Reliance Retail Plans to Purchase Henkel India’s Soap Brand

June 30, 2009	(Be the first to rate this story!)  Loading ...
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Mukesh Ambani’s Reliance Retail has put in bids to acquire two of Henkel India’s soap brands, a sign of the big ambitions it has in the fast-moving consumer goods (FMCG) business. Any deal for the male deodorant soap Aramusk and Moloy sandalwood soap, put up for sale late last year, is estimated to be worth about Rs 10 crore. The Henkel brands are unlikely to generate significant revenues at the national level, but they are attractive buys locally, especially in the eastern part of the country. Reliance Industries (RIL), the parent of Reliance Retail, has identified the FMCG sector as the next big growth area, and is planning to set up two or three subsidiaries to manage the business. What started as a private label initiative for Reliance Retail has now grown into a large business idea, said two persons close to the development.

They said the entire business (manufacturing and distribution) will be operated through third parties with Reliance controlling the brand and the technology behind it. The plan is to create consumer brands, acquire them and get into joint ventures with existing companies, a top company official said. Chennai-based Henkel had earlier put four non-core brands on the block, that included Maha Bhringol hair oil and Tuhina skin cream. ET has learnt that Reliance is not interested in acquiring the hair oil brand and Henkel has decided to retain Tuhina as its core brand. The Emami group is also in the race for the Henkel soap brands, but a person close to the deal process said Reliance has bid higher. Mumbai-based consumer goods firm Jyothy Laboratories also considered acquiring the brands, but it couldn’t be ascertained if it is still in the race. Mape Advisory Services is the investment banker for the deal. Aramusk and Moloy were owned by Shaw Wallace India before Henkel acquired them in 1999. Reliance Retail and Henkel India declined to comment.

The FMCG sector has coped with the slowdown better than most others, growing by 18-20% in the past 5-6 quarters, helped mainly by price hikes, increased consumer promotions, new product launches and smaller packs. Though growth slowed down in April and May, FMCG companies are aggressively gunning for volumes, and are optimistic that growth will rebound. For Reliance, the FMCG business is unlikely to attract negative publicity — unlike its retail venture — since it would involve small manufacturers and not compete with them as was the case with its retail unit. FMCG is also a business where overhead costs are low, and outsourcing is common. Reliance plans to enter into agreements with manufacturers and the FMCG business would get a captive audience at the 750-odd Reliance Retail stores and give the retail venture the margins the company would otherwise have paid to a distributor.

Among the categories that Reliance proposes to enter include foods such as staples and snacks, and personal care products including soaps, detergents, shampoos and hair oils. In January this year, Henkel, a 51% subsidiary of German consumer products company Henkel KGaA, had decided to divest its non-core regional brands. Henkel wants to prune its portfolio to focus on flagship brands Henko and Mr White (both laundry care brands), Pril dishwasher, Margo soap and Fa deodorants. Other brands in the Rs 600-crore Henkel India’s portfolio include Neem toothpaste and haircare brands Igora, Bonacure, Glatt and Palette. In addition to deodorants, the Fa franchise includes soap, talcs, shaving cream and after-shave lotions. Furthermore, Henkel introduced its Bref surface cleaners last year.

News Published Under:   Retail Market in India |

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