Reliance Consumer Products (RCPL) is offering higher margins to its distributors and trade partners to incentivize them to stock up and promote its portfolio of groceries and daily essentials.
RCPL offers 6-8% margin, twice industry average
The company is providing margins of 6-8%, which is nearly twice the industry average of 3-5%. This move is part of RCPL’s strategy to disrupt the market and gain a competitive edge.
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Notably, large consumer goods firms such as Britannia, Hindustan Unilever, Reckitt, Coca-Cola, Parle, and Nestle typically offer margins of between 3% and 5% to distributors and trade. RCPL’s higher margins are aimed at encouraging its trade partners to push its products, which include edible oils, staples, and pulses under its Independence brand, as well as Glimmer beauty soaps, Puric hygiene soaps, Alan Bugles snacks, and Snactac biscuits.
“Reliance Consumer Products is replicating the strategy it began with (cola brand) Campa to all categories it is present in… it is a disruptive strategy and works to incentivise the supply chain, more so for new entrants,” said an executive with direct knowledge of the matter to ET. “The company is offering these trade margins starting with smaller markets and plans to scale up distribution in metros over the coming quarters.”
RCPL products prices are 20-40% cheaper than rivals
However, the trade-level disruption is on top of the pricing strategy that the company is following. Almost all RCPL brands are priced 20-40% cheaper than rivals, setting the stage for a price war in the near term.
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“After Reliance’s play in FMCG goes national, margins for the industry in general are bound to increase. Almost all daily essentials categories, from soap and biscuits to staples, are seeing heightened competition from regional players, so terms of trade become even more crucial, which all large category players want to protect,” said another executive at a large distributor platform.
Meanwhile, Coca-Cola and PepsiCo are offering bigger trade promotions in some areas to counter Campa’s lower prices, according to an executive. RCPL sells Campa for INR 10 per 200 ml bottle, while Coca-Cola and PepsiCo sell 250 ml bottles for INR 20. RCPL focuses on higher margins in general trade channels like neighborhood kirana stores, which make up 85-90% of sales in tier-2 and smaller markets. For now, Mukesh Ambani’s consumer business has a limited presence on quick-commerce platforms.
