Reliance Industries Up’s The Game As It Ropes In Amul Veteran RS Sodhi; The Reliance Vs Competition In The FMCG Sector Just Got Hotter!

Who can forget RS Sodhi? He single-handedly changed the Indian dairy industry and was the Managing Director of the Gujarat Cooperative Milk Marketing Federation Ltd. (GCMMF), which owns the famous Amul brand.

However, Reliance is the organization that has managed to pull in yet another industry expert after it hired Coca-Cola’s former India chairman T Krishnakumar in 2021. 

Incidentally, the move to hire T Krishnakumar, who had formerly worked with Coca-Cola for nearly 17 years, was right before Reliance bought Campa Cola in 2021, and with that, it also announced its intent that it was gearing up for a challenge and a bid to take on industry leaders in this segment – Coca-Cola and PepsiCo.

A year after, Reliance bought Campa Cola, the home-grown brand that lost its market share after Coca-Cola re-entered India in 1993.

Thus, it comes as no surprise that with the recent hiring, Reliance may now be planning to make its way into the booming dairy market. However, as per reports, RS Sodhi is said to be hired in an advisory role and primarily to build the company’s fresh fruit and vegetables verticle and move to integrate it with its already existing grocery business.

The Booming Dairy Sector And The Right Candidate

For RS Sodhi, this task should be simple as he has already, through his leadership, achieved the spectacular success that Amul did.

Sodhi has been associated with the dairy industry for over three decades, and during this time, he has made significant contributions towards the growth and development of Amul. He started his career with GCMMF in 1982 as a production officer and gradually climbed the ranks to become the Managing Director in 2010.

Under Sodhi’s leadership, Amul has grown into India’s largest food brand, with an annual turnover of over Rs. 52,000 crores (around 7 billion USD). He has been instrumental in implementing various initiatives that have helped Amul become a household name in India as in other parts of the world.

One of Sodhi’s notable contributions is the “Amul Model,” a unique cooperative model replicated in several parts of the world. The Amul Model is a farmer-owned cooperative that aims to empower small farmers and provide them with a fair price for their milk. It has helped millions of farmers across India to earn a livelihood and improve their standard of living.

Sodhi has also actively promoted the benefits of dairy and its products. He has been a vocal advocate of the importance of including dairy in the diet, especially for children, and has been working towards increasing milk consumption in India.

Sodhi has received several awards and accolades for his contributions to the dairy industry, including the Padma Shri in 2019, one of India’s highest civilian honors. He has also been named as one of the “Most Powerful People in Indian Business” by Business Today magazine.

Hence, he would be an advantage when Reliance is looking to build the company’s fresh fruit and vegetables verticle and move to integrate it with its already existing grocery business.

India’s Dairy Sector

Reliance has eyed to enter almost every vital business sector, and the same is the case now; the company first made its debut in the dairy sector in 2007. Its dairy business, under two brands – Dairy Life and Dairy Pure, operated a pan-India procurement, processing and distribution platform. It offered various products like packed milk, flavoured milk, butter, ghee, curd, dairy whitener, sweets and skimmed milk powder.

At that time, Reliance’s foray meant competition for Amul, but then Sodhi remarked that he was not worried about Reliance’s new dairy business saying it was ideal for the market to have more players, the entry of a large corporate house would benefit farmers and customers.

However, Reliance sold its dairy business to Heritage Foods a decade later. Once again, when it is betting on the FMCG sector, it is likely to enter the dairy business as it plans to build an integrated FMCG company.

Money Money!

India’s dairy industry is poised for unprecedented growth owing to healthy demand from institutional segments, consumers’ growing inclination for branded packaged dairy products, rising urban income, and increasing per capita consumption of value-added dairy products.

Facts And Figures

• Milk production in the current is growing at a rate of 2% globally. In contrast, the growth rate in India is over 6%, according to government data.

• The Daily Mail consumption in the country rose from a low of 107 grams per person in 1970 to 427 grams per person in 2021. As against the world average of 322 grams per day in 2021. 

• India’s share in global production is estimated to nearly double to 45% in the next 25 years from the current 23%.

• The Indian dairy market is estimated to more than double to rupees 30,00,000 crore by 2027. Driven by growth in volume and value terms, according to NDDP Chairman Minish Shah, the size of the Indian dairy market currently is more than 13,00,000 crore.

Interestingly, Reliance’s new hiring comes when Amul, which is India’s largest dairy brand, rapidly scaled up its non-dairy product portfolio to become a whole foods and beverages company to compete with the likes of Britannia, Coca-Cola, ITC and, of course, Reliance and future. 

Steps Into The FMCG Market 

In 2020, India’s FMCG market was valued at 110 billion U.S. dollars. Compared to 2012, the market size of fast-moving consumer goods nearly tripled. By 2025, the market is expected to grow to 220 billion dollars.

Hence, it is only natural that biggies like Reliance should eye the sector, but to do that, Reliance has taken some critical steps. 

1. Price Wars: As expected, Reliance has a proven strategy of offering a price lower than the market to boost its sales and capture the market. It now provides home and personal care products at 30-35% lower prices to pull price-sensitive Indian consumers. It’s launched a new FMCG brand called “Independence.”

2. Successful Leaders: Before getting RS Sodhi in, Reliance signed on Coca-cola India’s ex-president in 2021 to grow in retail.

3. Distribution: In Q3, Reliance Retail reported 201 million footfalls across its network of 17225 stores, which is an impressive 26% rise on a YoY basis. At the same time, it is also creating distribution with traditional dealers and modern B2B channels.

4. Local Tie-ups: It successfully integrated local stores with JioMart and transformed them into regional delivery hubs. From 2020, it has onboarded nearly 3 M+ merchants, and by 2027 it plans to touch almost 10 M merchants connecting 7500 towns and 500000 villages.

5. Supply Chain: To ensure its success, it skipped wholesalers and distributors and reached retailers directly, saving 2.5% to 8% margins than current FMCG players.

6. Acquisitions: It’s recently acquired Metro Cash & Carry, which has 3 M+ retail partners. It’s also got stakes in Justdial and Dunzo and has invested Rs 9000 Cr for over 72 acquisitions and mergers in retail space since 2008. 

To grow in the food sector, it allied with the Maliban Group, which exports biscuits to 35 countries.

7. Apps: It transformed MyJIO into a super app providing everything under the sun – from groceries to banking to pharma and media. JioMart and WhatsApp’s alliance nearly upped their orders by almost nine times.

Conclusion: The recent move is a sure shot to up Reliance’s game in India’s Dairy sector which is poised for a massive leap as also another concrete step to strengthen its hold on the FMCG sector further; Reliance Retail has already crossed Rs 2 lakh Cr revenue in the FMCG space so far.

With the latest, it is a sign that Isha Ambani, headed vertical, is now taking on biggies like Nestlé, HUL, Britannia, Dabur, P&G, and Reckitt.

Hence, Reliance’s foray into the FMCG sector is expected to launch many wars, while Capper Cola pits Reliance against Coca-Cola and Pepsico.

Its foray into milk and dairy products will pit it against another set of Biggies, Amul and mother dairy.

Will Reliance be able to take on the biggies?