In FMCG, It’s a Jio Moment! The Reliance versus HUL and ITC Turf war Is About To Start
Reliance Industries (RIL), owned by Mukesh Ambani, is preparing for another battle after upending the telecom industry in 2016.
The previous time, Reliance’s aggressive entry into the domestic telecom services market had eliminated a number of competitors.
This time, the market for fast-moving consumer goods (FMCG) is under attack. Ambani’s Reliance is preparing to go all out, taking inspiration from its prior attempt.
It will make use of both its current private label brands and the extensive network of general trade stores, the local kiranas, that will be dispersed across India.
Competition for shelf space
You can get an indication of the scope of Reliance’s goals in the FMCG industry by looking at its expansion plans, for example, in the physical retail space.
As per the forecasts by Edelweiss Securities, which regularly monitors the company, RIL expects to sign up 10 million merchants over the next five years.
In contrast, Hindustan Unilever, the largest FMCG company in the nation, has 9 million retail partners that sell its goods. Less than 7 million stores, according to estimates, sell ITC’s products, which include everything from salt to cigarettes.
Nestle India is the largest pure-play food and beverage company in the nation, with 4.5 million retail partners. And in contrast to RIL, their retail footprint was developed over a long period of time.
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With more than 15,000 locations operating under its many names, Reliance is already by far the biggest player in the modern retail industry.
According to Isha Ambani, Chairman of Reliance Retail (RRL), the firm served approximately 200 million retail consumers in FY22, a 233% increase over FY2021. This is in the rapidly expanding e-commerce market.
In her remarks at the RIL AGM last week, she stated that “we recruit over 150,000 partners a month and are on track to 1 crore merchants as we grow our presence to span the entire country, servicing over 7,500 towns and over 500,000 villages in the next five years.”
Further supporting it, RRL has partnered with Meta (previously Facebook) to make it possible for customers to place orders over WhatsApp.
Value For Money
Cost-effectiveness is crucial. Value for money is an additional important criterion that affects how FMCG companies fare in the Indian market.
Offering affordable items to the general public has proven to be the most important component throughout the years in a price-conscious market like India, where per capita consumption of FMCG products continues to lag even that of developing economies like Indonesia and Vietnam.
This is despite the fact that India’s FMCG sector is the fourth largest in the world with annual sales exceeding Rs 5 trillion (lakh crore).
“Incumbents cannot and should not ignore RIL’s FMCG foray. Once RIL makes an acquisition or advertises aggressively, multiple businesses may feel the heat.
As per Edelweiss, RIL is probably considering buying entities like Garden Namkeens (Cavin Kare), Lahori Zeera (beverages), and Bindu Beverages (fizzy drinks and fruit juices).
Its internal assessments indicate that the Sampann portfolios of Tata Consumer, Adani Wilmar, and Varun Beverages are currently in jeopardy.
HUL and Marico also run some risks because they are significantly more diverse.
For businesses like Nestle, Dabur, and Colgate, we anticipate lower risk.
It’s like the Jio moment in FMCG happened yesterday.
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