Reliance Retail's Disruptive Play: Conquering FMCG Market
Reliance Retail's disruptive strategy in India's FMCG market is revolutionizing the industry, challenging incumbents and capturing market share.
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The fast-moving consumer goods (FMCG) market in India has become the battleground for fierce competition between industry behemoths such as Hindustan Unilever Limited (HUL), Procter & Gamble (P&G), Dabur, Marico, Tata Consumer, ITC, and others. However, amidst the giants, a master disruptor has emerged—Reliance Retail Ventures, owned by business tycoon Mukesh Ambani.
Reliance is known for its ability to change market dynamics and venture into new segments successfully. Now, it has set its sights on conquering India's massive grocery retail market, estimated to be worth over USD 500 billion by Euromonitor International.
With its vast distribution channel and a strong network of kirana partners, Reliance is poised to revolutionize the FMCG space.
Unveiling the Strategy
Reliance Retail has carefully crafted a strategy to make a significant impact in the FMCG market. Unlike incumbents who solely focus on their own brands, Reliance is adopting a unique approach, helmed by Isha Ambani, to leverage local brands and manufacturers. During its Annual General Meeting last year, the company announced its plans to launch affordable products, aiming to carve a niche for itself in the sector.
Let's delve into the four primary moves driving Reliance's FMCG strategy:
Getting Deeper into Distribution:
Reliance Retail aims to establish a strong FMCG presence by becoming distributors, not only for their own products but also for national brands like Hindustan Unilever (HUL) and Marico. By broadening its distribution network, Reliance Retail is strategically positioning itself to capture a larger market share.
Working with Kiranas:
Recognizing the significant role kirana stores play in India's grocery retail market, Reliance is partnering with them to drive growth. The company is transforming its kirana store partners into JioMart delivery centers while encouraging them to become sellers on the JioMart platform. This collaborative approach enhances both the reach and efficiency of Reliance's FMCG operations.
Developing Private Labels:
Reliance Retail has embraced the power of private labels to challenge established brands. The JioMart website currently offers nearly 70 private label brands across 10 categories, including groceries, fashion, and beauty. These products are priced affordably, giving stiff competition to existing brands. With the ability to facilitate B2C transactions, Reliance Retail further solidifies its position as a direct competitor to traditional FMCG players.
Acquiring National and Regional Brands:
Rather than starting from scratch, Reliance Retail has strategically acquired brands across various categories to tap into existing consumer bases. Over the past few years, the company has acquired notable brands such as Campa Cola, Sosyo Beverages, and Lahori Zeera. The most recent addition to its portfolio is Sri Lankan biscuit leader Maliban Biscuits. These acquisitions enable Reliance to leverage the brand equity and customer loyalty already associated with these products.
The Reliance Edge
Although Reliance Retail entered the retail space relatively late, it has proven its ability to compete fiercely with incumbents. The company aims to replicate this success in the FMCG sector by capitalizing on the dominance of kirana stores in India's grocery retail market. With more than 75% of grocery sales still occurring through kiranas, Reliance is not just eyeing the organized sector but targeting the entire market.
Unleashing the "Selling Ecosystem"
To effectively engage with kirana stores, Reliance Retail embarked on a unique approach during the pandemic, making its mark as a distributor. The company sold its own products alongside competitive brands, establishing strong relationships with kirana store owners.
Additionally, Reliance's online grocery brand, JioMart, has gained significant traction. Launched in 2019, JioMart operates on a hyperlocal delivery model, assuring customers of timely and efficient service. The platform's wide range of offerings, coupled with its robust logistics network, has made it a trusted name in the online grocery market.
Expanding Merchant Partnerships
Reliance Retail aims to strengthen its position as a market leader by expanding its merchant partnerships. The company is focused on covering 7,500 towns and 3 lakh (300,000) villages, leveraging its existing base of 20 lakh (2 million) merchant partners. By establishing a vast network of merchants, Reliance can effectively distribute its FMCG products across the country, making them readily accessible to consumers.
Acquisitions and Private Labels
Reliance Retail's acquisition spree has played a crucial role in expanding its FMCG portfolio. By acquiring brands like Metro Cash & Carry and Milkbasket, Reliance has integrated them into its ecosystem, strengthening its market presence.
With competitive pricing and quality comparable to leading FMCG players, Reliance's private labels have quickly gained recognition among consumers.
Reliance Retail acquired Chaudhary brothers’-owned Campa Cola for Rs 22 crore and relaunched the brand in March 2023. Moreover, the company has also announced its plans to acquire 50% of the 100-year-old Gujarat-based beverage company, Sosyo Hajoori Beverages.
Prior to that, it acquired 51% stake in Lotus Chocolate Company for Rs 74 crore and plans to take over an additional 26% of the latter eventually.
In the non-grocery FMCG category, the company has acquired lingerie brand Zivame for Rs 1,200 crore in 2020, 89% stake in Clovia — another more affordable brand compared to Zivame — for Rs 950 crore, offline lingerie brand Amante (owned by MAS Holdings) for an undisclosed amount, British toy retailer Hamleys for Rs 620 crore in an all-cash deal, a majority stake in online furniture company Urban Ladder for Rs 182 crore, a majority stake in online pharmacy retailer Nedmed for Rs 620 crore, and 26% stake of task-runner and quick-commerce app Dunzo for Rs 1,488 crore.
While not fast-moving, but consumer goods nonetheless, Reliance Retail acquired couture fashion brands namely, 52% of Ritu Kumar for an undisclosed amount, 51% of Abu Jani and Sandeep Khosla, 40% of Manish Malhotra’s couture brand, and company has joint ventures with Anamika Khanna and Rahul Mishra.
In terms of private labels, the company recently launched Independence, which will have an array of staples such as edible oil, packaged atta, and packaged pulses, under its umbrella, along with biscuits. Reliance Retail also has private-label brands such as Good Life, Snac Tac, Pure It, and Enzo. These brands cut across almost all grocery FMCG categories such as packaged foods inclusive of noodles, home cleaning, beauty, and personal care including hand wash brands, dishwash, and floor cleaners.
Creating an Ecosystem
Reliance Retail's ambition extends far beyond the FMCG space. The company is actively diversifying its offerings to include financial services through Jio PoS (Point of Sale) terminals. By integrating financial technology into its ecosystem, Reliance aims to become a leading fintech player in India. This expansion beyond traditional FMCG demonstrates the company's vision to create a comprehensive retail ecosystem that caters to diverse consumer needs.
Expanding Footprint and Infrastructure
With over 15,000 retail stores and warehousing space of 670 million cubic feet, Reliance Retail is rapidly expanding its infrastructure. The company is building a robust foundation to support its retail ambitions and ensure efficient supply chain management.
Reliance's investments in warehousing and retail space provide a significant advantage, enabling it to cater to the growing demands of Indian consumers.
Reliance Retail's disruptive play in the FMCG market is poised to reshape the industry landscape in India. Through its innovative strategies, including deeper distribution, kirana collaborations, private labels, and strategic acquisitions, Reliance is challenging incumbents and capturing market share.
Leveraging its vast network of kirana partners and the growing popularity of JioMart, Reliance has established a strong foothold in the grocery retail sector. As the company expands its footprint, offers affordable options to consumers, and builds a comprehensive ecosystem, the FMCG space in India is set to witness a seismic shift, with Reliance at the forefront of this transformation.
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