MUMBAI: India’s biggest retailer Reliancewill acquire dozens of small grocery and non-foodbrands as it targets building its own $6.5 billion consumergoods business to challenge foreign giants like Unilever, twosources familiar with the plan told Reuters.
Reliance, run by Indian billionaire Mukesh Ambani, plans tobuild a portfolio of 50 to 60 grocery, household and personalcare brands within six months and is hiring an army ofdistributors to take them to mom-and-pop stores and biggerretail outlets across the nation, the sources added.
The consumer goods push under a vertical named RelianceRetail Consumer Brands will come on top of Ambani’sbrick-and-mortar store network of more than 2,000 groceryoutlets and ongoing expansion of “JioMart” e-commerce operationsin India’s nearly $900 billion retail market, one of world’sbiggest.
Reliance is in final stages of negotiations with around 30popular niche local consumer brands to fully acquire them orform joint venture partnerships for sales, said the first sourcefamiliar with its business planning.
The total investment outlay planned by the company toacquire brands isn’t clear, but the second source said Reliancehad set a goal to achieve 500 billion rupees ($6.5 billion) ofannual sales from the business within five years.
“Reliance will become a house of brands. This is aninorganic play,” said the person.
Reliance did not respond to a request for comment.
With the new business plan, Reliance is seeking to challengesome of the world’s biggest consumer groups, like Nestle, Unilever, PepsiCo Inc and Coca-Cola, which have been operating for decades in India, thesources said.
It’s a daunting task, though, to beat such well-establishedforeign companies that have their own manufacturing units inIndia and thousands of distributors who take their world-famousproducts like Pond’s creams or Maggi noodles across the vastnation of 1.4 billion people.
Unilever’s India unit reported sales of $6.5 billion in thefiscal year ending March 2022, and says that nine out of 10Indian households use at least one of its brands.
“There is a fair bit of brand value which is attached to theestablished names and it becomes very difficult to compete withthem,” said Alok Shah, a consumer analyst at India’s AmbitCapital.
“If inorganic is the route for Reliance, they will be ableto scale up much faster. But they’ll need to get the pricing anddistribution right to compete with bigger rivals.”
Hiring, Product categories
As a retail leader, Reliance still garners most consumergoods revenues by selling or distributing products of otherrivals at its own supermarkets and mom-and-pop outlet partners.
Reliance did develop a few so-called private labels where ithired contract manufacturers to make cola drinks and noodlepacks for sale in its own retail network, but that businessgenerates only 35 billion rupees ($450 million) in annual sales,said the second source.
Foreign firms had been already uneasy about Reliance’ssupermarket strategy, where its private labels were competingfor shelf space with brands of global rivals, Reuters reportedlast year.
Reliance’s new consumer goods push targets deals withpopular Indian brands.
Among the brands it is in talks with for acquisition orpotential joint venture, according to one of the sources, isSosyo, a soft-drink brand of a near 100-year old Indian company,Hajoori, based in the western state of Gujarat and popular forits flavoured drinks.
The company’s director, Aliasgar Abbas Hajoori, said in astatement, “We don’t comment on speculations.”
LinkedIn profiles reveal how Reliance has been slowlyramping up efforts to expand its consumer business. In recentweeks, it has hired senior executives from companies like Danoneand Kellogg Co for quality control and sales.
One LinkedIn job ad by Reliance stated it had short-listedstaples, personal care, beverages, and chocolates as categoriesfor initial launches, and was hiring mid-level sales managersfor the business in more than 100 cities and small towns.
Among the main tasks of such executives will be to appointdistributors and manage merchants, the ad stated.
