Soft Drinks To Soaps, Reliance Unveils Big Price War Plan

After stirring a price war in the soft drink segment with the relaunch of Campa, billionaire Mukesh Ambani-led Reliance has entered the personal and home care segment of FMCG, offering products at 30 to 35 per cent lesser price. Experts say "the jury is out" and a competitive offering from Reliance would attract the customers to try its products and evaluate performance, quality and perception in comparison to the same from the established brands.

Products of RCPL, the FMCG arm and wholly-owned subsidiary of Reliance Retail Ventures Limited (RRVL), are available only in selected markets but the company is building a dealer network on a pan-India basis, and the availability of its products will be scaled up across modern and general trade channels. "They are creating a distinct and dedicated distribution network comprising traditional dealer/stockists as well as modern trade b2b channels," said an industry source.

It articulates ambitions to be a relevant player in the $110-billion FMCG (Fast Moving Consumer Goods) segment, largely dominated by players as HUL, P&G, Reckitt, and Nestle. RCPL has priced its Glimmer beauty soaps, Get Real natural soaps, and Puric hygiene soaps at Rs 25, which is much lower than the products of leading brands such as Lux (Rs 35 for 100 gm), Dettol (Rs 40 for 75 gm) and Santoor (Rs 34 for 100 gm) etc, while prices of its Enzo 2 litre front load and top load liquid detergent is Rs 250 (on Jio Mart) in comparison to a 2-litre pack of Surf Excel Matic priced at Rs 325.

For Enzo front-load and top-load detergent powder, it had priced at Rs 149 for 1-kilogramme pack (on Jio Mart). Front-load and top-load refer to the two categories of washing machine. While, in the dish wash segment, it has started with the attractive price point of Rs 5, 10 and 15 for bars and has also launched liquid gel packs at price points of Rs 10, Rs 30 and Rs 45. RCPL, which competes with HUL's Vim, Jyothy Lab's Exo and Pril in the dish wash category, has also introduced a Rs 1 sachet of liquid gel in the category.

It is yet to announce the price of Enzo detergent bars. Earlier this month, RCPL relaunched the iconic soft drinks brand Campa, entering into the turf of US cola majors PepsiCo and Coca-Cola. It had priced competitively at Rs 10 for a 200-ml bottle and Rs 20 for a 500-ml bottle. According to the online market and consumer data platform Statista, the Indian soft drinks segment is estimated at USD 8.85 billion.

Technopak Advisors Chairman Arvind Singhal said Reliance has earlier successfully disrupted the market in the telecom sector with its prices. "They want to compete with HUL's Surf and Lux, market leaders in their respective categories. They have a product, which is of Rs 25 against Rs 34 of Lux, it is a substantial incentive for the customer to try it once. Once the customer has tried it and the product is actually as good as Lux is, then Reliance can build a market. But if the consumer finds that it is slightly inferior to Lux, then Reliance will not succeed," said Singhal.

He added that Reliance does its homework very well and is quite successful also. It has been strongly focused on areas of private consumption. A report from expert market research estimates the Indian beauty and personal care industry valued at $21.65 billion in 2022.

Pallab Roy- Partner, KPMG in India, said the Indian FMCG space has become interesting with many companies announcing their forays and investments in this space. It continues to have attractive margins with good scope to grow on account of moving from loose to packaged products as well as consumption per capita.

"Having said that, it also takes a good amount of time as well as investments to create iconic FMCG brands with pull and a formidable distribution network. While the jury is out on this one, the FMCG industry will surely transform further, and this will work out better for the consumer," said Roy.

Deloitte India Consulting Partner Rajat Wahi said with better technology, ingredients and other support available, including many third-party manufacturers who have scaled up in the last 5 years, it has become easier for new and existing players to develop and launch brands today, and this is reflected by the many new D2C/consumer brands launched every day across packaged food, beauty, health, wellness, etc.

But the real challenge for most brands is around scaling up and reaching consumers across the physical retail, especially the general trade in India as e-commerce today accounts for only 4-5 per cent of retail. Modern trade accounts for another 8-10 per cent of total retail for FMCG and consumer products and balance 85-87 per cent of retail is still represented by general trade, local small chains or neighbourhood mom & pop stores which represent between 11-13 million outlets.

These outlets are serviced by thousands of distributors and dealers and such networks have been built by leading FMCG brands over many decades. They continue to be fine-tuned with best practices and technology and where every per cent of margin has been rationalised to make the entire value chain competitive.    

"In my view, these "fortresses" or "moats" are almost unscalable today by the newbies as they look to expand their reach across the country, and it will take them years, if not decades, to replicate this model. This may be equally challenging for any retailer wanting to launch their private brands in India, as the conundrum of supplying the brands to the existing 11-13 million outlets still remains for them," said Wahi.

All India Consumer Products Distributors Federation (AICPDF) President Dhairyashil Patil said RCPL stock is yet to hit the market. "In soaps, some brands as Lux, Santoor etc. are established ones and dominate the market. Besides, there are more than 1,000 other brands which are available in the market. But unless and until it becomes a brand and starts advertising with a media campaign and make products available in the market, it would not be able to be noticed," he said.