The Reliance Industries unit has roped in former Coca-Cola India chairman T Krishnakumar and another four-five executives from the same company, some of whom quit the beverage maker last year following a global restructuring, said three executives directly aware of the development. Reliance Retail is the market leader in organised retail.
Krishnakumar worked with Coca-Cola for 17 years before he left in March. Coca-Cola had elevated him as chairman of the India business last September and named Sanket Ray as president following the recast.
Food and beverage is among the fastest-growing categories in organised retail. Krishnakumar’s mandate will be to help bulk up this portfolio. Products like Snac tac noodles and Yeah! colas are Reliance private label brands and compete with Nestle, Coca-Cola and Pepsico products. The new team is also expected to explore synergies and revive talks between Coca-Cola’s asset-heavy bottling partner Hindustan Coca-Cola Beverages (HCCB) and Reliance Retail for a possible acquisition by the latter.
ET had reported August 2 that Reliance is in discussions to acquire the Subway franchise in India. Krishnakumar may play a key role in negotiations and post-merger integration, said the people cited above.
Reliance Retail aims to integrate multiple digital touchpoints–built organically or acquired such as MilkBasket, Urban Ladder, NetMeds—on the super app. It also plans to add Just Dial apps on the platform. The constituents of the super app ecosystem haven’t been decided yet. Company officials said this will depend on clarity on the ecommerce policy.
“Amongst all of the Jio apps, the apps where traction is good are JioMart and JioTV. With app in app integration of JioMart under WhatsApp, it would help improve traction of JioMart app meaningfully from current levels,” said Sachin Salgaonkar of Bank of America. “This is because the current 530+ million active WhatsApp users in India need not download the app to shop on JioMart.”
He expects revenue contributions from JioTV and JioCinema to pick up in the next 12-18 months as Jio looks to monetise them.
Having started with grocery, JioMart has added categories such as home and kitchen, fashion, beauty, jewellery.
“The new team’s mandate is to hunt for QSR (quick service restaurant) opportunities, and build on the foods and beverages space,” said one of the executives cited above.
Getting the Subway franchise will pit Reliance Retail against Domino’s, Pizza Hut, KFC and McDonald’s. Subway’s India franchise is held by multiple regional operators who run about 600 stores.
“Investor responses to recent IPOs indicate that the QSR business will lead the overall food services business, with entry-level pricing and scale distribution fuelling demand,” said one of the executives cited above. “It’s a plum consumer-facing opportunity that Reliance Group wants to capture.”
Reliance Industries didn’t respond to queries.
“Reliance will leverage private labels to onboard more kiranas and will be offering higher margins to kiranas compared to the 10-12% offered on similar products by multinationals,” said an expert. “Just like in telecom, they will play the price game to be the disruptor.”
Talks between HCCB and Reliance Retail were put on the backburner with the outbreak of the pandemic, which led to a steep reduction in valuations for beverage companies. Two back-to-back peak cola seasons of April-June last year as well as this year coincided with the most severe phase of the pandemic, with lockdowns and limited timings of grocery stores stalling mobility, shutting down malls and restaurants and travel.
A buyout of Coca-Cola’s bottling business will also involve independent negotiations with multiple smaller franchise bottlers. Unlike rival PepsiCo, which has its bottling operations consolidated with RJ Corp-owned Varun Beverages, Coca-Cola’s bottling in India is divided among HCCB and close to a dozen smaller independent bottling partners.
“For Coca-Cola, refranchising bottling would mean a reduction in fixed costs and higher profitability, while for Reliance there are synergies with its PET packaging business and huge retail footprint,” an executive said. “Reliance, however, is keen only on a scale buyout of the entire operations which includes both HCCB and the independent bottlers.”