..and more in today’s Finbrief
Hello. Welcome to the September 7 edition of finbrief daily business brief!
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FEATURED STORY
🥤 Reliance to heat up the Cola wars
Reliance is set to relaunch iconic retro soft drink brand, Campa around Diwali. They acquired the homegrown brand from Pure Drinks Group in a deal estimated at a rather modest Rs. 22 crores (well, not so modest considering it has very little sales today). With this, the company will take on the two big global majors in the market: Coca Cola and Pepsi. Fun times ahead!
Wait, what is this Campa? Time for a brief history lesson.
- Coca Cola entered the Indian market in 1949 — and became quite the rage. And Pure Drinks Group (yup, the same one) was the sole manufacturer and distributor for the drinks brand.
- In 1977 however, Coke was booted out of the country by the government post-emergency when it refused to share its secret drinks formula.
- The owner of Pure Drinks Group, Charanjit Singh, saw an opportunity and launched a new drink in the market: Campa Cola.
- In the absence of competition, the brand dominated the Indian market for the next 15 years (along with soft drink brands developed by Parle: Thums Up, Goldspot, and Limca).
- Enter former PM Manmohan Singh with his economic reforms in 1991 (he was the Finance Minister then) which opened up the Indian market. Coca Cola re-entered the market, and along with Pepsi (who entered in 1989) aggressively captured the soft drinks market in India.
- Unable to compete effectively, Campa slowly scaled down their operations.
So why is Reliance acquiring them? They’re not an FMCG company right? Well, they are now.
- Reliance announced its entry into the Fast Moving Consumer Goods (FMCG) space at their last Annual General Meeting held last month — a move that pits it against domestic and global giants like HUL, Coca Cola, ITC, P&G and Nestle in the $100 billion plus market.
- According to an executive, the company has already identified almost 2 dozen potential brands to acquire or have a joint venture with. Some of the other brands in advanced stages of negotiation include Garden Namkeens, Lahori Zeera and Bindu Beverages.
- Their strategy for the FMCG space seems to be to acquire established smaller brands and then scale them — something that can significantly reduce the time to bring products to market when compared to starting a brand from scratch.
- So expect a lot more announcements to follow soon as the company doubles down in this fast growing market.
▶︎ WHAT’S THE TAKEAWAY?
With Reliance’s entry, the Cola market and the FMCG industry more broadly, is poised for a good shakedown. After all, the company has a history of disrupting entire industries with their launches (remember Jio?). FMCG brand preferences are a lot more stickier though (and many are backed by big global companies with a lot of money to spend) — so we expect this to be a harder nut to crack. But if there’s one company that can do it, it is Reliance.
🗞 Other quick hit stories
✈️ Tata Sons — the holding company of Tata Group — to raise $4 billion to infuse capital into Air India: The fund will be used to bring in new aircraft, offer differentiated services, and improve Air India’s operational efficiency — all with a view to attract passengers and gain market share. They will also look to refinance some of the existing costly debt. The Tata group had acquired Air India in October last year from the government at an enterprise value of $2.3 billion.
🏷 Inflation to moderate in second half of the year, says RBI Governor Shaktikanta Das: “While the incoming inflation prints in the near term could be bumpy, we expect it to moderate in the second half of the current year,” he said. India’s Consumer price-based (CPI) inflation eased to 6.71 percent in July on an annual basis, from 7.01 percent in June, owing to easing food and oil prices. Mr. Das also said that RBI will prevent excess volatility in the rupee against the dollar. Rupee has been one of the more stable currencies in recent times while many currencies strongly depreciated against the dollar.
⚡️ Reliance to buy US based solar energy software company, SenseHawk, for $32 million: Another Reliance story as Reliance Industries (RIL) agrees to acquire a 79.4% stake in California based solar energy management software company SenseHawk. SenseHawk helps companies accelerate solar power projects by streamlining processes and using automation. The SenseHawk acquisition is part of Reliance’s mega ambitions in the green energy sector. RIL Chairman Mukesh Ambani told shareholders that new energy will be the company’s biggest growth engine within the next 5–7 years and committed a capital outlay of $10 billion (Rs. 80,000 crores) over the next 3 years in the sector.
💡 Fin fact of the day
Bollywood superstar Salman Khan’s first camera appearance was in a Campa Cola commercial — six years before his first movie came out. Watch the ad below.
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