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Reliance to give Pepsi, Coke a desi punch

Reliance to give Pepsi, Coke a desi punch

Author | Source: The Economic Times | Friday, Oct 27,2006 9:11 AM

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Reliance to give Pepsi, Coke a desi punch

Coca-Cola and Pepsi are all set to face a new competitor. And it's none other than Reliance. Mukesh Ambani's Reliance Retail plans to launch its own cola, which will be retailed through its supermarkets across the country.

Reliance Retail has plans to launch its private label brands in other product categories like tea, foods, dairy products, biscuits and cosmetics. The move is likely to change manufacturer-retailer dynamics in the retail industry, as mediators like distributors will be cut out, and goods will also be available to the consumers at a much lower rate than non-private brands

While Reliance declined comment, sources said the company is in negotiations with a Chinese company for importing concentrate. At the same time, it's on the look out for idle capacities to be used for bottling the proposed 'Reliance Cola'. The company has touched base with the makers of a small local player RC Cola, to lease out its bottling plant, a source said. But this could not be confirmed.

And it's not just about colas. The company plans to introduce its own brands (known as private label in the retail industry) across half a dozen product categories, such as tea, natural food, diary products, biscuits and cosmetics. The idea is to cut out distributors and other intermediaries to sell the products cheaper than the mainstream players.

Industry experts feel that with more and more and private labels in the fray, the manufacturer-retailer dynamics is set to change. Says Raman Mangalorkar, principal, AT Kearney (retail division), “It will put retailers in a commanding position vis-à-vis manufacturers and brands. It will also see a lot of retail chains getting into contract manufacturing.”

In India, while chains like Food Bazaar and Vishal Mega Mart have already had a successful stint with private labels, many other players are likely to join the bandwagon in the next 5-6 months.

As of now, the four private label brands under Food Bazaar are 'Fresh n Pure' in natural foods (atta, ghee, butter and cheese), 'Tasty Treat' (jams, sauces, pickles and snacks), 'Clean Made' (laundry and home wash products) and 'Premium Harvest' (packaged foods). Damodar Mall, head of Food Bazaar, said: “In the pipeline are 3-4 new launches in each of the existing private labels.”

Globally, private labels are already a big trend. According to an ACNielsen report, private labels have a 17% share of the consumer (FMCG) market globally and this figure is still growing.

Private labels in the emerging markets saw fast growth in the last year, an increase of nearly 11%. It now holds a 6% share of consumer goods sales in the emerging markets. “This growth was primarily driven by the increasing strength of the modern trade as well as the entry of private label products into new categories,” the study said.

Some of the new categories which have seen a striking growth worldwide include milk, yoghurt, butter, cheese, ready meals and poultry products. Big retailers like Tesco and Sainsbury sell a whole variety of consumer goods, including colas, under private labels.

On the situation in India, a study conducted by ACNielsen says 56% of the Indians surveyed believe that supermarket's own brands (private labels) are a good alternative to other brands compared to 52% in China and 48% in Taiwan. In addition, 62% feel that supermarket brands are extremely good value for money. Also, on the quality front, 60% think private label brands are up to the mark.

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