all, the brokerage said, it offers gross margins of 40-60%, higher than the roughly 15% in the retail space, which would help realize Mukesh Ambani’s vision of making Reliance more robust. , resilient, goal-oriented and truly future-ready to more than double its value by the end of its golden decade in 2027.

Singhal of Technopak Advisors pointed out that most of India still has very low purchasing power. “They yearn to have soft drinks and would have heard of Coke and PepsiCo and would have a brand recall. Tomorrow, if they have a Campa Cola that’s being promoted and a big price gap to make a change, they can make the change easily. There is a brand recall, but if Reliance comes up with a value proposition – a good or better price – don’t see a challenge in some customers making a switch,” he said.

Meanwhile, Adani Wilmar CEO Angshu Malik doesn’t think a single player like him can change consumption from bulk to packaged. It takes at least two to three big players. “The commodities sector is very large in terms of volumes. There are enough opportunities for all of us to grow. We don’t have to take each other’s share,” he said.

Singhal too RIL’s entry may have only a marginal impact on FMCG rivals as total commodity spend in India currently stands at $800m and could reach $1.8bn across all consumption expenditure categories. FMCG will double in the next 10 years in terms of market opportunities and there is enough room for enough players to grow, he said.

Research firm Edelweiss also does not expect a big impact on the number of existing players in a two-to-three-year perspective, but said it was still very early to chart an impact and that it had to wait and see when the launches would take place.

He expects RIL to initially target the more commoditized parts of FMCGs like pulses and grains, edible oils, flour, dried fruits, spices, pickles, pasta, idli dough dosa, namkeens, candies, low-end detergents, etc. to also target the 20-30% unorganized/regional brands in most segments,” he said.

Edelweiss added that RIL will aim to leverage its enhanced distribution, infra cash and carry and procurement capabilities.

Since the August 29 AGM, shares of RIL are down 2.5%, but so far this year the stock has increased investor wealth by more than 5% relative to the benchmark. Sensex which fell 0.6% during the period.

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