Mukesh Ambani-owned Reliance Retail Ventures Ltd (RRVL) has acquired METRO Cash & Carry India, German international wholesaler METRO AG’s wholly-owned subsidiary, for ₹2,850 crore.
This acquisition will give RRVL access to METRO India’s wide network of 31 large format stores across 21 cities, a large base of registered kiranas and other institutional customers, strong supplier network and some of the global best practices implemented by METRO in India
Reliance Retail acquires METRO Cash & Carry India for ₹2,850 crore
Isha Ambani, Director, Reliance Retail, said, “The acquisition of METRO India aligns with our new commerce strategy of building a unique model of shared prosperity through active collaboration with small merchants and enterprises. We believe that Metro India’s healthy assets combined with our deep understanding of Indian merchant/ kirana ecosystem will help offer a differentiated value proposition to small businesses in India.”
The company said that METRO’s addition will augment Reliance Retail’s physical store footprint. It will also boost its ability to better serve consumers and small merchants by leveraging synergies and efficiencies across supply chain networks, technology platforms and sourcing capabilities.
The multi-channel B2B cash & carry wholesaler has reach to over 3 million B2B customers in India, of which 1 million are frequently buying customers, through its store network and eB2B app.
A person close to the development said, “This acquisition is an important piece in making the Jiomart Kirana Partner wholesome. This acquisition gives the company an omnichannel presence in this segment.”
METRO India operates 31 large format stores across 21 cities with about 3,500 employees. The multi-channel B2B cash & carry wholesaler has reach to over 3 million B2B customers in India, of which 1 million are frequent buyers.
Reliance Retail already had an online B2B presence, now, it will help them boost the offline presence too with infrastructure, and warehouses. This helps the company to create a seamless B2B and B2C supply chain too. Not only that, Reliance can fulfil online orders through these warehouses and wholesale stores too, the person explained requesting anonymity.
When asked if the company was likely to rebrand METRO Cash and Carry, in the near future, he said that it may take some time to make that decision.
Speaking about the acquisition, Lloyd Mathias, Business Strategist and Independent Director, said a strong wholesale unit will enhance Reliance Retail which is already No 1 brick-and-mortar retailer with over 16,000 stores including 2,700 grocery stores. “Reliance will now have dominance across B2B in addition to their towering presence in B2C retail, and with their strengthening of their online presence they are set to dominate Indian retail end-to-end,” he said.
But then why, a company like Metro Cash and Carry, which entered India in 2003 wasn’t able to leave its mark.
An industry expert, requesting anonymity, explained that the wholesale segment is a “different ball game in India. Deals are often done on the phone, a player like Metro or now Reliance will not have any big impact in the wholesale trade unless wholesale trade gets regulated in a slightly more well-defined manner and structure.”
Besides this, globally, Metro’s biggest customer base is the hotels, restaurants, and catering (HORECA) segment. In Europe, their customers are small cafes and bistros which pick up semi-cooked products, or pre-made products, and keep them in a hot case and sell them, which is contrary to the Indian eating habits.
So by default, the HORECA segment is dominated by big hotel chains. The buying factor of the hotel chains becomes a big thing in the deal. However, “One-third of the small shopkeepers who are not covered by the conventional distribution system, are the ones who go to the wholesale market. METRO attracted mostly these kinds of consumers who ended up buying FMCG products which are low margin, rather than the high margin HORECA products,” the person explained.
To Reliance’s benefit, it has a bigger buying power. “If they are negotiating with FMCG players, they will manage better margins. Plus with their own consumer brands unveiled, it will give them an extra edge,” he said.
Besides, there isn’t much of competition for Reliance in this segment apart from Walmart’s Best Price and Lots, hence, “Reliance will occupy the flagship space in the small segment that Cash & Carry is,” the person said.
However, in the overall game for Reliance Retail, the B2B segment is just one piece. It has made over 25 acquisitions in the retail tech, customer service, D2C, B2B, and the B2C segment among others over the past three years which form pieces of the large jigsaw puzzle the Reliance Retail is planning to build.
(With inputs from Chitra Narayanan, Delhi)