Reliance Consumer Products (RCPL) is reportedly in advanced talks with Kali Aerated Water Works, a leading soft drink manufacturer based in Chennai. According to insiders with direct knowledge of the matter, the two companies are discussing a potential partnership for the manufacturing and distribution of Reliance’s Campa soft drinks range.

According to sources, prior to its acquisition of Campa in August of last year, Reliance had explored the possibility of purchasing a controlling stake in Kali Aerated Water Works. Kali Aerated is a major player in the southern soft drink market, with its Bovonto cola brand fiercely competing against multinational giants like Coca-Cola and Pepsi. With over eight manufacturing facilities in the southern region, Kali Aerated produces a variety of fizzy drinks, including lemon, orange, and ginger ale, as well as selling juices and tender coconut water.

“The deal, which is in advanced stages of closing, will give Reliance immediate advantage of Bovonto’s manufacturing lines as well as strong distribution outreach, and a distinct edge over the competitors,” one of the executives said.

Despite attempts to reach out to Reliance Consumer Products (RCPL), the FMCG subsidiary of Reliance Retail Ventures (RRVL), no response was received. Similarly, executives at Kali Aerated Beverages did not respond to inquiries made.

“Despite very limited marketing and advertising spends, regional brands continue to hold significant share in their home turfs. This is despite national brands like Coke, Pepsi, Thums Up and 7Up investing heavily in regional marketing and local language ads,” said another executive who represents a large bottling company.

Kalimark, or Kali Aerated Water Works as it is formally known, primarily sells its drinks at lower prices than national brands in Tamil Nadu and Andhra Pradesh. The company has been in the beverage business for over a century, beginning with the production of Bovonto, a grape-flavoured carbonated drink. According to its LinkedIn profile, entrepreneur PVSK Palani Appa Nadar founded Kalimark in 1916 as a manufacturer and supplier of carbonated and non-carbonated beverages.

RCPL’s Strategy:

Currently, the business is operated by the fourth generation of the founding family and has a workforce of 501-1,000 employees.

Reliance Consumer Products (RCPL) has partnered with three Indian Premier League (IPL) teams – Lucknow Super Giants, Punjab Kings, and Sunrisers Hyderabad – as a pouring partner for its Campa franchise. This move is intended to increase the on-field visibility of Campa, a tactic that has traditionally been utilized by Coca-Cola and PepsiCo in the realm of sports marketing.

Reliance, led by Mukesh Ambani, recently launched its Campa soft drinks range in Andhra Pradesh and Telangana, featuring cola, lemon, and orange flavours. The prices of these drinks are lower than those of Coca-Cola and PepsiCo, resulting in multinational soft drink brands increasing their trade discounts, consumer promotions, and local marketing expenditures, according to industry sources. This development has caused concern among distributors who fear that a price war within the sector could harm their profit margins. Prior to this, RCPL had been selling Campa via its own grocery stores and JioMart, leveraging Reliance Retail’s network of 17,225 stores.

Last year, Reliance acquired Campa from Pure Drinks group for an estimated Rs 22 crore. In January of this year, it also obtained a 50% stake in Gujarat-based Sosyo Hajoori Beverages, which is best known for its flagship beverage brand Sosyo. Hajoori Beverages also has other brands under its umbrella, such as Kashmira, Lemee, Ginlim, Runner, and Opener. Sosyo is a leading player in the Gujarat market.

According to analysts, Reliance’s entry into mass-market categories such as soft drinks, soaps, and biscuits is likely to lead to price wars, but competing with well-established brands could be difficult.

Nuvama Equities said in a recent report: “Most of the FMCG companies have gained market share in their core categories over the last 10 years as they continue to get benefits due to consolidation and changes in distribution, sales automation, innovations and scale benefits. RIL has huge financial muscle but FMCG players know how to deal with new entrants.”

The executives mentioned above have stated that RCPL’s diverse range of summer-oriented items will now feature ice cream sold under its own grocery brand, Independence. This launch will commence with the Gujarat market, a region where Amul, India’s biggest dairy brand, has traditionally been dominant.