Reliance does a Jio on FMCG: Aggressive pricing, disruptive products
Mukesh Ambani's Reliance is an expert at triggering price wars. What started with the telecom sector has now entered the personal and home care segment of FMCG. Reliance's aggressive pricing strategy to capture the market has put established players in an uncomfortable position. They are now being forced to either play Reliance's game or fall behind in the race.
Why does this story matter?
- It is extremely difficult to build a business from scratch and become the leader in a segment. Reliance has done it in the telecom sector with Jio.
- With RCPL (Reliance Consumer Products Ltd.), the company aims to do the same in the FMCG sector. India's FMCG market is expected to reach $220 billion in value by 2025, and Reliance wants a piece of that.
Reliance has been testing the FMCG waters for a while
Reliance has been testing the waters in the FMCG sector for a while now. In December last year, RCPL launched Independence, its made-for-India packaged consumer products brand. The company also acquired a few legacy brands, including erstwhile soft drink major Campa and beverage maker Sosyo Hajoori. It is also in talks to bring more brands under the Reliance umbrella.
The conglomerate has taken an aggressive stance from the beginning
Reliance has been aggressive in the FMCG sector from the get-go. Unlike other sectors that it disrupted, Reliance has a headstart in FMCG. The company's massive footprint in the telecom and retail sector will help it scale its FMCG business quicker than the usual standard. Add to that Reliance's very aggressive pricing that can disrupt the whole industry.
RCPL is charging its products much lesser than its competitors
RCPL announced its foray into home and personal care products last week. The price of various products has left no doubts about its pricing policy. The company has priced its Get Real, Glimmer, and Puric soaps at Rs. 25, which is much lower than leading brands such as Lux, Dettol, and Santoor. The same aggressiveness can be seen in other cases as well.
Reliance's Campa products are cheaper than PepsiCo and Coca-Cola
Earlier this month, the company targeted the aerated drinks market dominated by PepsiCo and Coca-Cola with Campa. RPCL has priced Campa Rs. 10 for a 200ml bottle and Rs. 20 for a 500 ml bottle. The company sells Campa 2-liter drinks for around Rs. 60, undercutting PepsiCo and Coca-Cola by around Rs. 20, which is a big number in India's price-sensitive market.
Reliance lacks a presence in unorganized retail shops
The success of an FMCG brand depends on the strength of the brand and the distribution network. Being the largest retailer in the country, Reliance has a considerable presence around India. Its challenge would be to acquire shelves in the unorganized market. In the mom-and-pop shops around the country, brands like Lux, Santoor, and Surf are the dominating forces.
Aggressive pricing by Reliance can cause a price war
The company's pricing can enhance its appeal. When a product is Rs. 10 cheaper than the standard market price, consumers would be enticed to try them, and shopkeepers would be drawn to keep them. This will trigger an all-out price war between the incumbents and Reliance. The latter's war chest would allow it to keep the pricing low and possibly beat the competition.