Reliance Retail scouting for non-food FMCG brands

Reliance Retail is scouting for brands in the non-food FMCG space to build a portfolio that will complement its private label business.

Having acquired two soap brands from Henkel in the recent past, the retail company believes that establishing known brands is a better proposition than trying to establish its private labels.

According to an official of Reliance Retail, “Soaps and detergents is the largest category in the FMCG sector and our decision to acquire the two soap brands made business sense.

“We continue to scan for brands in non-food categories such as shampoos and toothpaste.”

Its soap strategy will now encompass new price points and propositions to segregate its private label brands from acquired soap brands such as Aramusk and Chek, which the retailer acquired from Henkel.

For instance, Aramusk, a premium brand will be positioned differently from its private label mass soap brand, Amara.

Ms Nandini Chopra, Executive Director, Corporate Finance, KPMG, said the retailer’s strategy seems to be to look for brands with poor topline growth which can be acquired by paying as little as possible.

In fact, the Future Group is believed to be in talks with established FMCG player Godrej to acquire some of its languishing soap brands such as Ganga to complement its private label strategy.

Meanwhile, Reliance Retail has integrated its five value formats under a single entity which will benefit from having a common supply chain and buyer interface.

The formats, including Fresh, Mart, Super and Wellness along with Sahakari Bhandar, have been brought under a single value format to streamline efficiencies.

Mr K. Radhakrishnan, Chief Executive, Hypermarkets, Reliance Retail, said, “In the last six months, we have seen our topline improve. We are now at the tipping point of the retail business and are ready to take off.

“Costs have been brought down and profitability has improved. Our mandate is now to expand the number of stores.”

Profitable venture

In fact, while the rest of its value formats are still struggling to make money, it is the Sahakari Bhankar outlets that turned profitable recently.

“We have management control of the Sahakari Bhandar and its outlets are making money.

“Our formats in Delhi and Mumbai are yet to become profitable but we expect the outlets in the smaller cities to become profitable sooner,” said Mr Radhakrishnan, speaking on the sidelines of the India Retail Forum in Mumbai.