Reliance Retail (RR) has begun appointing super-stockists to distribute its private label products in multiple FMCG categories, Kotak Securities said in a report.
Reliance Retail already has a wide range of private labels across several entry-level food and non-food FMCG categories and will likely acquire more brands. "We believe own FMCG sales can add a margin layer to the overall Jiomart business", the report said.
In its AGM held on August 29, 2022, Reliance Retail announced its foray into the FMCG business, by developing and delivering high quality products at affordable pricing.
"We think this move is logical given RR already has a private label portfolio of food (pulses, packaged foods and beverages) and non-food FMCG (home, hygiene and personal care) brands that it has developed over a course of time to serve its widespread own store footprint of 1,713 stores (Fresh + Smart stores as of March 31, 2022," Kotak Securities said.
Jiomart has stepped up merchant partnerships and has onboarded 2 mn merchants. With Jiomart having built up significant reach, we believe Reliance Retail will use this network to retail its own products as well. It has started with entry-level products across food and non-food FMCG categories. Its strategy seems to be to price its own products a notch lower than the corresponding FMCG brand in order to drive shelf space gain.
The company is experimenting with both traditional distribution and e-B2B models hand-in-hand to aggressively capture kiranas of all sizes and capture shelf space.
Among Reliance Retail's new commerce businesses, the B2B model is well understood though the B2C model is undergoing iterations. As we understand, both these businesses are low-margin today due to structural reasons and high competitive intensity. FMCG business can add a margin layer over these existing businesses, making RR's investment in B2B more worthwhile. Assuming RR begins distributing its products to 100,000 kiranas initially, it can garner FMCG sales to the tune of Rs2-5 bn within 1-2 years of launch, the report said.
Reliance Retail already has a large private label portfolio across categories. These brands have been hitherto available on RIL's own sales channels (own stores, websites, etc.) but should now be available at third-party kiranas and stores as well.
RIL's FY2022 Annual Report mentions that RR had 15 per cent share of own brands in hand wash and hygiene category (under Puric brand) in its stores/websites.