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Jayant Mundhra

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Dexter Capital Advisorsย โ€ขย 11m

Mukesh Ambaniโ€™s FMCG business is highly underperforming ๐Ÿ“›๐Ÿ“› Yet, what we see the media do is celebrate the sub-par execution by over-emphasising on the Rs 3k crore sales figure for FY24. Itโ€™s only on a deeper deepdive, that you see things as they are. Letโ€™s do that, starting with some context ๐Ÿ‘‡ .. Around September, The Economic Times had reported that Reliance Consumer Products (RCPL) was targetting revenues of Rs 5k crore and Rs 15k crore in FY24 and FY25. -> Now, ET says RCPL hit Rs 3k crore of sales in FY24, and is targeting Rs 5k crore in FY25 -> So, a big underperformance in FY24 and a massive recalibration of aspirations for FY25? At least thatโ€™s what ETโ€™s reports suggest. .. Though, whatโ€™s strange is that ET is no longer mentioning the earlier targets. Instead, what itโ€™s reporting is: โ€œReliance Consumer hits big in 1st year which took rivals decadesโ€ Complete change of narrative? ๐Ÿ˜…๐Ÿ˜… .. And there is one more thing, which doesnโ€™t look as good. Reliance Consumer owns almost 25 brands (breakdown below): 3 beauty and personal care 6 hygiene and home care 4 beverage 1 chocolate 9 food And a few more. .. So, overall sales was a sum of sales of these new and old brands. And among these, Campa accounted for about Rs 400cr of sales (again, as per ET). That leaves about Rs 2.6k crore of sales among about 25 brands. Now consider this ๐Ÿ‘‡ .. Reliance owns 5k+ grocery-centric stores. Letโ€™s assume all the sales happened via these fully-owned stores. That would mean, an avg brand except Campa did not even do avg daily sales of Rs 600 per store. Is that good? How? .. And, it gets worse. As per ETโ€™s report, of the Rs 3k crore of sales, Relianceโ€™s stores only accounted for Rs 2k crore. -> The remaining Rs 1k crore came from Kiranas -> Thus, most likely, an avg brand did not even do avg daily sales of Rs 450 per Reliance store .. Breaking down the numbers and placing them into perspective, I sense that the performance of the FMCG business has not been good at all. And this is despite massive deep-discounting practices. Clear signs that Reliance is actually struggling here. What do you think?

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