Technopak Advisors: There is enough opportunity for every player in the market today: Arvind Singhal, CMD, Technopak Advisors
It was announced by Mr Mukesh Ambani during the recently concluded annual general meeting in 2022 that they will stabilise the operations in Gujarat. They have been going on in acquisition drive besides Campa Cola and have been looking at local brands as well. How do you see all of this coming together and for competition?
So, let me give you some data to start with. The categories which have been announced under Independence yesterday, dry groceries mostly, they are currently a 150 plus billion US dollar market in India and over the next 10 years we project it will be over 300 billion dollars. Now just put in perspective that you are adding extra 150 billion dollars of market opportunity so A) there is a lot of headroom for growth for just about anybody and everybody in this space. B) From Reliance’s perspective their total retail business is currently about 25 billion dollars in revenue size. FMCG play is a much bigger opportunity for and therefore no surprise that Reliance is now wanting to be an FMCG player in addition to being a retailer there.
Even today of this 150 billion dollar market of dry groceries about less than 20 billion dollars is in any of packaged form. So there is headroom to grow from the so called loose unpackaged to packaged and branded. Of course, overall consumption will increase very substantially as purchasing power increases for consumers in India over the next 10 years. So I think it is an anticipated move from Reliance.
We are wondering whether that is going to make life difficult for the likes of the pure FMCG plays, your , Unilevers and then, of course, retailers like D-Mart as well perhaps because this is neck and neck competition?
Not really speaking. Let us talk about D-Mart for a minute. D-Mart is a retailer like Reliance Retail is a retailer. To me Independence actually competes with the independent millions of kirana stores and so called general trade. There D-Mart really does not compete with them directly as such. Even in terms of ITC, ITC has a very diversified portfolio of goods and probably priced a bit more premium than what Independence might be priced at.
They are looking at a different segment of more value added customers there. So yes I mean obviously competition is likely to increase for all incumbents right now, having said so I just mentioned the headroom for growth both in terms of moving from loose unpackaged to packaged and branded and absolute growth in the market. I think there is enough opportunity for just about every player in the market today.
Do you believe this entry of into the staples and packaged goods segment is really going to accelerate conversion now from unbranded to branded products and how you see Reliance Industries as well leveraging the overall technology? For instance they have got JioMart on WhatsApp for end-to-end shopping experience. So do you see a further tech integration as well?
Actually in this case for categories they have announced, the challenge or the opportunity or the competitive edge is not going to be tech so much as it is going to be understanding about how the commodities market work because almost all the categories you can lose a lot of money or you can make some money depending upon how well you have actually put your sourcing and in this case commodity sourcing in place.
Whether you look into edible oil, rice, pulses, spices each of these categories require a very-very strong and deep understanding of how the commodities market have to be played out . That is the competitive strength which Reliance has to build. Technological edge in terms of the front-end is probably lesser of an advantage.
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