Monday, May 20, 2024

RIL’s FMCG push may  spur  price  war

NEW DELHI : Reliance Consumer Products Ltd’s aggressive efforts to expand distribution in a short time, a feat that typically takes years, as it enters the household goods market is expected to trigger a pricing war, according to industry experts.

The unit of Reliance Industries Ltd, which unveiled its packaged consumer products brand, Independence, in December, has also invested in and partnered with companies to gain access to categories such as beverages, biscuits, and chocolates.

Last week, Reliance Consumer announced plans to expand its portfolio of packaged consumer goods to include home and personal care products. The move will bring brands such as Glimmer beauty soaps, Get Real natural soaps, Puric hygiene soaps, Dozo dish wash bars and liquids, HomeGuard toilet and floor cleaners, and Enzo laundry detergent powder, liquid, and bars to mom-and-pop stores in smaller pack sizes, in addition to Reliance Retail’s nearly 3,000 modern trade stores where some of these brands are already sold.

Several executives Mint spoke to said the company has aggressive plans to focus on categories such as beverages and home care products—while pushing these products in mom and pop stores. In addition, the company has appointed distributors and roped in senior fast-moving consumer goods (FMCG) company executives.

One of the executives familiar with the development said the company is adopting an aggressive pricing strategy, offering products at less than the competition and also at entry-level price points. For example, in Dozo liquid dish wash, the company is offering a 1 single-use pouch. On the other hand, a 100-gram bar of Get Real soap is priced at 25. Lower-priced stock-keeping units may work in the underserved market to induce usage, this person said.

A Reliance Consumer spokesperson did not respond to email queries sent by Mint on Saturday.

Reliance’s entry into the market may impact pricing in categories such as home care products and staples, including floor cleaners and pulses, industry experts said, adding that for categories such as packaged foods and personal care, where brand loyalty is crucial, the company may need to earn consumer trust over time.

“In staples, up to a certain extent, yes, they may be able to create pricing pressure. Within staples, brand loyalty does not exist beyond wheat flour and rice. But they may not take away shares from players like ITC and Adani Wilmar,” said an executive at a large FMCG company.

Meanwhile, Reliance has also acquired a clutch of small brands while investing in overseas players and bringing their brands to India—this includes its acquisition of beverage brand Campa.

Another person involved with Reliance’s FMCG business said the company would largely target consumers in mass market and use pricing as a plank to enter shops and households. “Whatever products they have are not exactly differentiated from what is already in the market—they are standard products at a lower price,” said another retail executive, speaking on condition of anonymity.

For instance, on Reliance Retail’s online commerce platform—JioMart—a 600 ml bottle of lemon-flavoured Campa is priced at 25; Coca-Cola is priced at 31, which includes platform discounts.

The move could ignite a “serious price war”, he said, declining to be named.

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