Reliance's FMCG arm bets on higher margins, cheaper pricing to gain ground

Reliance Consumer Products disrupts FMCG market by offering its distributors 6-8 per cent margins - double the industry average - while pricing products 20-40% lower than competitors, to drive growth

Reliance Consumer Products, the fast-moving consumer goods (FMCG) arm of Reliance Retail Ventures, is offering distributors and trade partners 6-8 per cent margins, nearly double the industry standard, according to a report by The Economic Times.

 

This strategy aims to encourage stockpiling and promote its range of groceries and daily essentials. In comparison, established consumer goods companies such as Britannia, Hindustan Unilever, Reckitt, Coca-Cola, Parle, and Nestle typically provide margins between 3 per cent and 5 per cent.

 

Reliance Consumer Products markets various products, including edible oils, staples, and pulses under its Independence brand. Other offerings include Glimmer beauty soaps, Puric hygiene soaps, Alan Bugles snacks, and Snactac biscuits. This extensive portfolio is part of the company’s broader push into the competitive FMCG sector.

 

Strategy inspired by Campa Cola’s success

The Economic Times quoted a source saying Reliance Consumer Products is expanding the strategy it employed with its cola brand, Campa, across all its product categories. This approach is disruptive, incentivising the supply chain and benefiting new entrants.

 

Initially targeting smaller markets, Reliance Consumer Products plans to expand its distribution network to metropolitan areas in the coming months.

 

Alongside attractive trade margins, the company is adopting an aggressive pricing strategy. Its products are priced 20-40 per cent lower than competitors, potentially triggering a price war. This pricing model has already prompted market leaders such as Coca-Cola and PepsiCo to offer enhanced trade promotions in regions where Campa Cola competes. For instance, Reliance Consumer Products prices its 200 ml Campa Cola bottles at Rs 10, whereas Coca-Cola and PepsiCo offer 250 ml bottles at Rs 20.

Focus on general trade channels

Reliance Consumer Products is reportedly leveraging traditional trade channels, such as neighbourhood kirana stores, which account for 85-90 per cent of sales in Tier-II and smaller markets. The company has a limited presence on quick-commerce platforms, showcasing its focus on conventional retail.

 

According to industry sources, Reliance Consumer Products’s margins include financial support for distributor sales teams. For retailers, the higher margins serve as launch incentives, compensating for the company’s relatively modest spending on advertising and marketing.

 

Analysts believe as Reliance scales its FMCG operations nationally, overall trade margins in the sector may increase. Heightened competition, particularly from regional players, is intensifying the need for companies to optimise their trade terms to maintain market share.