Reliance Retail acquired Metro at KR 2850 to increase physical footprint | Daily News Byte

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Mukesh Ambani-owned Reliance Retail Ventures Ltd (RRVL) has acquired METRO Cash & Carri India, a German international wholesaler wholly owned by METRO AG, for INR 2,850 crore.

This acquisition will give RRVL access to METRO India’s extensive network of 31 large format stores in 21 cities, a large base of registered Kiranas and other institutional buyers, a strong supplier network and some of the best global practices implemented by METRO in India

Isha Ambani, Director, Reliance Retail said, “The acquisition of METRO India is in line with our new trade strategy of building a unique model of shared prosperity through active collaboration with small retailers and businesses. We believe Metro India’s sound assets combined with our deep understanding of the Indian merchant/ Kirana ecosystem will help deliver a differentiated value proposition to small businesses in India.”

The company said the addition of METRO will increase Reliance Retail’s physical store footprint. It will also increase its ability to better serve consumers and small retailers by leveraging synergies and efficiencies in its supply chain networks, technology platforms and procurement capabilities.

The multi-channel B2B cash-and-carry wholesaler has reached over 3 million B2B customers in India, 1 million of whom are frequent shoppers, through its store network and eB2B app.

A person close to the development said, “This acquisition is an important part of making Jiomart Kirana Partner healthy. This acquisition gives the company an omnichannel presence in this segment.”

METRO India has 31 large format stores in 21 cities with around 3,500 employees. The multi-channel B2B cash-and-carry wholesaler has reached over 3 million B2B customers in India, of which 1 million are repeat customers.

Reliance Retail already had an online B2B presence, now it will help them boost their offline presence as well with infrastructure and warehouses. This also helps the company to create a seamless B2B and B2C supply chain. Not only that, Reliance can also fulfill online orders through these warehouses and wholesale facilities, the person explained, requesting anonymity.

When asked if the company is likely to rebrand METRO Cash and Carry in the near future, he said it may take some time to make that decision.

Speaking about the acquisition, Lloyd Mathias, business strategist and independent director, said the strong wholesale unit will enhance Reliance Retail, which is already the No. 1 retailer with over 16,000 stores including 2,700 grocery stores. “Reliance will now have dominance in B2B in addition to their huge presence in B2C retail and with their strengthening of their online presence they will dominate Indian retail from end to end,” he said.

But why then, a company like Metro Cash and Carri, which entered India in 2003, could not make its mark.

An industry expert, requesting anonymity, explained that the wholesale segment is “a different ball game in India. Deals are often made over the phone, a player like Metro or now Reliance will not have much impact on the wholesale trade unless the wholesale trade is regulated in a slightly better defined manner and structure.

Additionally, globally, Metro’s largest customer base is the hotel, restaurant and catering (HORECA) segment. In Europe, their customers are small cafes and bistros that pick up semi-cooked products, or ready-made products, keep them in a hot box and sell them, which is contrary to Indian eating habits.

So, by default, the HORECA segment is dominated by large hotel chains. The factor of buying hotel chains is becoming a big deal in the business. However, “One third of the small traders who are not covered by the conventional distribution system are those who go to the wholesale market. METRO attracted mainly these types of consumers who ended up buying FMCG products which are low margin rather than high margin HORECA products,” this man explained.

In favor of Reliance, it has more purchasing power. “If they negotiate with FMCG players, they will have better margins.” Plus, when their own consumer brands are introduced, it will give them an added edge,” he said.

Besides, there is not much competition for Reliance in this segment, apart from Walmart’s best price and lot, hence “Reliance will occupy the leading space in the small segment which is Cash & Carry,” the person said.

However, in the overall game for Reliance Retail, the B2B segment is only one piece. It has made over 25 acquisitions in retail tech, customer service, D2C, B2B and B2C segments, among others, in the past three years that form the pieces of the big puzzle that Reliance Retail plans to build.

(With contributions from Chitra Narayanan, Delhi)



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