Exclusive: India’s Reliance to acquire dozens of brands in $6.5 billion consumer goods play



© Reuters. ARCHIVE PHOTO: Customers buy groceries inside a Reliance Industries Ltd store in Mumbai, India, October 7, 2020. REUTERS / Niharika Kulkarni / File Photo

By Abhirup Roy and Aditya Kalra

MUMBAI (Reuters) – India’s largest retailer, Reliance, will acquire dozens of small grocery and non-food brands as it aims to build its own $ 6.5 billion consumer goods business to challenge foreign giants such as Unilever (NYSE :), two sources familiar with the plan told Reuters. .

Reliance, led by Indian billionaire Mukesh Ambani, plans to build a portfolio of 50 to 60 brands of groceries, household products and personal care products within six months and is hiring an army of distributors to take them to Family shops and larger outlets everywhere. the nation, the sources added.

The boost in consumer goods under a vertical called Reliance Retail Consumer Brands will join Ambani’s network of brick-and-mortar stores with more than 2,000 grocery outlets and the continued expansion of e-commerce operations. ” JioMart “in the nearly $ 900 billion Indian retail market. one of the largest in the world.

Reliance is in the final stages of negotiations with some 30 popular local consumer niche brands to fully acquire them or form joint venture partnerships for sales, the first source familiar with their business planning said.

The total investment planned by the company to acquire brands is unclear, but the second source said Reliance had set a target of Rs 500 billion ($ 6.5 billion) in annual business sales in five years.

“Reliance will become a house of brands. This is an inorganic game,” the person said.

Reliance did not respond to a request for comment.

With the new business plan, Reliance seeks to challenge some of the world’s largest consumer groups, such as Nestlé, Unilever, PepsiCo (NASDAQ 🙂 Inc. and Coca-Cola (NYSE :), which has been operating in India for decades. according to sources. dit.

It is a daunting task, however, to beat such well-established foreign companies that have their own manufacturing units in India and thousands of distributors carrying their world-famous products like tin creams or Maggi noodles all over the world. nation of 1.4 billion people.

Unilever’s unit in India reported sales of $ 6.5 billion in the fiscal year ending March 2022 and says nine out of 10 Indian households use at least one of their brands.

“There’s a bit of brand value attached to established names and it becomes very difficult to compete with them,” said Alok Shah, a consumer analyst at Ambit Capital of India.

“If the inorganic route is the route for Reliance, they will be able to climb much faster. But they will have to get the right prices and distribution to compete with bigger rivals.”

CONTRACTING, PRODUCT CATEGORIES

As a retail leader, Reliance still earns most of its consumer goods revenue by selling or distributing products from other rivals to its own supermarkets and outlet partners.

Reliance developed some so-called private labels where it hired manufacturers by contract to make cola drinks and packets of noodles for sale on its own retail network, but this business generates only 35 billion rupees ($ 450 million) in sales. annual, said the second source. .

Foreign companies had already been uncomfortable with Reliance’s supermarket strategy, where their private labels competed for shelf space with global rival brands, Reuters reported last year.

Reliance’s new consumer goods drive the goals of deals with popular Indian brands.

Among the brands with which it is in talks for the acquisition or a possible joint venture, according to one source, is Sosyo, a soft drink brand of an almost 100-year-old Indian company, Hajoori, based in Western Gujarat and popular for its flavored drinks.

The company’s director, Aliasgar Abbas Hajoori, said in a statement: “We do not comment on speculation.”

LinkedIn profiles reveal how Reliance has been slowly stepping up its efforts to expand its consumer business. In recent weeks, he has hired senior executives from companies such as Danone and Kellogg (NYSE 🙂 Co. for quality control and sales.

A Reliance LinkedIn job post stated that it had commodities, personal care, beverages and chocolates as categories for the initial releases, and was hiring mid-level sales managers for the business in more than 100 small towns and villages.

The main tasks of these executives will be to appoint distributors and manage traders, says the announcement.



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