Reliance's New FMCG Firm Is 'The First Of Many Steps', Says Nomura
Nomura expects Reliance Retail to leverage its tie-up with WhatsApp to drive sales of its branded products.
The incorporation of Reliance Consumer Products Ltd. represents the first of many steps for the Mukesh Ambani-led conglomerate to participate fully in the staples and consumer goods sector, according to Nomura.
The creation of a new company despite having private label brands under Reliance Retail Ventures Ltd. shows Reliance's intent in the fast-moving consumer goods sector "outside its own distribution network", the research firm said in a Dec. 16 note.
On Dec. 15, Reliance Retail Ventures Ltd. launched a new brand in Gujarat called Independence. It's part of Reliance Consumer Products, a wholly owned subsidiary.
The brand is currently being tested as part of a pilot programme and that its prices are reasonable, Nomura said.
"However, the actual distribution reach of the Independence brand into kirana stores, acceptance from consumers, its product price points and addressable market, and product innovation will be key before concluding Reliance’s foray will be a headwind for FMCG companies," Nomura said.
The entry of another large player in staples and packaged foods, according to Nomura, will "aid and accelerate conversion from unbranded to branded products, thus benefiting and growing the staples and packaged foods categories as a whole".
It expects Reliance Retail to leverage its tie-up with WhatsApp to enable sales of its branded products across a "significant" user base in the coming years.
Nuvama Wealth Management Ltd.'s Abneesh Roy said "an interesting battle between Adani versus Reliance versus Tata seems to be brewing up slowly".
Reliance's foray is on expected lines, he said. "We expected Reliance to start with these segments since there is a lack of a large dominant national player, or MNCs, and organised retail plays a small part currently in these segments."
Roy said a direct risk from Reliance "seems to be on Adani Wilmar Ltd., Patanjali Foods Ltd., and to a small extent on Tata Consumer Products Ltd."
Disclaimer: Adani Enterprises is in the process of acquiring a 49% stake in Quintillion Business Media Ltd., the owner of BQ Prime.