💸 Reliance's Latest Acquisition Spree: Metro & Naturals
Reliance is continuing to play the acquisition game to become a part of every aspect of yourself. Here's all about its latest acquisitions.
There seems to be no end to Reliance's ambitions.
The salt-to-steel, oil-to-telecom conglomerate now wants to rule every aspect of people's lives.
So, it is doing what it does best: acquisitions.
And here we are to talk about two of Reliance Retail's major acquisitions: Metro Cash and Carry and Naturals (RIL bought a 49% stake).
So, ReadOn!
💰 RIL's Metro Acquisition
Earlier this year, Metro Cash and Carry announced its swayamvar (a ritual where a bride chooses her own husband from a number of suitors).
One deserving company, who would take care of its employees, would get its India business.
And the contenders for Metro's Swayamvar: Tata, Reliance, DMart, Udaan, Swiggy and many more.
The winner? Reliance Retail (no brownie points for guessing this)!
RIL is buying Metro's business for Rs. 4,060 crores.
But first, why is Metro selling its business in the first place?
Well, it wants to increase profit margins. But it is facing tough competition in India (you can read more about it here).
And why does Reliance, or for that matter, any company want Metro's business?
First, Metro is the only wholesaler in India that is profitable (according to a Metro spokesperson).
Second, its business is huge. It has 31 large wholesale stores and multiple warehouses.
Third, it has a huge, huge list of customers including everyone from kirana stores to hotels, restaurants, cafes, corporates, SMEs, etc.
So, whoever acquired the business would basically hit a jackpot. They would get a huge network of distribution centres, warehouses and customers. All of it without spending a very important resource: time.
One deal would allow them to benefit from 19 years of hard work. That's how the world of business is: you can buy 19 years of experience with just a few thousand crores!
But, wait. If Metro was struggling to be profitable, why would anyone want to get into this business?
Well, let's understand why Metro was struggling to be profitable.
🧠 The B2B Profitability Dilemma
Now, groceries and other such products have a razor thin margin, especially in the B2B business.
So, the whole game is about order volumes.
And every company wants to be into this game because recession or inflation, people are going to buy groceries. And as India's population increases, the demand for groceries is only going to rise.
So everyone wants a slice of this pie. And they want the biggest slice.
But to get this slice, they first need to acquire a loyal customer base. So, most companies like Udaan and JioMart are currently burning cash to gain customers. They are offering discounts, free deliveries and what not to entice customers.
Metro found this whole system unsustainable. It did not want to burn cash and reduce profits anymore. So, it decided to quit India.
On this side, the existing players celebrated: one down, few more to go.
That's because these existing players still believe that they can hit the ball out of the park, that they can bowl their competitors. (Excuse the cricket puns, this article was written while the India-England match was being played).
And with Reliance now acquiring Metro's business, it could be the one putting everyone out of business (Reliance has some experience with that).
How? Well, well. It has money, JioMart, a huge network of kirana stores, its easy to use WhatsApp ordering system and an experience of disrupting sectors.
And while it is facing tough competition from quick commerce companies, with Metro's warehouses under its control, it could beat these startups at their own game.
But if you know Reliance, then you know the story doesn't end here.
So, what will Reliance buy next?
It has planned to acquire a 49% stake in Naturals.
🧐 Reliance's Naturals Acquisition
We aren't talking about the Naturals ice cream parlour that has probably gotten your mouth watering. We're talking about the Naturals Spa and Salon chain that has over 700 salons across India.
Like we said, Reliance wants to earn money from every aspect of your life. Whether you buy a biscuit or shave your beard, Reliance wants a cut of the sales (Tweet this).
Acquiring Naturals could be a great way for Reliance to find a permanent buyer for its beauty products as well.
Yes, Reliance is also allegedly making beauty products now. It has launched its own brand Tira and will soon open stores that will feature international beauty brands and its own branded products.
These stores will give tough competition to beauty giants like Nykaa and Myntra.
And these are just the projects we know about. God knows what other industries Reliance is planning to enter next.
Oh, wait. We do have a clue about one more industry Reliance is planning to enter: semiconductors. How?
You guessed it: Another acquisition.
It is planning to acquire a 30% stake in semiconductor manufacturing facility ISMC Analog.
What else will Reliance do, how much more of our lives will Reliance control, which other sector will it establish a monopoly/duopoly in?
All we can do is wonder about these questions while Reliance strikes deals after deals.
⚡In a line: Reliance is leaving no stones unturned to become your main service provider.
💡Quick question: What do you think Reliance will buy next?
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